A couple of months into 2024 and we’re continuing to see headlines of large and notable organizations announcing new (or even continued) mass layoffs.
Negative stories and experiences from impacted employees have been prevalent, going viral on TikTok, filling up our LinkedIn feeds, and leaving a lasting impression on companies that many don’t believe handled things the right way. Companies have cited several reasons for layoffs, including increased investment and focus on AI, rightsizing their workforce after over-hiring during the pandemic, or the slowing economy.
Whatever the reasons may be, a reduction-in-force (RIF) is sometimes required for continued business operations. In this post, we’ll discuss compliant alternatives to involuntary RIFs, and why it’s critical for organizations to ensure they are compliant if an involuntary workforce reduction is necessary.
Compliant Alternatives: Attrition, Hiring Freezes, Furloughs, and Voluntary RIFs
Before deciding to conduct layoffs or involuntary RIFs, many organizations explore other options first. Inherently, these alternatives are compliant ways to reduce headcount, whether it’s temporary or longer term. Here are a few compliant alternatives to involuntary events that businesses may consider:
Natural Employee Attrition and Hiring Freezes
In any business, employee attrition is natural throughout the year. In most cases, organizations want to reduce attrition, and ensure their most valued and talented employees see a continued path to personal success and growth within their organization. However, when businesses need to cut costs, it is useful to review attrition rates and trends, and determine if natural attrition provides an opportunity to restructure the positions or responsibilities within the workforce.
Similarly, when an organization needs to minimize or reduce costs, another option is to implement a temporary hiring freeze, and instead focus on upskilling the existing workforce to take on new or evolved responsibilities. Organizations should be careful not to overload their employees, as this can lead to unhappiness and unwanted attrition, but this is also a chance to enable existing employees to grow and keep progressing toward their career goals.
Evaluate Compensation and Hours for Existing Employees
While this is not an ideal solution, reducing pay or hours for existing employees is a valid option to consider if the only alternative is to lay people off. With this approach, an organization should expect that some employees will be unhappy and leave regardless. However, this approach can also be a transparent acknowledgment to the workforce that while times are tough and the organization is forced to make difficult cost-cutting decisions, they still value the employees they have.
Whether it’s through a furlough or other methods, this can be a short-term option, with the hope that compensation or hours will increase again as the company turns their current situation around.
Conduct a Voluntary Reduction-in-Force
Another way for employers to stay compliant and let their employees know that all options have been considered is to offer a voluntary reduction-in-force.
A voluntary RIF typically means offering a subset of employees a buyout or early retirement package, aimed at helping the business meet their goals for reducing the size of the workforce without having to involuntarily lay employees off. Voluntary reductions-in-force can provide an opportunity for tenured, valued employees to move on from an organization in a positive way. They leave with a compensation package in hand that rewards them for their efforts, and results in the same net-result for the organization.
A potential risk to be aware of with a voluntary RIF is that businesses cannot fully determine who will or will not elect to take the package, and as a result, could lose a valued employee that they would prefer to retain.
Compliant Involuntary Reduction-in-Force (RIF) Events
There is a lot at stake for organizations and employees when an involuntary reduction-in-force event occurs, and compliance is critical.
The business has made the difficult choice that despite other strategies or attempts at cutting costs, they need to reduce their headcount. They will need to make critical decisions on the existing workforce, ensuring they give their organization the best opportunity to succeed moving forward, while remaining compliant with the various rules and regulations that must be followed during a reduction-in-force.
Involuntary reductions-in-force create uncertainty as employees wait to hear if their role, department, or themselves will be impacted. For impacted employees, hearing that they’ve been laid off will be extremely difficult, and organizations owe it to these impacted individuals to provide clear, transparent information, and make sure they receive what is rightly owed to them.
For employees who will remain, it’s important for organizations to show them that all options were considered, and that they handled the RIF in the best way possible. How an organization manages the event matters, as those retained employees will be critical to the path forward, and that means employees need to feel respected, valued, and rewarded for their work.
Rules and Regulations Impacting Involuntary Reductions-in-Force
To manage compliant RIF events, organizations must first be aware of the rules and regulations governing reductions-in-force, including WARN, ADEA/OWBPA, and Adverse Impact.
WARN
The federal Worker Adjustment and Retraining Notification Act (WARN) was created to ensure advance notice is given to employees in the case of mass layoffs, so that employees have sufficient time to prepare and transition to potential unemployment. It’s relevant for organizations with 100 or more full-time employees and requires that a 60-day notice is provided during a reduction-in-force that results in a worksite closing affecting 50 or more employees during a 30-day period, or a mass layoff affecting at least 500 employees or 1/3 of the employer’s total workforce during a 30-day period.
While these rules exist at the federal level, certain states have their own, more specific “mini-WARN” requirements, so it’s important for organizations to understand the impact that both may have on their business. If your expected reduction-in-force falls under WARN requirements, one thing to consider is whether you can restructure the reduction-in-force event so that you do not trigger WARN. If that’s not possible, your organization needs to provide individual employees and local government with explicit information about the planned reduction-in-force, including the date, reason, and point of contact at your organization. Your organization also needs to ensure severance packages align to state-specific WARN requirements for impacted employees.
Bottom Line: Compliance matters. If your organization does not follow WARN requirements by providing proper advance notice, you could be fined up to $500 for each day that you do not.
ADEA/OWBPA
The Age Discrimination in Employment Act (ADEA) was created to prevent discrimination based on age in various aspects of employment, including hiring, promotion, and compensation. The Older Workers Benefit Protection Act (OWBPA) is an amendment to the ADEA and defines specific requirements to protect older workers (40 and above) when it comes to severance or other benefits provided during a reduction-in-force. The key requirement to be aware of is the ADEA waiver, which outlines the terms of an employee’s separation offer, must be in clear language and reviewed and approved by older workers who are impacted by a RIF. Workers must be given a reasonable period to review and approve the waiver and related severance agreement (typically at least 21 days) and must also be given a 7-day window to revoke their acceptance.
Bottom line: If organizations do not follow these guidelines when conducting a workforce reduction that involves older workers, they could be opening themselves up to legal risk. Having a clear process for providing, receiving, and tracking ADEA waivers is critical.
Adverse Impact
When an organization conducts a reduction-in-force, it’s important to ensure there is not a disproportionate, negative impact on protected classes of employees, including those of a specific race, age, gender, religion, disability, or veteran status. While older workers are specifically protected by OWBPA, any RIF selection process must be fair and unbiased against these other protected classes as well. The best way to protect your organization and your employees against adverse impact is to have a comprehensive and consistent process established that ensures the selection of employees is carefully vetted.
Bottom line: Systems and tools used in your RIF process should allow for reporting capabilities to show that there was no adverse impact during selection.
How to Ensure a Compliant Involuntary Reduction-in-Force
The best way for organizations to demonstrate compliance is through process. Defining a consistent and thorough process that will be followed each time is critical to maintaining compliance. The process should include:
- An objective and thorough procedure for identifying, evaluating, and making decisions on impacted individuals. This can be done by consolidating comprehensive, accurate data points related to the potential audience, and ensuring that the correct stakeholders are involved during review.
- A defined, end-to-end process that is followed for each event, and results in a package for impacted individuals that fully documents the information they are required to receive. A documented, consistent protocol ensures your organization does things in the best way possible and can defend against any potential scrutiny. This process should be trackable, auditable, and easy to report on.
- A review of the rules and regulations discussed in the section above to ensure your organization is compliant in the way you make decisions, the packages you provide, and the information you share with individuals or government agencies.
Summary
To best protect your organization and employees, it’s essential to explore all options when faced with a potential reduction-in-force, and if one is necessary, to ensure that your organization is managing events in a compliant manner. Establishing a thorough and consistent process and having the right tools in place is key.
Our Transition Manager customers have seen the benefits that come from using a technology-enabled solution to manage compliant voluntary and involuntary RIF events. Contact us to learn more.
