With lots of instability in the markets and the economy, many companies strive to stay afloat while protecting their bottom line. Unfortunately, this results in many layoffs and reduction in force (RIFs) actions. However, implementing a layoff or a RIF carries legal risks. Businesses must carefully consider these risks to avoid violations of federal and state statutes. Unlike individual terminations, it can also invite class action lawsuits from multiple employees.
Fortunately, there are established best practices to guide management in conducting the process legally and compassionately.
- Know the WARN Act: The WARN Act is a federal law that requires employers to give employees 60 days’ notice (or compensation) if a plant closing or mass layoff affects at least 50 employees or 33% of the workforce at a location. It’s important to consider the 90-day window, looking 90 days before and after the planned RIF date, to see if the WARN Act applies. Some states also have their own WARN acts with different rules, so be aware of local requirements.
- Check for fairness: Even if the RIF isn’t intentionally discriminatory, it’s crucial to ensure it doesn’t unfairly impact certain groups of employees. Use the “80%” rule of thumb” or “EEOC 4/5ths” test to see if nonminority employees are affected at a rate less than 80% of minority employees. If there’s a potential problem, review the decision-making process carefully and make adjustments if needed.
- Offer severance packages: Consider providing severance packages to employees in exchange for a release of claims. While not required, this is a good practice to protect your company. If you do offer severance, make sure to provide additional information to employees over 40. They should know who the company is laying off, who is not and how the management made decisions. Also, keep in mind that employees over 40 in a mass layoff need 45 days to review the release agreement, compared to 21 days for individual layoffs.
While implementing RIF actions can help decrease a company’s running expenses, they might have the opposite effect if not done with empathy. By following these steps, businesses can navigate the RIF planning process effectively while looking out for their employees and their company’s interests.
