Reductions in Work Force

Reductions in Work Force

The following synopses of seven (7) academic journal articles were collected from the last five years. They are relevant to a variety of business practitioners from human resources management, internal and external legal counsel, as well as core management on the subject of workforce reduction.

1. “Legal Considerations of Workforce Reduction”

The first step toward minimizing legal risk in connection with a RIF is careful planning. To begin, think long and hard about the business rationale for the RIF. Specify the organizational changes that would be involved, articulate how and why those changes will affect particular jobs or departments, and calculate how the changes translate into a reduced headcount. Association leadership should consider possible alternatives to a RIF, such as a hiring freeze, voluntary exit incentive program, or reduction in salaries. At this stage, consult the association's employee handbook and other written policies for any restrictions on the organization's ability to terminate or lay off employees, and consider amending those policies if necessary (Camardella, 2002).

The next step, therefore, is to determine a fair method and defined criteria for selecting among employees in affected positions or departments. One possible selection method is to use a forced ranking system, under which employees in the affected areas are ranked by cumulative points based on weighted criteria such as unique skills, past performance, length of service, and versatility. Another method is to compare past performance evaluations. This method has the allure of simplicity, but may not be effective or fair if the existing documentation of past performance is sketchy or out of date (Camardella, 2002).

The article suggested that, before the actual selection process begins, you should provide detailed training to managers who will be involved in the process including an overview of the reasons and business justification for the RIF and careful instruction on the selection procedures and schedule. Explicitly caution managers not to let favoritism or personal animosity influence the selection process and thoroughly coach them in how to communicate information about the RIF to employees (Camardella, 2002).

Another issue requiring special attention before selections begin is documentation. The paper trail created during a RIF can be either helpful or extremely harmful in the event of subsequent litigation. Draft an initial memorandum either to senior management or to a file that includes all materials related to the RIF to memorialize the business rationale for the RIF as well as the selection method and criteria to be used. Then determine what written record, if any, will be made to explain the reasons for each selection (Camardella, 2002).

The result of the selection process will be a list of employees identified for layoff or termination. It is advisable to analyze this list with the input of legal counsel to determine whether any patterns exist, which could support a claim of discrimination. If it appears that the reduction in force will have a disproportionate impact on a protected class of workers (such as women, African Americans, or older workers), the association may want to make adjustments to the selection list (Camardella, 2002).

Even the most carefully planned RIF may be challenged in court. Therefore, if your association will offer any severance benefits, consider requesting a release of claims in exchange for those benefits. If the association does decide to seek releases, obtain legal assistance in preparing them to ensure that they are enforceable (Camardella, 2002).

2. "Guidelines for Severance Pay"

When employers are engaged in workforce reduction, especially if the termination is involuntary and not due to any fault in the employee, employer leadership and legal counsel are often asked: what is the right thing to pay in severance?

There are no laws mandating severance pay. From a legal standpoint, the Worker Adjustment and Retraining Notification Act (WARN Act) requires employers to provide notice 60 days in advance of plant closings or “mass layoffs”, however this only applies to employers with a hundred or more employees. Employees are entitled to certain fringe benefits (which can include but not limited to vacation, sick leave, (COBRA) medical and disability as well as pension plan benefits) (Guidelines, 2006).

According to the article, some severance practices are so frequent they could be called standards (Guidelines, 2006).

• The first is that severance pay is not paid to those who are terminated for cause

• The second practice is to link severance pay to years of service

• Third is to distinguish among grades or ranks of employees

• The fourth common practice is to establish a "band" of severance pay: that is, everyone will receive a minimum amount of severance (e.g., two weeks), and there will also be a maximum

• Fifth, to receive severance benefits, the employee must sign a release, waiver, and covenant not to sue.

“The most recurring and important questions that must be asked and answered in formulating a severance pay plan are”: (Guidelines, 2006).

Who is eligible for severance? not those who voluntarily quit or are fired for cause, not union members (they usually have their own severance packages included in the collective bargaining agreement), or others); are both part-time and full-time employees covered (and what is the definition of "full-time" or "part-time")" (Guidelines, 2006).

Employee classifications. Employees can be divided into many levels. The simplest, perhaps, are either exempt/nonexempt or a three-level scheme: executives, managers, and everyone else.

Non-monetary considerations. Other severance benefits that may be offered in addition to, or in lieu of, severance pay, are agreeing to pay the employee's COBRA premiums. If a company

can afford it should be as generous as with severance benefits as possible (Guidelines, 2006).

3. “Reducing Your Workforce: What You Don’t