Five Important Considerations if Faced with Reducing Your Workforce

Increasing reports of a looming economic recession suggest that U.S. employers will soon be facing a more difficult financial landscape. Some employers are already taking steps to plan for a potential downturn by making structural workforce adjustments or preparing contingency plans to make such adjustments. With these types of significant workforce decisions heating up, now is the time to review and update your approach to conducting a reduction in force (RIF).

If you anticipate a RIF in your company’s future, consider incorporating the following recommendations:

1. Set a realistic and legally compliant timetable. Careful planning, hopefully well in advance of the anticipated reduction, can make the difference between costly, unproductive litigation and a smooth transition. Keep in mind that there are important legal issues to consider at the inception of any reduction planning that cannot be deferred to a later time, such as key selection criteria used to determine the reductions and whether or not employers will need to provide WARN notices or similar state law notices to affected employees.
2. Engage legal counsel early in the process and centralize decision-making. There are many legal issues and business risks to consider in any RIF. Engaging counsel early allows employers sufficient time to navigate and avoid those risks. In many instances, the necessary analysis and strategy can be completed through the attorney-client privileged communications. For similar reasons, employers should centralize decision-making, and those decision makers should be the ones communicating with legal counsel.
3. Identify and document the objective reasons for the RIF and the selection criteria at the outset. Documenting the objective business reasons driving the reduction is key to establishing the fact that the employer is not targeting the reductions to any particular department or employee or groups of employees based on an unlawful reason. This step will also serve as the framework for deciding selection criteria. Employers should first identify the positions impacted by the reduction and the criteria used for such determination—for example, a position that does not support a thriving side of the business or that is no longer needed based on reorganization. Once the positions are identified, employers should then determine the selection criteria for identifying employees within each position who will be terminated. While we will always advise that the best defense to a potential RIF-related legal claim is to rely upon objective selection criteria (such as seniority or last-in first-out), business needs may sometimes dictate the use of more subjective factors (such as performance). Legal counsel can provide guidance on how best to apply such criteria.
4. Be ready to provide employee census information. Most RIFs conducted with the help of legal counsel will require some level of statistical analysis related to the selected employees, compliance with WARN or related state laws, and compliance with any federal and state discrimination laws. Maintaining an updated employee census can help expedite this process, particularly when termination decisions need to happen quickly.
5. Remember the importance of proper termination documentation. If an employer is contemplating offering affected employees a separation agreement, keep in mind that RIFs often require that unique language be included in any such agreements (in other words, don’t just dust off your form separation agreement). In addition, we suggest that employers have a set of standard talking points prepared.

Conclusion

In summary, take the time to do a reduction in force the right way.