It appears the economic soft landing the Federal Reserve Bank and just about everyone else had hoped for is on, but some headline-grabbing negativity of layoffs at a number of major companies has occurred. A reduction-in-force (RIF) is a common occurrence in eras of economic flattening and downtrends. At times a RIF can be necessary to streamline and make more productive those companies that have become top-heavy or experience a change in workloads. While a RIF is a vital tool in cutting expense and right-sizing a business’s workforce, it carries with it certain legal consequences that should be considered.
When deciding to reduce employee numbers companywide, a business should be aware of the actual and perceived impacts of those efforts. Additionally, a company should stick by those decisions to reduce the workforce for a period of time, so as to avoid any appearance of other employment actions carried out under the veil of a RIF, which can have negative impacts on employee morale and a business’s employment brand. Consulting an experienced employment attorney can help determine the best path forward.
First and foremost, a company considering a RIF to right-size their workforce must avoid actions which particularly single out a protected class, namely age, race and gender. These are the most common claims of discrimination with the Minnesota Department of Human Rights (MNDHR) and the Equal Employment Opportunity Commission (EEOC). Tales of forced retirement for older employees are music to plaintiffs’ attorneys’ ears. Taking actions in the RIF process which single out individuals by their age – or in some cases gender or race – will likely bring not only a claim by an affected employee, but possibly a class action by any number of similarly-situated employees who were let go.
Discuss proposed layoffs with an attorney prior to deciding on which employees are being considered for termination. Utilize business-related metrics such as written reviews, employee performance scores, discipline history, and unexcused absences and tardiness to help with the determination. These form a legitimate causal connection between the selection for layoff and the individual and can be documented easily.
Once the proposed RIF is set out on paper, work with experienced human resources professionals and legal counsel to make sure that a protected class isn’t inadvertently overrepresented in the layoffs. While it may not have been intended, certain employment metrics, location-based factors and other criteria may result in more people over a certain age, or from a certain race, suffering a greater percentage of the layoffs. This disparate impact can also give rise to a legal claim, and may also set up the possibility of a class action.
Utilizing those employment-based reasons for the RIF, and taking a closer look at the demographics of your workforce will help provide a more holistic view as to who is impacted the most and how that may play out legally. If the impact of a proposed RIF seems askew consult experienced human resources professionals and legal counsel before proceeding.
Call It What It Is
A RIF is a cross-company trimming of employees. A termination is the firing of an individual. Don’t use the former to justify the latter, and don’t disguise a layoff as something else. It is wise for a company to avoid hiring new employees for the positions that were just cut to prevent the appearance of impropriety. While mistakes can be made, it is best to maintain the decision to trim a department or vital position for a period of at least six months to one year before recreating the position or hiring someone to fill a spot. Such an action can give rise to the appearance of discrimination for the employee who was let go.
If there are problem employees, poor performers, bad attitudes or those who are excessively absent without reason, handle them in the normal course of the employment process. Utilize proper documentation, coaching notes, employee performance metrics and discipline and absenteeism records to justify their termination as opposed to handling that sometimes-unpleasant process with a layoff. A standard termination and a RIF each have their place in the life cycle of a business and in the span of an employment relationship. Use each one correctly to avoid legal problems.
While we wait week-to-week for the next batch of employment data, it’s important to consider the legal aspects those issues present each unique business. If a RIF is in the future as part of your business’s normal evolution, consult an attorney to determine whether the proposed actions are sound.
Simonson is an attorney with Fryberger, Buchanan, Smith and Frederick, P. A. specializing in business, contract, and employment law.