Planning Layoffs: How to Structure a Reduction in Force in Todays Economic Climate

1
Planning Layoffs How to Structure a Reduction
in Force in Todays Economic Climate

• Labor Employment Women Executives Networking
  Briefing
• February 10, 2009
• Washington, DC
• Kara M. Maciel, Esq.
• kmaciel_at_ebglaw.com
• Ana A. Salper, Esq.
• asalper_at_ebglaw.com

2
REALITY BITES

• 2008 BLS Report
• Unemployment rate hits 7.2 in December
• In 2008, 2.3 million jobs lost
• In November 2008, RIFs were up 275
• 2009 Economic Outlook
• Caterpillar announces cuts of 22,000 global jobs
• Starbucks plans to cut 6,700 jobs
• the unemployment rate will continue to rise
  sharply well into 2009"
• Gad Levanon, Senior Economist at The
  Conference Board, Nov. 10, 2008

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DOWNSIZING LEGAL PITFALLS LET US COUNT (SOME
OF) THE WAYS

• The Worker Adjustment Retraining and Notification
  Act (including state WARN acts)
• - 11/08 Class action against Value City
  Department Stores
• 2. Age Discrimination in Employment Act (ADEA)
• - 10/08 Gender, race class action against Dell
  arising from RIF
• Older Workers Benefits Protection Act (OWBPA)
• - 2007 - Courts invalidating OWBPA releases
• Contractual liability (collective bargaining
  agreements, employment contracts, employee
  handbooks, etc.)
• Lack of planning is the most prevalent reason
  companies face legal liability

4
IS A RIF UNAVOIDABLE?

• Do you have an alternative?
• Worksharing agreements
• Flexible schedules
• Hiring freezes
• Temporary shutdown
• Reduction in the work week

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RIF UNAVOIDABLE NOW WHAT?

• If a RIF is unavoidable, consider
• How many employees and from which areas
• Voluntary vs. involuntary
• Impact on
• - Affected population
• - Contractual obligations
• - Severance/benefit plans
• - Timing of layoff/announcement

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Voluntary Programs

• Voluntary resignation
• Voluntary retirement
• Employment contract buyout
• Remember to avoid constructive discharge claims
• Avoid implication that a refusal to accept
  voluntary termination will be terminated
  involuntarily later

7
Involuntary Reductions

• After a voluntary RIF, or
• If the company decides not to offer a voluntary
  program,
• Next Step Involuntary RIF
• First consideration
• Will the WARN Act apply
• Consider numbers affected and timing

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Worker Adjustment and Retraining Notification
(WARN) Act

• Covered Employers must give 60 days advanced
  written notice of plant closing or mass
  layoff
• Plant closing 50 employees
• Mass layoff 500 or 33 of workforce
• Layoffs considered at a single site of employment
• Covered Employers - 100 or more full-time
  employees aggregated over all employment
  locations
• Notice requirements to government agencies

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Worker Adjustment and Retraining Notification
(WARN) Act

• State WARN Acts
• Check your state law
• No state equivalent in DC, MD, or VA but
• New Yorks WARN Act became effective February 2,
  2009, which drastically expanded employees
  rights
• FOREWARN Act of 2007
• Will amend WARN to model NYs state law

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Contract Considerations

• ? Employment Agreements
• For cause termination
• Consideration issues
• Salary commitment
• Collective Bargaining Agreements (CBAs)
• Rehire obligations
• Severance and HI provisions
• Successorship issues

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Planning The Involuntary RIF

• Document the business need for the RIF
• Set time table (WARN, CBAs or other agreements,
  OWBPA)
• Establish Oversight Committee
• Review layoff and selection criteria
• Set layoff criteria
• Keep in mind skills/positions necessary to retain
• Distribute selection criteria to all
  decision-makers

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Planning The Involuntary RIF

• Selection Process (utilizing layoff criteria)
• Forced ranking
• Seniority / Past performance / Peer review /
  Ability to perform in post-reduction environment
• Laying off problem employees?
• Train supervisors on applying criteria without
  bias
• Adverse Impact Analysis
• Statistical impact study to avoid disparate
  treatment and impact claims
• Oversight Committee should review with legal
  counsel
• Communication plan
• To employees, to the public, to the media

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Communicating the Decision

• Meet with employees individually
• Avoid water cooler gossip
• Present OWBPA releases last
• Have a witness in the room perhaps the
  decisionmaker and the HR Representative
• Generally, the less said, the better
• Create a script and stick to it, to the extent
  possible

14
Post-Termination Considerations

• Security
• IT issues
• Safety issues
• Product tampering policies
• Confidentiality obligations
• Questions from employees
• Unemployment
• Benefits continuation

15
Restraints on Departing Employees

• Non-Solicitation Agreements
• Customers
• Employees
• Non-Competition Agreements
• Trade Secret protection

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Communicating Externally

• If the RIF will be newsworthy, consider drafting
  a press release
• Explaining reason for RIF
• Providing numbers of affected employees
• Perhaps PR Department/Crisis Management will
  draft, but HR/Legal should review (e.g., be
  careful of statements such as this is expected
  to be it)

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Releases Consideration

• What should be offered to terminated employees?
• Severance (consider a formula based on current
  salary/years of service i.e., two weeks
  severance for each complete year of service) in
  exchange for signed release
• Outplacement services
• Payment for COBRA benefits
• Payment for all earned wages and benefits upon
  termination (check state law)

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ADEA/OWBPA Requirements

• Use Ordinary English
• Specific Reference to the ADEA
• No Release of Future Claims
• Consideration (required)
• Consultation with Counsel
• Consideration Period
• - 21 days for single release
• - 45 days for RIF program

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ADEA/OWBPA Requirements (cont.)

• Seven Day Revocation Period
• Disclosure Requirements (Exhibit A)
• Need to disclose description of decisional unit
  and eligibility factors
• Courts have recently invalidated releases where
  employer did not provide selection criteria
• Decisional units too broadly or too narrowly
  described can invalidate age discrimination claim

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ECONOMIC REALITY BITES

• QUESTIONS?

21
Planning Layoffs How to Structure a Reduction
in Force in Todays Economic Climate

• Labor Employment Women Executives Networking
  Briefing
• February 10, 2009
• Washington, DC
• Kara M. Maciel, Esq.
• kmaciel_at_ebglaw.com
• Ana A. Salper, Esq.
• asalper_at_ebglaw.com