Law Alert!

Tough economic times make for tough business decisions. Stories of layoffs and plant closures have become an almost daily occurrence in the business news. If your client is faced with the unenviable task of reducing his or her workforce, or if your client has recently been the victim of an RIF, good legal counsel is essential. On the employer side, it is important to remind the client of the requirements of both the federal Worker Adjustment and Retraining Notification (WARN) Act (29 USC §§2101-2109) and corresponding California statutes (Lab C §§1400-1408). If older workers are impacted by the reduction in force, the Older Workers Benefit Protection Act (OWBPA) (Pub L 101-433, 104 Stat 978) and Age Discrimination in Employment Act (ADEA) (29 USC §§621-634) may come into play. On the employee side, this is a situation where discrimination claims often may be asserted, as well as claims based on the employer's failure to observe the federal or state statutory requirements.

Employers should remember that a legitimate RIF is based on the elimination of positions, not of particular employees. An employer that attempts to use an RIF as a subterfuge for the termination of "problem" employees risks violating federal and state discrimination laws and breaching contractual obligations.

The following checklist, currently included in section 18.19 of CEB's Advising California Employers and Employees, provides some guidelines for minimizing the risk of liability in implementing an RIF:

• ___ 1. Articulate the business need and identify the business goal to be accomplished.
• ___ 2. Determine whether the RIF can be avoided or minimized by other cost-cutting measures such as salary or hiring freezes, voluntary attrition through early retirement plans, severance plans, enhanced benefit plans, or cutbacks in nonexempt hours.
• ___ 3. If an RIF is unavoidable, determine whether the reduction should be limited to only identified departments, organizations, or levels of managers, or be applied across-the-board.
• ___ 4. Once the affected units or levels have been determined, identify the positions that need to be eliminated or consolidated. In some situations, there may be only one incumbent. In other situations, there may be several incumbents and, therefore, individuals must be identified from the targeted positions.
• ___ 5. Set the criteria for selection. If criteria are weighted, articulate the weighted formula. While subjectivity is not per se unlawful, objective, weighted factors are the most defensible. If there is to be bumping between departments or different sites, determine the criteria for bumping.
• ___ 6. Rank multiple incumbents under the stated criteria. The lowest-ranked employees in the identified unit should ordinarily be the employees who are laid off, absent extraordinary circumstances.
• ___ 7. After a tentative list of layoff candidates has been generated, check the list for adverse impact by protected category such as race, sex, national origin, disability, and age (by 5-year brackets starting at the age of 40). Take a before-and-after "snapshot," noting what percentage of the workforce is in each category before the layoff and after the proposed layoff. If the tentative layoff list appears to disparately impact a protected group, re-analyze the selection criteria to ensure that there is no subtle form of illegal discrimination.
• ___ 8. To ensure that the selection is based solely on legitimate business reasons, review the tentative list for:
  • ___ a. "Whistleblowers";
  • ___ b. Workers' compensation claimants;
  • ___ c. People about to vest in, e.g., stock options, retirement plans.
• ___ 9. Determine whether additional compensation should be provided in exchange for a release of claims. Releases and waivers of claims may have to meet OWBPA requirements.
• ___ 10. Once the final determination has been made, ascertain whether the RIF will trigger WARN (or the California counterpart) notice requirements.
• ___ 11. Provide COBRA notice (Lab C §2807).
• ___ 12. Consider transition assistance such as outplacement.
• ___ 13. Provide managers with guidance on how to communicate information to the workforce and how to manage the reduced workforce after the RIF has taken effect.

The following "Termination Checklist," currently included in section 17.93 of CEB's Advising California Employers and Employees, also includes some helpful reminders for when a workforce is being reduced in number. (Further information on this topic can also be found in CEB's practice guide, Wrongful Employment Termination Practice.)

• ___ 1. Has employment law counsel been consulted about the termination decision?
• ___ 2. Are all managers and supervisors who participated in the termination decision, as well as human resources, in agreement with the grounds for termination?
• ___ 3. Is there credible documentary and testimonial evidence to support the termination decision?
• ___ 4. Is the termination consistent with the way other employees at the company have been treated under similar circumstances in the past?
• ___ 5. Have the company's termination policies (e.g., internal dispute or "just cause" policies) been followed?
• ___ 6. Are there any provisions in company policies (e.g., in the employee handbook) that might protect the employee from being terminated for the reasons contemplated by the company?
• ___ 7. If there is a progressive-discipline policy, has it been reviewed to ensure that all required steps before termination have been complied with?
• ___ 8. If progressive discipline has not been imposed, is there sufficient basis to justify an immediate termination, e.g., for theft, falsification of company records (such as a résumé or timecard), or destruction of property?
• ___ 9. Is there documentation to establish compliance with the progressive-discipline policy, if any?
• ___ 10. Does the termination potentially violate any state or federal statutes prohibiting discharge under the present circumstances?
• ___ 11. Did criticism of the employee's conduct or performance start only after the employee made a protected complaint, such as a complaint about harassment or discriminatory, unfair, unsafe, or other unlawful conditions at work?
• ___ 12. Is the employer's stated reason for the termination consistent with performance or conduct problems that have been discussed with the employee in the past?
• ___ 13. Will discussions in connection with written performance evaluations or disciplinary actions support the termination decision?
• ___ 14. Is the company's stated reason for the termination consistent with documentation of the problem in the employee's personnel file?
• ___ 15. Do ratings on recent written performance evaluations support the termination?
• ___ 16. Is the company's stated reason for the termination consistent with the recent conduct of management (e.g., are recent "merit" pay increases or bonuses consistent with termination for "poor performance")?
• ___ 17. Has the employee's explanation of the events leading up to termination been considered? Is there sufficient credible evidence for rejecting the employee's explanation, or does the evidence support the employee's version of events?
• ___ 18. Is the employment relationship likely to be deemed "at will," or could an implied-in-fact contract not to terminate except for "good cause" be inferred from long-term employment, promotions, commendations, oral assurances or other indicators of job security?
• ___ 19. Do company policies or practices expressly or impliedly promise employment for a specified duration or promise continued employment as long as performance is satisfactory?
• ___ 20. If an express or implied contract to terminate only for good cause exists, is there good cause for the termination?
• ___ 21. Have alternatives to termination (e.g., suspension with or without pay or transfer to a different supervisor) been considered and documented?
• ___ 22. Has the employee been given the opportunity to request an investigation into the facts relied upon for the termination?
• ___ 23. Is the employee physically or mentally disabled and, if so, were documented attempts made to reasonably accommodate his or her disability (including accommodations for conduct or performance related to the disability)?
• ___ 24. Is the employee pregnant?