Doing reductions in force (RIFs) are always a risk. It may be common knowledge about the need for one, given the economy, loss of a big client or contract, or a global pandemic. Nevertheless, when employees lose their jobs, they will want to know why THEY are being chosen over someone else. Using seniority is often safer and simpler because the standard is more objective, but companies rarely wish to do go that route, often because their newer employees are less expensive, or sometimes just because they are better. Sometimes employers use RIFs to “clean house” of overpaid, underperforming employees. The problem is, often those employees represent an older segment of the workforce, and using higher compensation as the reason for choice is not a defense to an age discrimination claim.
I recommend a few steps to reducing the risks associated with conducting a RIF. First, pick the factors you will use in determining who is to stay and who is to go. You can use a combination of factors, say, performance, seniority, cross-training, skill set. If using performance, then make sure you can demonstrate why one employee is considered stronger than another. Hopefully, you can turn to some documentation in the file, either performance reviews, counseling, past promotions, and the like. Be careful to avoid using criteria like “attendance,” unless you have worked carefully not to use any “protected absences” in the assessment, such as paid sick days, leaves of absence, or days missed that may involve a “serious health condition” under FMLA or a “disability” under the ADA.
Like many employers, you may wish to use performance-based criteria, but your personnel files are essentially empty. You can design a quick form evaluation that your managers and supervisors complete, which renders a score, using multiple factors. We can assist you in doing this. When possible, have multiple managers or department heads weigh in on this analysis, to best deflect claims of favoritism, bias, or discrimination.
Once you have settled on the factors, be transparent about them. I usually recommend doing a memo to all impacted, explaining the need for the RIF, the factors you have used, and why this employee in particular was chosen. I have a sample memo we can send you.
Prepare a working list of the anticipated affected employees for review. Then, sit back, and review the demographics. Do we see any troubling patterns? Is your entire list over 40? Or does it comprise a high proportion of one gender, race, or religion, compared to your overall workforce? Has someone on the list just told you she was pregnant, reported a work-related injury, or complained about wage issues?
Then we consider how the message will be delivered, and by whom. No matter what criteria you use to terminate an employee, the manner in which a termination is conducted can trigger litigation. Losing a job is considered one of the most traumatic events in a person’s life. People identify themselves with their jobs. Taking that away from someone can cause anger, resentment, and a lawyer consult. Years ago, I handled a litigation for a sizable health care group who had made the decision to outsource one of its departments. In the process, an employee was terminated who had worked her whole life for the organization – 18 years. She sued, claiming discrimination and retaliation, even though her entire department had been eliminated. During her deposition, she broke down in tears about her termination meeting. An administrator from outside the division had been called in to conduct the terminations. “I worked there my whole life, and they couldn’t find someone who knew me to fire me,” she cried. I handed my client a note that said, “THIS is why we are sitting here.”
Handle these meetings with care. Be humane and thoughtful. Give thought to the timing of the meetings, who conducts them, and the message that is conveyed. Years ago, I helped walk a client through a large, nation-wide RIF involving hundreds of employees. They dispatched a team to fly to the various offices and meet with the employees in person. They also included someone that the employees knew from each location. They put together a packet to provide each employee, with a cover memo explaining the RIF, information about how to continue and claim benefits, along with a list of employers in the area that might be hiring and a coupon for a local restaurant. The employees were so appreciative of how the RIF was conducted that some sent notes thanking the company for being so gracious. We received no litigation or even demand letters in response.
Employees do not need any advance notice of the RIF unless your reduction triggers obligations under the WARN Act. If you are conducting a large RIF including at least 50 employees, reach out. I won’t go into the requirements for WARN here, but it is a technical process, and California works slightly different from federal law. Of course.
Before you pull the trigger, consider the bigger picture. Are other RIFs being considered? Try to include as many employees in the “group” as possible, so you don’t have to keep conducting “rounds” of RIFs. Nothing makes employees more nervous than worrying that their job is in continual jeopardy. You don’t want to reduce your workforce only to lose your best, valued employees.
Another consideration – are you offering a severance package? Unless you have a written employment agreement, severance is not required for private, non-union employees. Nevertheless, most employees expect them these days, and they are common practice. The amount provided varies wildly depending on industry, seniority, size of the employer, and job position held. Material severance pay should also necessitate a written severance agreement, including a release of claims. Getting an employee to release claims in exchange for a severance is the main factor in being protected from any repercussions. But remember, severance agreements are legal documents, which differ depending on jurisdiction, age of the employee, and the circumstances. Consult an expert.
Additionally, if you believe employees are being overpaid for their positions, consider offering them a pay cut as an alternative. They may not accept it, especially if you offer severance payment as an option. But even the offer can diffuse a claim of discrimination. I can’t tell you how often my clients tell me “But they would never have taken that pay cut,” only to have the employee testify later “I would have happily taken less money if this was really about money . . .”
Finally, do NOT use a RIF to avoid terminating an employee for cause. If you are not happy with the job performance of an employee or two, deal with the performance issues. Be transparent. Employees know when employers are not being candid. They just assume there is some nefarious reason for their termination, such as discrimination or retaliation. Don’t hand these employee grounds for a lawsuit.
