RIF Risks

As the U.S. economy continues to sag, employers are paring their workforces at an ever-accelerating rate. In June, 1,643 companies implemented mass layoffs, according to the Bureau of Labor Statistics, meaning that each one laid off at least 50 people. And while most of the 166,000 employees who lost jobs in those June layoffs can't or won't instigate legal action against their former employers, companies planning layoffs of their own should tread carefully.

The very nature of the current layoffs increases the legal risk. Layoffs happen even in up economies as
employers deploy new technologies or outsource work. In good times, the laid off workers typically leave optimistic about finding work elsewhere. But employees who lose jobs in a down economy are more likely to feel they have nothing to lose by taking their former employer to court, according to Gerald Hathaway, co-chair of the business restructuring practice at Littler Mendelson.

But beware of including a low level employee to create the appearance of diversity. "That's a misstep because everyone will understand the person does not have an equal vote," Austin says.

Choose Criteria
The committee must determine the criteria that will be applied in selecting the group to be terminated. If the company has an existing policy or a contract requiring layoffs by seniority, the committee's hands are tied. More frequently, employers use performance-based criteria, or they may assign a weight to each, such as 90 percent to performance and 10 percent to seniority. One step employers often forget is documenting who was compared to whom, according to David Lamoreaux, co-leader of the Labor and Employment Practice at consulting firm CRA International. Lamoreaux often serves as an expert witness in RIF cases.

"Go back and say, 'What criteria are really necessary?'" Hathaway suggests.

Lamoreaux adds that it's not enough to look at one staff reduction in isolation if more layoffs are planned.

Senior Editor

Mary Swanton

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