Keeping it Legal:
Managing Reductions in Staff or
Hours
Jeffrey E. Myers, Esquire
One Logan Square
130 North 18th Street
Philadelphia, PA 19103-6998
215-569-5592
Creating a Plan For Your
Reduction in Force
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Identify the Goals/Needs
Design New Structure to Meet Goals
Identify Areas to be Affected
Consider Different Downsizing Methods
Adopt Objective Selection Criteria
Identify Employees to be Affected
Perform Disparate Impact Analysis
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RIF Alternatives
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Attrition
Reshaping
Early Retirement Incentives
Voluntary Layoff
Contracting In
Furloughs
ATB Pay Reduction
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Legitimate Incentives
• Flat Dollar
• Service Based
• Incentives Based on a Percentage of
Salary
• Increases in Pension Benefits
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Alternatives To Reductions In Force:
Wage & Hour Considerations
• Potential Impact On Exempt Status of Salaried
Workforce
• Recent U.S. Department of Labor Opinion Letters
– Permanent changes to salary and workweek permitted
– Short-term changes may violate salary basis requirement
– Mandatory Time Off okay if:
• Week or longer and employee performs NO work
• Employee receives PTO for shorter periods
– Voluntary Time Off okay if:
• Full day or longer
• Truly voluntary
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Volunteers
• FLSA defines employment broadly (i.e., “to suffer or
permit to work”)
• Individuals who volunteer or donate their services for the
following are generally not considered employees:
– Public service
– Religious or humanitarian objectives
• Volunteers typically are part-time
• Volunteers generally act without contemplation of pay
• Employees may not volunteer services to for-profit
private sector employers
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EEO Concerns
Disparate Treatment
• Prima facie case
– Member of protected class
– Qualified
– Adverse action
– Others outside protected class treated
differently
• Employer’s burden: adverse action taken
for legitimate, non-discriminatory reasons
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EEO Concerns
Disparate Impact
• Prima facie case
– Neutral selection criteria, BUT
– Disproportionate number of employees from
protected class affected
• Employer’s burden: selection criteria are
job related and consistent with business
necessity; no less burdensome option
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Questions To Ask
• Is there a clear and legitimate business
reason for the RIF?
• Are there objective criteria for selecting
employees?
• Were the criteria applied consistently?
• Are actions consistent with all applicable
policies?
• Were terminated employees soon
replaced?
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Questions To Ask
• If performance is a factor, how objective
are evaluations/forced rankings?
• Are early retirement incentives legitimate?
• Any statistical anomalies?
• Were all contract provisions complied
with?
• How were employees on leave treated?
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Determining When a RIF Triggers
Application of the WARN Act
• Employers:
– 100 or more employees
– Excluding those who worked less than 6 of
the past 12 months OR less than 20
hours/week on average
• Employees:
– Hourly & salaried
– Managerial & Supervisory
– NOT business partners
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WARN Act
• Qualifying Events
– “PERMANENT” Plant Closure (Site or Facility)
• 50 or more employees affected in any 30 day period
– Mass Layoff
• 500 or 50 &1/3
– Aggregated Layoffs
• Employment Loss Defined
– Termination
– Layoff for more than 6 months
– Reduction in Hours (6/50 rule)
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Consideration of
State and Local Office Closing Laws
• More and more state and local governments are passing
plant closing legislation that varies from federal WARN
Act:
– New York, New Jersey
– Philadelphia Ordinance
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Apply to smaller employers
Different notice periods
Increased Severance Pay obligations in lieu of notice
Different definitions of triggering events
Different damage provisions and penalties
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Examples of States With Their Own “WARN”
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California
Hawaii
Illinois
Maryland
Massachusetts
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New Hampshire
New Jersey
New York
Tennessee
Wisconsin
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Designing a Separation Package
• The package must include:
– Earned Compensation
– Vacation
– Other Earned Benefits
• The package may also include a
separation agreement including severance
pay and a release of claims
• Outplacement/U.C. Assistance
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Designing a Separation Package
OWBPA Requirements
• Group terminations (more than one)
• 45 day consideration period/7 day revocation
period
• Disclosure Statements with Separation
Documents
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Identify the decisional unit
Eligibility factors
Time limits
Job titles and ages of all employees in the unit
Identification of who was selected/not selected for
termination
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Other Release Pointers
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Plain language
Knowing/voluntary
Real consideration
Right to counsel
Care in integration
State affirmative obligations of employees
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Communications Strategy
• The Displaced (Notice)
– When
– By Whom
– Content
• Public
• Customers
• The Survivors
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Safety Concerns
• Take necessary security and safety
measures before something happens
• Warning Signs for potential workplace
violence:
– Inflexible-difficulty coping with change
– Makes threats or intimidating comments
– Displays hopelessness or paranoia
– Takes criticism poorly
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Steps Employers Should Take to
Secure Intellectual Property
• Ensure that computer passwords are changed
prior to termination or layoff
• Ensure internal security protocols actually are
being pursued
• On the eve of a layoff, make sure large amounts of
documents are not being copied or downloaded
• Actual security
• Review the legal rights in states in which the
employer is taking personnel actions
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FOCUS
Finally,
F air
O bjective
C onsistent
U nified
S ympathetic
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Implementation
Contract Review
• Review Collective Bargaining Agreements
– Layoff Clause
– Bumping
– Notice
– Pension
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Use following slides only if required
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Bargaining Issues
• Decisional
– Required only if motivated by labor costs such
as wages and benefits
• Effects
– Timing
– Payment of Severance
– Continuation of Health Coverage
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WARN Act
Who is Entitled to Notice?
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Union
Individual Employees
Chief Elected Local Government Official
State Dislocated Worker Office
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WARN Act:
How Much Notice?
• Basic -- 60 Days
or
• As Much as Practicable (Not Zero)
• Natural Disaster
• Unforeseen Business Circumstance
• Faltering Company
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WARN Act
Form and Content of Notice
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Identify Site
Contact Person
Permanent/Temporary
Dates of Terminations
Affected Employees (Names,
Classifications and Numbers)
• Bumping Rights
• Union Information
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WARN Act Penalties
• Sixty Days of Pay (Calendar v. Working)
• Sixty Days of Benefits (Includes Gratuities)
• Civil Penalty -- $500 Per Day
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