As employers prepare to implement possible Reductions-in-Force (RIF) in anticipation of a looming recession, there are many less drastic alternatives that may be worth considering. While a RIF can immediately achieve necessary cost-savings, it remains a relatively blunt instrument that can be difficult to reverse. In contrast, various RIF alternatives allow for more surgical and targeted cost-savings that benefit employers by retaining employees who will be needed again on the upside of the business cycle. Avoiding a group termination can also eliminate the risk of litigation, which often arises after a RIF, and minimize the negative impact to employee morale. Employers should consider the following options when considering alternatives to a RIF:
- Spread the burden – Employers have the ability to
implement a variety of temporary wage and benefit related policies,
which can often achieve similar cost savings to a RIF by spreading
financial burden across a broader group of employees. These
short-term belt-tightening measures often take the form of a hiring
freeze or pay freeze or reduction in bonuses/wages. However, there
are some legal limitations to pursuing such measures, depending on
the circumstances. For example, an employee's employment
contract may guarantee a certain level of pay for a defined period
of time or an applicable state law might require a notice period
before compensation changes can be implemented.
- Get creative with scheduling – Consider temporary reduced
work schedules or job sharing. Both measures can benefit the
employee and employer by accommodating a slowdown in business while
continuing to keep more employees employed. If considering this
alternative, the arrangement should be memorialized so both parties
understand the expectations.
- Hit the pause button – A temporary pause in employment,
short of termination, for either some or all employees, may be a
preferable option to conducting a more permanent RIF. Under certain
circumstances, a temporary shutdown/furlough may achieve the
necessary cost savings without forcing an employer to completely
start over by rehiring all terminated positions from scratch when
business picks up again. While many employers are unable to halt
production or services without creating significant workflow
issues, those that can may find a temporary shutdown/furlough to be
an attractive middle-ground solution. Employers who pursue a
temporary shutdown/furlough must bear in mind that if the temporary
shutdown turns into a permanent lay-off, the shutdown could trigger
notice obligations under federal or state Worker Adjustment and
Retraining Notification (WARN) Act laws.
- Consider a voluntary early retirement incentive program –
voluntary Early Retirement Incentive Programs (ERIP) are often used
by employers who have the financial ability to offer enhanced
retirement benefits as part of an exit incentive program. From an
employee morale perspective, an ERIP is often preferable to a RIF
because it places the decision of who to terminate in the hands of
eligible employees. The downside to this approach is that there may
not be enough willing volunteers, which could then result in the
employer needing to conduct a RIF anyway. Moreover, an ERIP
typically ends up being heavily weighted toward those employees
with the most experience. Therefore, employers who elect to pursue
an ERIP should proceed with caution and carefully target the
incentives to achieve the optimal cost-savings. Furthermore,
consistent with the process of conducting a RIF, employers that
pursue an ERIP must comply with notification and disclosure
obligations under federal and state WARN Act laws, the Age
Discrimination in Employment Act (ADEA), and the Older Workers
Benefit Protection Act (OWBPA) and will want to condition receipt
of the retirement incentives on signing a separation agreement that
includes a comprehensive release of claims.
- Remember to check any collective bargaining agreements – The terms of the collective bargaining agreement may impact your ability to choose certain alternatives and/or cause implementation to be modified.
There are many considerations and legal implications in play when considering a RIF or alternatives to a RIF and we are happy to discuss them with you to determine if one or more of the options may fit your organization's needs.