Reductions-in-Force are Never Pleasant, but There’s a Right Way and (Many) Wrong Ways

Here in Wisconsin, we say – “Don’t like the weather? Wait five minutes” – to capture our ever-changing outdoors. (Case in point: as I write this article, today’s high temperature is 72 degrees; tomorrow’s is 36.) The phrase comes to mind when processing recent whiplash news that US employers added a better-than-expected 261,000 jobs in October, while  the tech sector reportedly cut more jobs already in November than any other month this year, impacting 21,000 employees across 46 companies.

Wait – is the economy hot or cold?

We have you covered either way. Last week we shared tips on keeping employees in an increasingly mobile workforce. But for those employers on the cooling side and considering a reduction-in-force (RIF), here are some best practices to keep in mind:

1. Weigh your options. It is easier for an employer to defend the decision to conduct a RIF if it has explored other less drastic measures such as hiring freezes, furloughs, or temporary reductions in pay or hours. (Of course, such alternatives come with their own legal considerations.)
2. Plan, plan, plan. RIFs come with stress (for both employer and employees) and legal risks. Careful planning is key to minimizing both. For example, for larger layoffs, build in time to run statistical analyses with counsel (under attorney-client privilege) to assess whether the selection criteria inadvertently have disparate impact on employees in protected classes. Know whether the RIF would affect employees on medical or military leave or employees who engaged in protected activity, and ensure such employees would have been included in the RIF regardless of their protected leave or activity. Consider forming an independent committee to review selection decisions for consistency with the RIF’s stated goals.
3. Document, document, document. Be sure to document the underlying business decisions and justifications at each step of the RIF process, particularly:
   1. The options explored other than a RIF (if any), and the reason(s) for conducting the RIF.
   2. The objective, non-discriminatory selection criteria (such as seniority, special skillsets, redundant jobs, eliminated positions, etc.) that led to your decisions to include individual employees in the RIF. And, if using subjective selection criteria, the legitimate reasons for distinguishing between employees (such as rationale from department-level managers who are familiar with the employees’ performance).
   3. With these criteria in mind, thoroughly document the reason(s) for selecting each employee included in the RIF.
4. Consider severance packages. Severance packages can help minimize legal risks associated with RIFs by getting a release of claims from departing employees. Any severance agreements should be reviewed for compliance with various applicable laws, including the Older Worker Benefit Protection Act, which mandates, among other things, that employees age 40+ included in a RIF receive certain information, an extended time to review the agreement (45 days in a RIF), and one week to “revoke” it even after execution.
5. Message honestly and consistently. As noted, RIFs are stressful on both sides. Employers should not lose sight of the fact that their employees’ livelihoods may be at stake. If possible, meet individually with affected employees (and a witness). In communicating the RIF, be empathetic, respectful, honest, and grateful for the departing employees’ services. If supervisors are likely to be involved in messaging, ensure they understand the rationale for the RIF and are trained to effectively communicate with employees.
6. Don’t forget about your retained employees. Employees not included in the RIF may be feeling apprehensive or angry. Consider meeting with retained employees to answer questions, rebuild trust, and improve morale.
7. And all the rest. The above is by no means a comprehensive overview of the legal pitfalls that a RIF can present. Depending on the situation, an employer’s planned RIF may trigger advance notice and other requirements under the federal Worker Adjustment and Retraining Act, immigration-related obligations, and more.

The tech industry’s recent woes serve as a reminder that the weather can turn quickly – and to be compliant and careful when conducting RIFs. Counsel can assist you from planning to execution and beyond.