Tips for planning a reduction in force if the economy loses steam
Tuesday, November 05, 2019
Our economy has been hot over the past few years, but signs indicate a slowdown may be coming. Employers planning a reduction in force (RIF) must consider the possibility that a third party may eventually judge the lawfulness and “fairness” of their decisions and that such judgment could result in significant consequences.
It may be impossible to avoid litigation, but employers can do some things to make litigation less likely and reduce potential liability, as outlined in this article.
Prior to Announcing the RIF
1. Carefully plan your actions to minimize legal risks.
Employers’ freedom to terminate employees is limited by at least three types of restrictions: statutes, common law and contracts. To avoid liability under any of these restrictions, you should carefully document your decision-making process to show that you made your decisions fairly, lawfully and based on legitimate, non-discriminatory and non-retaliatory factors.
Ensure your selection process can be defended against disparate treatment and disparate impact claims under Title VII of the Civil Rights act of 1964, as well as the ADEA, ADA, FMLA, COBRA, ERISA and other local, state and federal laws.
You should develop objective criteria to determine who is subject to the RIF. For example, you could consider disciplinary records, performance reviews, attendance records, tenure with company or in position, or special skills. If subjective decision making is involved, do it by committee, rather than relying on just one supervisor.
Carefully consider whether and how employees who are on leave for any reason (e.g., workers’ comp, FMLA, ADAAA, uniformed service, jury duty, etc.) may be affected by the RIF. Be careful not to impact them in a way that could be construed as discriminatory or retaliatory.
Contractual restrictions arise from employment contracts, collective bargaining agreements, statements made in offer letters or Plan documents or through other written or oral promises. Carefully examine your files to ensure you are not constrained by any contractual obligations and, if you are, that you comply with them.
Common law restrictions are created by courts to protect employees from some types of employer conduct that is not specifically prohibited by any statute. These include prohibitions against terminations that violate “public policy,” such as firing an employee for refusing to engage in unlawful conduct.
Common law claims also can arise from the manner in which a termination is handled. These include claims of defamation, false imprisonment and intentional or negligent infliction of emotional distress.
Consider offering affected employees severance pay in exchange for signing a general release and waiver of all claims. If you do this, ensure that you have considered all ERISA, ADEA and OWBPA implications and that your agreements comply with these laws.
2. Meet with supervisors to explain what is going to happen and what is expected of them.
Give novice supervisors and managers extra support and guidance for managing and communicating with employees.
3. Perform a security audit of the facility and physical assets.
Pay special attention to locks, gates, fences, lights and special hazards (e.g., chemical storage, electrical transformers/switchgear, phone cables, outside storage, etc.). Consider installing additional cameras and other devices.
If appropriate, bolster security for hazardous material storage, fire protection system control points and other attractive targets of sabotage. Develop procedures for identifying and responding to actual or threatened violence, and ensure managers and supervisors are trained on them.
4. Protect your electronic systems and data.
If affected employees have access to such systems and data, consider taking extra precautions to prevent theft, sabotage and abuse. At the time of each employee’s separation, have a competent person check the systems to ensure he/she hasn’t done anything malicious at the last moment. Lock them out of the systems prior to their separation meetings.
5. Conduct a thorough safety inspection of the affected area(s).
Employees who are about to lose their jobs sometimes file complaints with OSHA to “retaliate” against the employer.
6. Be alert and prepared for any signs of union organizing activity.
Layoffs tend to make employees nervous about their future job security. This feeling can inspire interest in unionizing. Remind supervisors and managers of the importance of immediately reporting any such activity to HR.
At the Time the RIF is Announced and Shortly Thereafter
1. Choose the right “messenger” to announce the RIF to employees.
Ideally, employees are informed in person of the bad news and what the Company plans to do to ameliorate the impact of the RIF on them and their families. Notify employees in a manner calculated to minimize employees’ distress and antipathy.
Choose your words carefully to avoid making matters worse and creating false hope. Among other things, assure affected employees the company will not contest unemployment claims. Let them know what will happen with respect to benefits, final pay, unused vacation, outplacement, etc.
2. Take appropriate steps to guard against sabotage.
Ensure sufficient supervision in affected areas to deter sabotage. Implement additional quality checks to ensure employees are not sabotaging products or letting their attention to quality wane.
Train supervisors and managers to be alert for, and properly respond to, warning signs of potential violence. Ensure supervisors understand the importance of promptly documenting and reporting any suspicious events or employee behavior.
3. Respond promptly and appropriately to employee safety complaints.
Consider conducting safety inspections between the notice date and the actual date of the event to find and correct any safety hazards before employees can report them.
4. Instruct supervisors to immediately notify your workers’ comp administrator and to conduct an investigation following any report of an alleged injury.
Immediately notify your workers’ comp carrier if a claim appears suspicious. The same cautions apply with respect to sick leave, STD and LTD.
5. Communicate with supervisors to get their feedback regarding conditions…
…“on the ground” and to update them regarding any new developments and help them manage the process.
6. Ensure adequate security is present at all times…
…especially when the facility is unoccupied or sparsely occupied (e.g., late shifts when fewer supervisors are present). If the facility will be vacant for an extended period, ensure it is protected against vandalism.
7. Arrange to recover all keys/access cards and other company property…
…from affected employees as soon as practical. Regardless of whether all keys and other access devices are returned, consider changing all locks and access codes, deactivate card access, etc. as soon as possible after employees are terminated.
8. Ensure every employee timely receives all compensation to which he/she is entitled…
…(this may include unused vacation, 401(k) matching amounts, etc.). Make sure you understand your state’s requirements regarding the timing of final payment. Some states require that employees their final pay the day of termination; most at least require payment within a short period following termination.
9. Make sure every terminated employee timely receives a proper notice…
…under COBRA or applicable state laws regarding continuation of insurance.
This list is not exhaustive, butfollowing these basic tips can help you to help reduce or eliminate a wide variety of the risks associated with RIFs.
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