Defusing reduction in force landmines
Reductions in force (RIF) can cost more money than they save if litigation landmines are not defused in advance. The following six best practice tips should be a part of every manager’s toolkit. Follow them before issuing that first pink slip.
1. Plan ahead. By the time management considers a reduction is force, the business workforce is usually in dire need of realignment. The triggering event could be a poor economy, a merger, or a new business initiative. Regardless of the cause, once the strategic decision to realign is made, there is a need for speed. Ideally, you want a well thought out RIF plan mapped out long before you need one. At a minimum, you want one that can successfully navigates the major legal land mines.
2. Include a lawyer on your planning team at the outset. Hasty decisions made without weighing the legal consequences can do more harm than good. It therefore makes sense to involve an employment lawyer who is familiar with your company to help you weigh the options and their corresponding litigation risks. Timing is critical. The earlier you involve a lawyer in planning the more legal landmines you can defuse.
3. Identify applicable notice requirements. The need for speed may clash with certain notice required by law. Depending on the size of your business you may be subject to the Age Discrimination in Employment Act (ADEA), which requires employers to give employees forty-five days to review certain types of group waivers or release agreements. Or perhaps you’re subject to the Worker Adjustment and Retraining Notification Act (WARN) that requires a sixty notice before certain terminations can go into effect or work hours get reduced. Certain states even have their own version of WARN and may requiring smaller businesses to issue WARN notifications. It pays to check.
4. Evaluate disparate impact. Disparate impact refers to any disproportionate effect on a legally protected classes of workers that could trigger a discrimination suit. The most commonly protected class that’s evaluated for disparate impact in a RIF is employees who are 40 years of age or older. The theory being that if you want to cut payroll expenses, higher paid older workers could be the first to go. Some states, however, have reduced the age of protected workers to 18 years of age or older and that that fact is creating new complications in the disparate impact analysis.
While employers typically focus on how a RIF will impact various age groups, other protected classes, should not be overlooked since they too can trigger a claim for discrimination. Evaluating, for example, the proposed RIF’s disparate impact on gender, race, ethnicity, and religion are a few other ways to slice and dice the data.
A Chi-Square Test (CST) is sometimes used to test the statistical significance of the numbers, but should only be used when the sample size is large. Otherwise, it can give wrong or misleading results. Regression analysis is another popular analytical tool.
5. Examine business necessity and reasonable factors other than age. Even if there is a disparate impact on a protected class, the termination may still be defensible if the termination of the selected employees can be justified by business necessity or reasonable factors other than age. It requires a case by case, employee by employee analysis.
6. Look at the likelihood of a retaliation claim. Once the list of names has been vetted for disparate impact, it is smart to vet it one more time for potential retaliation claims. This is tougher to do because the basis for a retaliation claim may not always be readily apparent. A dormant sexual harassment claim, for example, can morph into a wrongful discharge and retaliation claim if the person who didn’t submit to the sexual advance finds themselves on the RIF list.
RIFs represent substantial legal liability, but with the proper forethought and planning those liabilities can be greatly reduced.