Employer Considerations For Reductions-In-Force

During economic downturns or other unforeseen business disruptions (such as the COVID-19 pandemic), employers often need to reduce labor costs to ensure the continued viability of their businesses. To minimize risk and ensure the reduction in force (RIF) is cost-effective, it is often wise to have departing employees sign a release. For such a release to be valid, the RIF must be structured to account for a variety of legal issues, including (1) selection group(s)/criteria; (2) reporting/notice requirements; (3) amount and timing of severance; (4) continued access to health care; and (5) subsequent unemployment claims.

The value of adequate pre-RIF planning cannot be understated. An employer implementing a RIF must carefully consider its selection criteria to prevent a disparate impact on employees in particular protected classes, such as those over 40, and to obtain valid, enforceable releases under various state and federal laws. The Older Workers Benefit Protection Act in particular requires a structured approach to a RIF that must be taken into account from the very outset.

Mize PC strongly encourages employers to seek legal advice at the outset of a RIF. Proactive advice will result in significantly lower RIF-based liability than reactive advice.