Workforce Reductions at

1
Workforce Reductions at Information Technology
Companies
Charles F. MartelCooley Godward LLP
These materials are not intended as legal advice,
but rather as a general outline of issues to be
considered in force reductions. Each force
reduction is unique and requires individualized
decisions, and these materials are not a
substitute for specific legal counsel on these
issues. Companies considering and implementing
force reductions should seek legal counsel.
2
WHETHER?

• Before the RIF, Consider Alternatives
• Reduced Work Hours
• Salary Freezes/Deferrals
• Hiring Freezes
• Early Retirement Incentives
• Overall Cost Reductions
• Voluntary Leave (Note CA wage/hour law)

• Practical Note Review legal obligations to
  insure that alternative steps do not breach
  obligations

3
WHY?

• Articulate Big Picture Reasons to Create
  Framework for RIF
• Identify Why the RIF is being done
• Cost Reduction
• How much needs to be cut/how many positions
• Business Restructuring
• Identify the Nature of Restructuring and
  Reasons
• Pre and Post-RIF Organization Charts

4
WHO DECIDES?

• Goal is to make sure decisions are made by
  correct persons on the basis of complete and
  accurate information.
• Work Team
• Decide who will participate in decisional
  process
• Executive Managers
• HR/Legal
• Department Managers
• Outside Counsel
• Establish Time Frame

5
WHAT IS SAID?

• Goal is to Prevent Premature Leaks, Inaccurate
  Information and Promises
• Control Information Flow
• Limit Information to Work Team
• Prepare Consistent Message Articulating
  Recommendations for RIF
• Avoid Pre-RIF discussions with workforce

6
WHO IS LET GO?

• Making Preliminary RIF List
• Identify Criteria for Reductions
• Performance Record/Strength of Documentation
• Skill Set/Need in Post-RIF Company
• Rank Employees in Department
• Decide Who Decides
• Executive Management and Department Managers
• Review by HR/Legal

7
REVIEW PRELIMINARY RIF LIST

• Analyze WARN issues
• Analyze adverse impact issues

8
WHO IS LET GO?

• Adverse Impact Analyses
• Performed by counsel to protect privileges
• Determine effect of RIF on employees based on
  age, race, leave status, disability status,
  immigration status, possible retaliation
  issues
• Consider individual high risk cases

9
HOW MANY ARE LET GO?

• Federal WARN Act
• Applies to companies with 100 or more
  full-time employees that conduct
• Mass layoffs - at least 50 employees and 1/3
  of workforce
• Plant closings or partial plant closings
• 60 days advance notice
• Application can be cumulative
• Look 90 days forward and backward
• State Baby WARN Acts
• Part-Timers are not counted -- six month rule

10
WHAT WILL BE GIVEN TO THOSE LET GO?
Goal is to pay sufficient severance to make
releases enforceable Severance Pay

• Are you already required to pay severance --
  review
• existing policies, agreements, offer
  letters
• Decide on severance package
• Consider a severance benefits (ERISA) Plan
• Notice pay or non-contingent payment
• Consider Equity
• Are there vesting dates approaching?
• Are there employees who have not vested?

11
HOW WILL RIF BE IMPLEMENTED?
Documentation Communication
Security Documentation

• Prepare Severance/Release Agreement
• Should include full waiver, statement of
  severance, incorporate confidentiality/non-compete
  type agreement, confidentiality
• Age Issues - employees 40 and over are entitled
  to special notice including 45 day consideration
  period, 7 day revocation period, right to
  counsel, and list of comparative data
• COBRA notice
• Final Paycheck/when required?

12
HOW RIF WILL BE IMPLEMENTED

• Communication
• How to tell RIFd employees
• Individual vs. Group Notice
• Short Statement
• How to tell retained employees
• Consider retention meetings
• Media Statements
• Consistent statements

13
SECURITY

• Protect Computer/Material Data
• Plan for return of Company Property
• Timing for when/how long RIFd employees may
  stay
• Plan for dealing with potential workplace
  violence
• Tension between security priorities and
  public/employee
• relations