November, 2014

LIFE’S LESSONS* Fall 2014, Real Issues…Reconstituted Facts


With year-end on the horizon, businesses closely assess performance relative to their financial objectives. Workforce restructurings and staff reductions may be a knock-down effect of such assessments, to enable a business to maximize efficiencies and reduce costs. Assume ABC Co. is undergoing just such an assessment.

Bernice, the Head of Sales, plans to consolidate her teams by eliminating all district sales manager roles and designating up to three sales supervisors in each region, who will perform some local management functions in addition to their regular sales duties. Bernice’s plan will impact 10 employees, in six different states.

Lucas, the Head of Production, plans to cut 15 junior staff roles by automating and consolidating functions. In selecting among the employees whose functions are not directly impacted by automation, Lucas is considering performance, cross-training, attitude, flexibility in scheduling/overtime, and special skills.

Bernice and Lucas have come to HR with their respective workforce reduction plans, and asked whether they can move forward with the terminations. Before giving them the green light, much needs to be addressed from a Human Resources and employment law perspective.

Analyze the Selections Relative to the Workforce

Consideration must be given to the demographic composition of those selected, relative to the remaining employees. Are employees of a particular sex, race, ethnicity or age group being impacted disproportionately, and is there adequate business justification for each individual selected? This analysis should be conducted both for the employees being terminated and for those being selected for the new sales supervisor roles. For example, by considering flexibility, is Lucas adversely impacting working moms? Have all the production employees had the same opportunity for cross-training, or was it limited, such that a disproportionate number of older employees are being impacted? Are the sales supervisor roles truly distinct from the district sales manager roles? What is the age distribution between those in both roles?

Consider Timing and Communication

Assuming the selections are justified, Lucas and Bernice should consult regarding timing – will the termination dates coincide, or be staggered? How will the decisions be communicated – to those impacted and to the remaining workforce, both locally and throughout the regions? Are in-person communications possible? Will employees be permitted to remain on premises and/or retain access to the company’s systems after they have been notified of their termination? Also, verify applicable state law regarding final paychecks, as these too need to be coordinated (i.e., Connecticut requires the next business day, while New York requires the regular payday for the last pay period worked.)

Prepare Documentation

Finally, HR and the management team should compile relevant documents for the impacted employees. These may include severance agreements, disclosures for those age 40 or older to comply with the Older Workers Benefit Protection Act, special state notices (such as the Connecticut unemployment notice), COBRA notices, and perhaps a memo on the transition off company benefits, such as flexible spending accounts, life insurance programs, and outstanding claims for travel and expense reimbursement. In addition, it is helpful to have a script and some guidelines for the managers delivering the message so that they are prepared and consistent in their communications, and a checklist of company property to be collected from the employees. Careful planning can make all the difference in how news of a RIF is received.

* In my years of legal practice, there are certain recurring issues that cross a range of industries and circumstances. This column presents a hypothetical factual situation as a vehicle to substantively review these recurring legal and employee relations issues.

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