Thread regarding United-Guardian Inc. layoffs

It is an unfortunate but increasingly common fact in business in these difficult economic times that even successful organizations are forced to reduce the number of employees in order to maintain economic viability. Although a force reduction (RIF) can often improve the financial image of an entity, there can be serious legal and financial consequences if the dismissal is not properly conceptualized, designed and implemented. This checklist is intended to help organizations considering "shrinking" staff when considering the critical elements of a RIF.

This checklist is intended as a concise, simple English and practical summary of the most important components of an RIF that employers should consider. The checklist cannot by nature contain all the nuances or all aspects of the RIF process that may occur in treatises along the entire length of the book, nor fully explain it, nor is it a substitute for situation-specific advice from an RIF-experienced labor lawyer . The checklist is intended to give employers an overview of the RIF process with which they can plan these unpleasant (and potentially risky) events.

The checklist is divided into four sections: Section I - Planning, Section II - Involuntary RIFs, Section III - Voluntary RIFs and ERIs, and Section IV - Problem avoidance.

Section I - Planning

Identify the goals.

The most frequently mentioned RIF goals are reducing wage costs and better aligning personnel with the available work. It is often useful to specify the goals more specifically ("reduce wage costs in the finance department by 10 percent;" "eliminate the ketchup bottle production line") and record the goals in writing so that decision makers have a permanent point of reference when carry out their mission.

Determine the nature of the RIF.

RIFs are usually 'involuntary' (ie the employer identifies the employees to be fired) or 'voluntary' (ie the employer offers a departure package to a specific group of employees who individually decide whether to take the package and the company). Involuntary RIFs give employers more control over which employees leave, but more often form the basis for employees' lawsuits. Voluntary RIFs (sometimes in the form of early retirement incentive plans or "ERIs") are often less disruptive / emotionally painful and lead to greater cost savings (because employees who are about to retire are often among the most paid employees and more willing to Attractive dismissal option), but often give the employer fewer opportunities to retain the best employees. Employers sometimes use consecutive RIFs: a voluntary RIF and then, if that does not lead to a sufficient departure of employees, an involuntary RIF.

Consider alternatives.

RIFs are useful, but are often expensive and sometimes lead to lawsuits. Wage cost reductions and staff work reconciliations can also often be achieved through other alternatives, such as (a) waiting for normal staff turnover / loss, (b) reducing the number of hours that staff work per hour or changing jobs from full time to part time, (c ) division of jobs, (d) wage blocking or wage reductions, (e) implementation of short-term layoffs (one or two weeks) or factory closures, (f) allowing employees to volunteer for unpaid leave, and / or (g) ) transferring existing staff to different jobs or departments or facilities. These alternatives to RIFs may not be as cost effective, but they are probably less risky.

Ask for advice.

RIFs concern human resources, benefits, taxes / finance and legal issues. Unless employers employ skilled professionals, they must ensure in advance that there is easy access to such advisors who are familiar with RIF-related issues.

Ensure confidentiality.

The RIF process must be strictly confidential until it is formally announced. Maintaining confidentiality will minimize the fear / distraction of both employees and preventive claims by concerned employees who are trying to "guarantee" their jobs (that is, employees who think "that they will not include me in the RIF next month if I announce that I am disabled or have a s-xual harassment claim this month. ”) Limit the spread of sensitive demographic information about employees. Protect the electronic RIF documents and communication between RIF decision-makers and advisors with a password. analysis in a locked storage when it is not in use Shred draft documents Use only support staff who can keep secrets.

Ensure security.

Formally assess - as part of the ongoing planning process - the risks of violence, sabotage, and theft by employees becoming RIFs. Make plans to exclude the departing employees of the building and computer / telephone systems as soon as they are aware of their divorces, as far as possible. If the company expects certain employees to become violent or disruptive, report the security of the building or law enforcement prior to RIF to inform them and inform key personnel about contact details for key security personnel (but realize that some departing employees are offended) become unmanageable if they suspect that they are not being respected by a clear police presence). Educate seniors on how to respond to threats / violence.

Anticipate disputes.

Various documents have been made in an RIF, including working documents, statistical analyzes and divorce agreements and their exhibitions. If a lawsuit comes from the RIF, it is very likely that those papers must be handed over to the plaintiff's counsel and can be exhibited in court in the courtroom. The company must seek advice on methods for keeping certain documents that are protected by the 'client-client privilege'. Be careful what is written and how it is expressed; a jury might look over your shoulder in two years.

Minimize PR problems.

Public relations are important. Consider whether a prepared press release (rather than spontaneous answers to a reporter's questions) will position the employer most effectively in the eyes of the general public. A single designated spokesperson to answer all post-RIF questions from inside and outside the organization is often the most effective way to disseminate accurate and consistent information about the RIF.

Section II - Involuntary RIFs

Determine the scope.

Will the RIF go through the entire factory or company or be limited to specific departments or production lines? Will the RIF delete the job titles (perhaps by combining two jobs into one) or reduce the number of people in certain jobs or both?

Identify decision makers.

There must be a limited number of people who decide which employees will be released. Decision-makers must be a diverse group of objective, credible executives who are trained (or can be trained quickly) on how to implement the RIF in a careful, non-discriminatory manner. ("Credibility" is useful in acquiring employee purchases if the identity of the decision makers becomes known.)

Set realistic time schedules.

An involuntary RIF can be conceived, planned and implemented in smaller organizations within seven to 10 days, but larger employers will need more time to ensure that the RIF is thoughtful and legally defensible. When determining the timetable for the implementation of the RIF, consider the necessary transfer of work due to the departure of the RIF staff and whether there will be phased departure (ie a large group followed in weeks or months) by another large group of employees).

Determine the termination benefits.

Pay . Termination benefits are generally not required by law unless (a) the employer has previously committed to pay it (through an employment contract, collective labor agreement or a severance plan), (b) there is a state or local requirement, or (c) is paid as 'consideration' to buy the signature of an employee with a release / waiver of claims against the employer. Similarly, the amount of the severance payment is usually in the employer's opinion. Many employers apply the rule of thumb "two weeks of pay for each year of service", with minimum and maximum amounts. (However, be careful with "special deals"; improved termination benefits for a select number of employees can generate discrimination laws.)

Other benefits. There are other types of termination benefits that are often provided, including reimbursement of employee insurance premiums for ongoing health insurance, outplacement assistance / training, eligibility for recall, more than neutral letters of reference, etc. If the departing employees will have ongoing obligations towards the employer (eg (transitional assistance, confidentiality, non-disparagement), consider paying the installment in installments over time rather than suddenly to encourage compliance with such obligations. Determine whether the redundancy scheme (in particular an installment payment protocol) is a 'plan' governed by the Federal Employee Income (ERISA) Act and, if so, exactly meets its requirements.

Comply with the laws.

Many statutes have an impact on RIFs. The laws are numerous, complex, sometimes contradictory in their demands / prohibitions, often contain severe penalties for non-compliance and often form the basis for both individual and collective lawsuits against employers. The advice of a competent RIF lawyer is highly recommended. The RIF-related laws include:

Factory closure laws: federal and similar laws in different states are not limited to RIFs where there is an actual "closure". The laws require employers to be notified in advance of the intention to release certain parts of the workforce. the plant remains open. For example, the federal WARN law requires employers with more than 100 employees (excluding part-time employees) to provide 60 employees in advance with certain employees, government agencies, and trade unions who will lose at least one-third of employees. the workforce at one work location if that number is at least 50 employees. There are a few exceptions to factory legislation (such as "faltering company" and "unforeseen business circumstances"), but the exceptions are very limited and generally only allow less than the normal notification (and not notification). Factory legislation sometimes has specific requirements for "phased RIFs" (that is, when workers are released in several large groups during a certain period.)

Discrimination laws: federal and national statutes prohibit employees from being treated differently because of their gender, race, age, religion, pregnancy, disability and other legally protected categories. RIFs are often attacked because they discriminate against older employees. The age discrimination legislation applies to every aspect of a RIF. Federal law protects employees who have reached their 40th birthday, but some state statutes have no minimum age (ie an employer may be liable for discriminating against a 21-year-old employee). Employers are generally not allowed to terminate employees because they have reached a certain age (there are some, but very limited, exceptions to that prohibition). Federal legislation on age discrimination has specific and strict requirements for waiving claims for age discrimination (discussed under "preparing the papers" below).

Employee Benefits Laws: Federal pension laws (including ERISA) affect RIFs. Certain departure schemes and even less formalized departure schemes can, for example, be 'plans' that are regulated by ERISA. ERISA has specific and sometimes cumbersome requirements for covered 'plans'. However, the statute also offers certain attractive benefits for employers (including the privilege of many national laws and for non-jury investigations into ERISA claims). Employers must therefore carefully assess whether their proposed severance schemes fall under ERISA and how the potential benefits of that law relate to the disadvantages associated with legal compliance.

Fiscal legislation: the "deferred compensation" regulation in the federal Internal Revenue Code (Article 409A) provides for serious fines, mainly for recipients of the money, for certain types of termination benefits (usually those where large amounts are paid over a longer period). The 409A regulations not only apply to formal departure schemes, but also to individual departure schemes.

Immigration Laws: Federal immigration laws often stipulate that the legal status of a visa holder to continue working in the United States ends when the employment ends. The employer may have ongoing obligations towards visa holders. For example, an employer will have to offer the holder of an H-1B visa terminated in an RIF the reasonable costs of returning to the home country.

Revenge / whistleblower legislation: many statutes contain protection for employees who complain to their employers about or oppose suspected violations of these statutes. There are separate "whistleblower laws" in many states. Employers generally cannot select employees for termination in a RIF because they have reported or complained about suspected illegal business activity.

Leave laws: federal and national laws prohibit retaliation against employees who use their legally permitted leave rights. Although taking leave does not protect the employee from being dismissed in a RIF, employers must carefully analyze the temporarily selected employees for divorce to ensure that employees on leave or on leave are not targeted.

State laws: every state (and some provinces and cities) has discrimination, wages and wage payment and other laws that protect workers and impose requirements on employers, laws that affect RIFs. State / local protections and requirements are often more protective and cumbersome than federal laws (such as state or local laws that protect g–, lesbian, bisexual and transsexual workers). The laws are as numerous and different as the states, provinces and cities themselves. Employers must know and comply with local requirements.

Collect data selectively.

A detailed organization chart / task graph, showing the existing (pre-RIF) reporting relationships and numbers of established clients, will be very useful in comparison with a comparable “after” chart (with the desired expected changes to the RIF). A list of employees with their gender, age, minority / disability / whistleblower status, leave / employee benefit status and other legally protected features will be needed for the analysis of the "disparate impact" (discussed below). This demographic data is very sensitive, so it must have a very limited distribution and should NOT be given to decision-makers before identifying which employees should be fired: this is essential, so that it cannot later be claimed that the protected status of an employee is a factor in his / her selection for separation.

Identify the selection criteria.

The criteria must be business-related and consistent with both the contractual and collectively negotiated obligations of the employer and the announced policy. The most legally defensible criteria are objective (such as duration of service, demonstrated skills, training, amount of production, written performance evaluations, discipline history) but subjective criteria (such as "enthusiasm", "versatility", "personality") are also allowed If they are actually required for the specific function and are not applied in a discriminatory manner. Inadmissible criteria, in addition to the legally protected features, include "whistleblowing" (not only the prior submission / expression of claims of discrimination at work, but also allegations that the employer in no way complies with the laws that regulate his company), use of incapacity for work or FMLA leave, submitting a compensation claim for employees and support for or joining a trade union. Many employers who select employees to become RIF participate in the "assessment" of the employee (give a rating to each employee) or "ranking" (the employees sort by skills, value / contribution to the organization, etc.) To to assist with the selection. Such assessments and rankings must be as objective as possible (and of course employers must compare RIF-related assessments and rankings with previous performance assessments to ensure that there are no inexplicable differences). Consistency in the selection and application of criteria is crucial because it is recognized that certain criteria may not apply from department to department or from job to job; Consistency in the use of criteria in successive RIFs is desirable but not necessary if the RIFs actually vary in size, scope and motivation.

Develop a provisional list.

Based on the agreed selection criteria, decision-makers must prepare a confidential provisional list of jobs / employees to be deleted in the RIF.

Analyze / revise the provisional list.

Perform an "unequal impact" analysis by comparing the demographics of the provisionally selected employees for dismissal with those who will be retained to ensure that employees in protected classes are not inadvertently selected for separation with a higher percentage than their percentages in the workforce. For example, if 85 out of 100 employees on a production line are less than 40 years old, it is expected that only about 15 percent of those on that RIF production line are over 40 (that is, age-protected individuals). If the workforce is large enough, the help of professional statisticians can be very useful in analyzing the "disparate impact" (and their reports can be useful in defending any lawsuits that arise from the RIF). Investigate and resolve any apparent differences in the provisional list (eg Spanish women or employees over 40 are selected with a higher than expected rate).

Explore potential problems with the union.

If a trade union represents part of the workforce covered by the RIF, carefully study the collective labor agreement and consider the National Labor Relations Act for restrictions on the RIF. The collective bargaining agreement or federal labor law probably requires notification and negotiation with the union about the effects of the RIF and may require the employer to use certain criteria (such as seniority) or procedures ("bumping") in the RIF.

Identify immigration problems.

Determine whether employees to be fired withhold a visa or have applied for green cards. Identify the company's obligations if those employees are RIFs and make arrangements to meet those obligations.

Perform reality checks.

Ensuring that overall activities and individual departments and production lines can continue to function after the RIF (the use of "before" and "after" reporting relationships and personnel tables is often useful), and that the RIF does not eliminate persons with critical skills. Confirm that the employees make sense on (or not on) the divorce list; For example, has someone inexplicably been left out of the list - and is he being protected - for some reason that can later be challenged in court (for example, because of an ongoing s-xual relationship with a supervisor)? As far as possible, ensure that the supervisors of all departing employees agree that their employees are placed on the list.

Prepare the papers (and exemptions).

Most employers want departing employees to sign a legally binding document that will safeguard the company from all claims and bring the employment relationship to an end without amicable controversy. A divorce agreement with a waiver / release of claims is often used. Agreements for management-level employees are generally longer and more extensive than those for non-management employees. Think about the value of getting promises from the departing employee about non-disparagement, confidentiality and non-solicitation from customers or other employees. There are specific federal legal requirements for waiver of claims based on age discrimination in a RIF, including in particular that the employee is (a) explicitly advised in writing to consult a lawyer before signing the agreement, (b) 45 days of have time to cancel the contract before it is signed (a period in which the employee can voluntarily waive), (c) after seven days (a period that cannot be waived) after signing the contract to revoke it (ie that the distance is not in effect until the seven-day period) successful without withdrawal), and (d) disclosures consisting of general information about the RIF decision-making process, as well as specific information about the job titles and ages of selected and unselected ones persons for divorce in the RIF. (The required RIF disclosures for a large employer are often time-consuming to prepare, so organizations must have sufficient time to prepare them.) There are different legal requirements for exemption agreements. Given the complexity of applicable law and the desire to make the agreements binding and enforceable to block future claims, the agreements must be drafted or reviewed by counsel before being offered to the departing employees.

Give the necessary notifications.

The WARN law and all applicable laws concerning 'factory closures' may require, and collective labor agreements generally require that the employer notifies the RIF (and, often, some basic information about this, such as the number of employees being released and the timing) of the divorces). After reviewing the requirements for the content of such notifications, prepare them and send them. Be careful: it is important to precisely meet the requirements to prevent fines or lawsuits.

Collect materials that are needed for the exit meetings.

Some provincial laws oblige employers to give departing employees their last salary on their last day of employment (including payments for accrued but unused vacation time), while other national laws require employers to provide information on unemployment benefits, job opportunities, etc. material for managers who will do the exit meetings. The "continuation of the medical coverage group" (COBRA) notifications must also be provided as required by federal statutes.

Plan and train for termination meetings.

The exit meetings can be held on-site or off-site; off-site meetings are sometimes useful to control the reactions of volatile employees. The meetings must be short, simple, clear, informative, emotionless and definitive. It is generally preferable to inform the departing employees individually. The employee must be informed of the decision, the severance payments available and any conditions for receiving the benefits (such as signing and restitution of a divorce agreement), the transition procedures (restitution of company property, requirements of company-sponsored pension schemes such as group coverage, etc.). stock options, bonuses) and any transition of duties and responsibilities. The employees do not have to get all the facts about the RIF, but what they are told must be truthful. A hand-out sheet with a summary of the available benefits often simplifies meetings and minimizes follow-up questions after the meeting. The management staff who must inform the departing employees about the decisions is, as the saying goes, "the point of the spear", so it is essential that only capable managers are selected for the task: supervisors who are not emotionally equipped to perform badly News to be delivered (and being confronted with anger and tears of employees) is likely to make mistakes and endanger the company. Two people must represent the company in the exit meeting: a spokesperson and a 'non-speaking' witness. Managers must remain calm and sympathetic, but not defensive or overly apologetic (because this may involve misconduct) or too talkative (because extensive explanation / justification of the RIF can only encourage unproductive debate, suspicion, questions or mistakes). The manager must allow the employee to vent, but must not argue or argue and must remain steadfast (that is, do not imply that dismissal decisions may be changed). Employers must perform rehearsals (perhaps even role-playing) of the exit meetings to confirm that the selected managers can handle the task and 'know the script'.

Meet "survivors".

The retained employees will be nervous about the future of the organization and their jobs. Communication from management, ideally personal, often speeds up the return to normality. Employees can be informed about the future (as it then appears to management), be warned that there will be a normal adjustment period in light of the reduced jobs / staff and friends, and recruited to help the organization stabilize and prosper. Management must carefully avoid promises about the future, as additional RIFs, termination or restructuring may be required.

Section III - Voluntary RIFs and ERIs

Some employers want to consider voluntary RIFs or Early Retirement Incentive Plans (ERIs) as an alternative to involuntary RIFs. Points for attention for these voluntary divorces include:

Determine desired results.

Determine the ideal number of employees to be released from individual departments. Consider worst case scenarios: what if everyone who is eligible for a package chooses to take one and leave? What if only the best employees choose to leave? By knowing the ideal outcome, the employer can structure the criteria and the dismissal package to achieve those goals.

Determine the eligibility criteria / deadlines.

Employers can legally limit voluntary RIFs / ERIs to employees who have reached a certain minimum age, to certain departments / work groups, to staff with certain years of credited employment with the organization, and to certain periods (eg Retirement during a specified but limited "window period" "). A "years of service plus age" protocol is relatively common, meaning that the employee is eligible for a severance package if his years of service plus his age exceed a number chosen and announced by the employer to achieve the goal of reducing staff. The employees must be given sufficient time to consider their options (and the divorce agreement) before they are forced to make a decision; several weeks is not uncommon, while large voluntary RIFs sometimes give employees 30-45 days to register, in addition to the 45-day reflection period required to obtain a valid waiver of age claims under federal law .

Identify incentives.

Termination benefits (in particular termination benefits that are higher than the "normal" amounts previously paid by the employer to departing employees) or early retirement benefits are common components of a voluntary RIF departure package. The goal is to make divorce benefits cost effective, that is, high enough to encourage employees to leave, but low enough to minimize costs for the company. Employers can offer lower severance payments to retired older employees under very limited - and complicated - circumstances if otherwise consistent with existing pension plans; a competent employment law / benefit lawyer should be consulted if it is planned that the incentives for a voluntary RIF / ERI will vary based on age.

Comply with the law.

The legislation on discrimination and benefits / pensions (discussed above) also affects voluntary RIFs and ERIs. It is important to assess ERISA issues early in the planning process and to take into account questions such as: are the terms of the proposed voluntary RIF program consistent with the terms of the employer's pension plan and applicable benefit laws? Will an ERI be considered an ERISA 'plan' and therefore subject to the requirements of participation, vesting, financing, reporting and disclosure of that law and, if so, can the plan be restructured to prevent ERISA coverage? Will the RIF or ERI cause delayed compensation / Section 409A problems? The complexity of the benefits / tax laws requires careful consideration and advice from an experienced benefits lawyer during the RIF planning process.

Prepare papers.

Most employers use at least (a) a voluntary RIF announcement that clearly sets out the eligibility criteria, the available severance payments and the deadline, and (b) a divorce agreement (with full release of claims). The same legal requirements for exemptions for involuntary RIFs (discussed above) apply to voluntary RIF documents.

Ensure that 'voluntary' IS is 'voluntary'.

Voluntary RIFs are usually challenged in court on the grounds that the trial was not really voluntary; that is, the former employees were threatened, forced, or misled to accept the package and sign a waiver of claims. Therefore, ensure that employees eligible for the voluntary RIF receive sufficient and accurate information about the benefits, deadlines and consequences of choosing a departure package and separation from the company. Supervisors should be warned that they cannot make threats, promises, or misrepresentations to force or encourage employees to leave. Eligible employees must be given time to carefully consider their options (and seek advice) before making a decision and must be provided with information about the RIF (including the divorce agreement) well in advance of the decision period.

Control communication.

Voluntary RIFs are often complicated and sometimes controversial and subject to litigation, so that (a) there is a limited number of very knowledgeable company representatives who can answer questions and that other (less informed) management personnel are instructed not to speak to employees about the plan or plan process, (b) eligible employees with inquiries only to those corporate representatives responsible for the implementation of the voluntary RIF and (c) carefully prepare internal and external announcements, explanations and other communications to ensure clarity, completeness and accuracy of all communication.

Section IV - Problem avoidance

Ask assumptions / wisdom of expected actions.

Frequently ask "Is this okay?" Or "Is this fair?" Or "Is this respectful?" Or "Would a stranger understand and accept this?" And / or "What is the worst thing that anyone could make of this?" Often leads to avoid catastrophe.

Be consistent.

If the explanation for a RIF is "we have no more money" or "we have too many people", do not give high bonuses to top managers or do any major recruitment efforts shortly before or after the RIF is announced. You will not like the employees, the EEOC and the jury.

Anticipate the need for a RIF.

Unexpected RIFs often seem to generate the most lawsuits. Dismissed employees seem more willing to accept their destiny (and redundancy packages offered in exchange for waiving claims) if they know in advance that the organization is in financial trouble. Therefore, employers should consider telling employees about economic difficulties before a RIF is announced. Furthermore, RIF-related lawsuits are often easier for employers to win if there are recent detailed, specific, accurate, and fact-based written performance assessments of the released employees that show that they did not perform as well as the employees that were retained. The possibility of a RIF is another reason why an employer should make regular performance evaluations of all employees mandatory.

Anticipate the next RIF.

The RIF decision makers may be here today, but RIF'd tomorrow. Be careful with entrusting sensitive, "where the bodies are buried" information to anyone who can be released in the next RIF.

Look at the future.

The economy can change and, with a little luck, an employer may want to re-hire an RIF'd employee hired this month within a few months. Keep such relocation options in mind when planning a RIF when (a) setting a severance pay (because it may be awkward to re-hire an employee who received a huge redundancy package in a recent RIF) and (b) employees with critical but scarce skills (because employees, once they disappeared, may not return when the company needs them).

Powerful reductions are never easy or pleasant. However, by developing a comprehensive, well-thought out game plan, paying attention to details and seeking appropriate professional advice, employers can shrink with minimal risk.