TUESDAY, AUGUST 18, 2009
by Mark ValponiClevelandEvery day, business owners make tough decisions. The current economic conditions have intensified management pressures, the consequences of which may result in reductions in force.
Terminated employees today are not shy about challenging reduction decisions, often alleging discrimination based upon age, gender, race, and disability.
Therefore, it behooves a company to protect itself by following the primer below which outlines ten do's and don'ts for a reduction in force. The guidance, however, is not meant to take the place of consulting with an attorney prior to a reduction in force.
The Do's and Don'ts of a Reduction in Force:The Do's1. Do analyze and choose candidates by job classification.It is important to analyze the reduction in force by job classification so that similarly situated employees are examined on a demographic and job function basis.
2. Do analyze candidates by protected classes, workers compensation corporate claims, and whistleblower status.
Each candidate within each job classification must be analyzed with respect to membership in protected classes which each candidate may or may not occupy, including those who have filed workers compensation or whistleblower claims. All individuals who exhibit these characteristics must be given special scrutiny when deciding which candidates for a reduction in force are chosen.
3. Do follow company policy as to seniority, severance, outplacement, COBRA, and unemployment.Make sure that all company policies are followed. Obviously, if the company has agreed in its employment manual to make reductions on the basis of seniority, the classification of individuals into protected classes will not be as critical. Ensure that the company's policies regarding severance, outplacement, and any continuation of other benefits are followed.
4. Do offer extra consideration for releases. It is always advisable to obtain releases from the selected candidates who occupy one or more protected classes. In order to ensure that the releases are binding extra consideration must be tendered usually in the form of additional severance and/or outplacement services if the company's policies do not otherwise provide for the specific benefits or at the levels offered.
5. Do honor ADEA mandates. In any release wherein an age claim under the Age Discrimination in Employment Act is included there are mandatory time periods employees must be given to review and potentially revoke the release, as well as other requirements which must be included. Failure to follow these mandates will invalidate the release.
6. Do analyze end results for disproportionate impact. After all selected candidates are identified, an analysis should be conducted to make sure that there is not a disproportionate impact on any protected class. This must be performed regardless of the criteria used for selection.
7. Do memorialize criteria for each selected candidate.The rationale for choosing each candidate selected for the reduction in force should be placed in writing and kept with the human resources department.
8. Do meet with each solicited candidate individually, if practical.Each selected candidate should be met with individually, if that is practical, and the message of the reduction in force communicated in person. A witness representing management should participate in those meetings as well. A consistent message should be given to each candidate. This is especially important where the message is being conveyed by multiple people at different locations.
9. Do put in writing the reasons for reduction, COBRA rights, outplacement; if applicable, severance unemployment benefits. Each selected candidate should be given a writing, which indicates the reasons for the reduction in force as well as an explanation of any benefits which the individuals are entitled to receive, i.e. COBRA rights, severance and benefits.
10. Do analyze whether advance notice of the reduction will be required under the federal WARN Act or similar state law.The WARN Act requires, with some exceptions, that employees be provided advance notice-of 60 days-in cases of qualified "plant closings" and "mass layoffs." Some states have similar laws that also require advance notice. Each reduction in force should be analyzed to insure compliance with these laws.
The Do's and Don'ts of a Reduction in Force:The Don'ts 1. Don't make selections based solely on seniority unless it is necessary.For companies which do not have seniority systems in place, a reduction in force presents an opportunity to reduce the workforce of inefficient or poor performers. That opportunity should be taken advantage of, even if extra consideration must be tendered in order to obtain releases.
2. Don't create a layoff list unless required to do so.Layoff lists should only be established if required under company policy or pursuant to a valid collective bargaining agreement.
3. Don't treat candidates inconsistently.All selected candidates should be treated the same. If there are reasons for creating different subgroups of selected candidates, those classifications should have a rationale basis.
4. Don't set poor precedent.Keep in mind that the extra consideration provided to selected candidates will establish a precedent for future reductions in force.
5. Don't dribble the reductions out over time.Because these reductions can have a devastating impact on the work force, the reductions should all take place at one time with the expectation that there will be no further reductions unless future circumstances dictate otherwise. To dribble out the reductions over an extended period of time creates consternation, speculation and inefficiency in the workforce.
6. Don't mix the messengers.To the extent possible, the same company representative should be present at the individual meetings with the selected candidates so that a consistent message is conveyed.
7. Don't make oral promises or suggestion of reemployment. Oral promises or suggestions that a person is entitled to a recall if the company hires new employees should be avoided at all costs. Such promises or suggestions could lead to litigation if that person is not recalled.
8. Don't negotiate against yourself. Many times after candidates are presented with a release they may attempt to obtain additional consideration in exchange for their signature. Even though the release may contain language that its specifics are to be kept confidential, any deviation from a consistent level of benefits being offered to the candidates could lead to other candidates demanding similar treatment.
9. Do not hire new employees without complete analysis of consequences.After a reduction in force becomes effective, new employees should not be hired into affected job classifications without a complete analysis of the consequences. It is the new hire decision which may trigger the establishment of a prima facie case under employment law discrimination statutes.
10. Don't discard personnel files for 6 years.Because discrimination claims based on membership in a protected class can be asserted 6 years after the adverse employment action, personnel files of the selected candidates should be retained for at least 6 years after the adverse employment actions are taken.
Mark J. Valponi is a partner with
Taft Stettinius & Hollister LLP in Cleveland, Ohio, representing management in public and private sector companies regarding a broad range of labor and employment issues. He can be reached at mvalponi@taftlaw.com
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