Many employers looking for ways to deal with the financial hardships of today’s tough economy are considering reductions in force (RIFs), layoffs and other forms of organizational restructuring.
These changes, of course, have an adverse effect on employees—some of whom are likely to head to an attorney’s office shortly after receiving their pink slips. They’ll be looking to assert claims of unlawful discharge or illegal layoffs against their employers. They have nothing to lose and everything to gain by seeing an attorney.
Sometimes, there’s no good alternative to a RIF. Cutting hours or other temporary measures simply may not be enough to get through rough economic times.
But how you conduct a RIF may spell the difference between a fresh start for the company and a nightmare of litigation over discrimination and other layoff-related lawsuits.
Disparate treatment, impact
There are two major types of RIF discrimination claims: (1) disparate treatment and (2) disparate impact claims. To prevail on a claim of unlawful discrimination as a result of a RIF, the former employee must provide evidence that he or she was subjected to disparate treatment or was disparately impacted by the RIF decision.
Disparate treatment: In a disparate treatment RIF case, the court and jury generally will examine whether there’s evidence of intentional discrimination in deciding who would lose their jobs. Did the employer choose to lay off the employee at least in part because of the employee’s membership in a protected class?
Disparate impact: Proving a disparate impact claim, on the other hand, requires showing that some neutral RIF policy or practice had an adverse effect on a protected class. An employer can counter the proof of disparate impact by establishing that the challenged policy or practice was job-related for the position in question and consistent with business necessity.
Cutting your RIF risks
It’s prudent to carefully plan and execute any RIF—and be mindful that a court may later scrutinize any action for consistency, reasonableness and fairness.
Before doing anything, write down the business reason that necessitates a layoff. Then select who stays and who goes based on that business reason.
Here’s how to conduct a clean RIF:
1. Before the RIF, analyze the workforce segment you plan to cut. Compile information on employee demographics, departments, divisions and salary/paygrades. This becomes your database against which you will later analyze your employee-selection decisions.
2. Top should notify the affected workforce that a RIF is imminent. Explain the reasons for it. Engage in timely and candid communications with employees to keep them apprised of developments. You don’t want rumors in the workplace grapevine to be the employees’ source of information.
3. Determine the jobs and job functions that will be retained. Analyze their value to the company. Factoring in the goals of the RIF, the company’s short- and long-term needs, and its continued operations, decide which jobs or tasks should be retained as currently structured, which should be consolidated, which can be reduced in terms of time and which can be eliminated entirely.
4. Carefully structure (without bias or unfairness) the criteria for determining who stays and who gets laid off. Use either existing or new evaluations developed for the purpose of the RIF. Ensure that the evaluation criteria are bias-free, primarily objective and closely related to the jobs and tasks subject to the RIF. If your appraisal includes subjective criteria, ensure that you consistently consider and formally include them in every employee’s evaluation. If you consider job tenure or seniority, be sure all decision-makers apply that factor uniformly to all jobs and employees. If you use any weighted criteria, be prepared to justify the weight given those factors and how business necessity supports them.
5. Closely compare the affected employees and rank them. Your rankings must be consistent with the individual evaluation ratings and justified by the company’s current or future business needs.
6. Have management and HR oversee all stages in the process to ensure compliance with the RIF plan.
7. After tentatively selecting which positions to eliminate and which particular employees to lay off, conduct an
adverse-impact analysis. Bring in your legal counsel at this time if you haven’t already done so. This final analysis will focus on assessing consistent reasons for laying off an employee, ensuring fair and unbiased evaluations and revealing any possible patterns or significant statistical differences in protected classes.
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