Frantic Fridays

TGIF? Not anymore.  For many employers, the end of the week means another round of frantic employee terminations.  Even in the face of sudden economic downturn, reductions should not be rushed.  Employers need a game plan for the implementation of a reduction of force.

  • How will the employer notify employees?  Individually? In a group? For one multi-state RIF, a major employer communicated the lay-offs via email, followed by in-person meetings.
  • The employer needs to be prepared with Separation Agreements and General Releases if applicable.
  • Employees need to be provided with information regarding benefit continuation.
  • In some states (such as California) employees must receive their final pay and accrued vacation pay at the time of termination.  In other states, such payments can be made in the next pay period.
  • Employees should return company property (keys, badges, cell phones, blackberrys, laptops) before leaving.
  • Arrangements should be made for personal property (provide the employee with a means of carrying personal items or make arrangements for pick up or delivery).
  • The employer must make sure that its Interactive Systems are secure.  The employer should cut off an employee's access to its computer systems before communicating a termination.  Savvy employees can cause significant and wide-reaching damage in a matter of minutes.
  • Likewise, the company should make sure its physical premises are secure.  Employers should advise receptionists or security of any entry or visitation restrictions on existing employees.
  • Employers should be prepared for media inquiries.  Public relations are key to a survival of a RIF in the public eye.

Train, Train, Train

After all the high level management meetings and legal review, the implementation and communication of a reduction in force is often the responsibility of front-line supervisors.  Making sure supervisors are trained is a critical and often overlooked step in implementing a lay-off. 

Employers should take the following steps:

  • Provide the supervisor with a script communicating the reason(s) for the reduction, why the individual employee was chosen, and the nuts and bolts of the separation.  A Q & A sheet can be helpful.
  • Provide the supervisor with the necessary paperwork  (Separation Agreement, COBRA, exit interview form, etc.) in advance.  Supervisors should understand the basic provisions, including the amount of time the employee has to consider the agreement.
  • Counsel supervisors about confidentiality.
  • Caution supervisors against any reference to protected classifications or protected activities, such as comments like "you were almost ready to retire anyway" or "since you've been back from maternity leave..."  As in all employment decisions, supervisors must avoid stereotypes and assumptions.
  • Provide supervisors with responses to remaining employees.  Supervisors should not make promises of job security or continued employment.
  • Prepare the supervisor for employee challenges.   Supervisors should be able to direct employees to someone in human resources or management.
  • Keep in mind that the supervisor may be concerned about his/her job security as well.

Effective Releases of Age Claims

The Age Discrimination in Employment Act  ("ADEA") prohibits employment discrimination against employees age 40 or older.  In order for a release of a claim for age discrimination under the ADEA to be effective, it must meet the requirements of the Older Workers’ Benefit Protection Act (“OWBPA”).  While simply meeting the minimum statutory requirements does not satisfy the burden of proving that the release is knowing and voluntary, failure to do so can be fatal to the enforceability of the release.            

The OWBPA requires, at a minimum, that the waiver agreement between the individual and the employer:

  • be written in language easily understood by the average employee;
  • specifically refer to rights or claims arising under the ADEA;
  • not waive rights or claims that may arise after the date of the waiver is executed;
  • provide for consideration which is in addition to anything of value to which the individual already is entitled;
  • advise the individual in writing to consult with an attorney prior to executing the agreement;
  • give the individual at least 21 days within which to consider the agreement;
  • provide for a seven-day revocation period.

The OWBPA imposes additional requirements in the context of a group or class termination. The employer must provide the departing employees with at least 45 days (not 21 days) to consider the release and provide the employees with detailed information concerning those eligible and ineligible for the separation program. The latter information must include any class, unit or group of individuals covered by the program, any eligibility factors for the program, and any applicable time limits, as well as the job titles and ages of all individuals eligible or selected for the program, and the ages of all individuals in the same job classification or organizational unit who are not eligible or selected for the program.  

 

The purpose of the information is to provide older workers with enough information to decide whether a termination may be discriminatory before signing a release. If this information is inaccurate or if the employer does not define the job classification or unit properly, the age release may not be enforceable.  One court recently invalidated age releases because the company represented that it laid-off 152 employees at one facility, when the correct number was 154, and because the company used confusing codes to identify the job classifications at issue.

 

Note that the above requirements do not need to be met where an employee is not releasing a claim under the ADEA, even if the employee is part of a group lay-off or reduction. Thus, where the employee is under age 40, the employer does not need to give the employee 21 (or 45) days in which to consider the agreement (although the employee should have a reasonable period of time in which to do so) and the employer does not have to permit the employee any revocation period. In such agreements, it is advisable for the employee to confirm his or her birth date.

Safe Separations

Employee separations are increasingly more frequent in today’s economic environment. At the same time, ever-expanding employee rights combined with a poor job market may make departing employees more likely than ever to sue. 

Many employers mitigate this risk by offering a severance payment to their departing employees in exchange for a release of claims and other promises by the employee.   However, too often employers take a "one size fits all" approach to separation agreements.  In order to get what they pay for, businesses need to ensure that their separation agreements are tailored to the individual circumstances and protect the company’s interest to the fullest extent permitted by applicable law.

Separation agreements should include the following key provisions:

  • Condition severance payments on a general release.
  • General releases must be state specific.
  • Releases of some claims may not be enforceable – include an acknowledgement that the employee has received everything to which s/he is entitled.
  •  Individual or group releases for employees age 40 or older must meet the Older Workers Benefit Protection Act requirements to be effective.
  • Require the employee to return all company property before receiving any payment.
  • Further protect the company with restrictive covenants and confidentiality and non-disparagement clauses.

RIF Plans

Employees who are let go into an uncertain job market may challenge terminations in the form of discrimination, whistle-blower, breach of contract and other claims.  Accordingly, reductions in force need to be well thought-out and defensible.

First and foremost, employers need a documented RIF Plan which should include:

  • the business justification for the lay-off.  Employers can look to forecasts, sales figures, overstaffing, technical changes, etc. to provide a business reason for a reduction.
  • other alternatives to achieve the goals of the reduction vs. the cost of the RIF.  Employers who can demonstrate that they explored other options will fair better in litigation and public relations.
  • objective criteria to detemine what jobs will be eliminated.  Employers should be able to provide a job analysis as to why positions were eliminated.
  • criteria for selction.  Such factors can include: sales, evaluations, discipline, customer relations, coworker interactions, ability to manage, and seniority. 
  • evaluation of employees against selection criteria.
  • ranking of employees/value to the performance of work remaining after the RIF.  What special skills and knowledge to the remaining employees have?
  • review of rankings to eliminate unfair or systemic biases
  • statistical analysis of the impact of the RIF on protected classifications.