Reductions in Force and Other Alternatives

Transcription

1 Reductions in Force and Other Alternatives Margaret Santen Hanrahan, Esq. Ogletree, Deakins, Nash, Smoak & Stewart, P.C. One Ninety One Peachtree Tower 191 Peachtree Street, N.E. Suite 4800 Atlanta, Georgia (404) Web:

2 Introduction Throughout the United States National unemployment rate as of August 2009 was 9.4%, significantly increased from a year ago. As of July 2009, number of unemployed people was approximately 14.5 million. As of July 2009, one out of every three unemployed people has been unemployed for more than 27 weeks. Significant rise in EEOC charges and other discrimination lawsuits. In 2008, the EEOC saw the most charges per year (95, 402) since the agency was created in 1965.

3 Introduction Increase of RIF-related lawsuits Age discrimination suits are at all-time high of 29% Class actions State law claims with creative theories Personal liability in FLSA actions- bankruptcy Other theories Prevailing party language- ways to exert leverage for larger settlement

4 Implementing Reductions in Force and/or Other Alternatives Options in lieu of a layoff Planning and executing a Reduction in Force Legal and other considerations

5 Options in Lieu of Layoff Pay Reductions Ensure applicable state wage payment laws are reviewed May need to provide advance notice before pay period Ensure reduced salary meets minimum threshold $455/wk Other factors may limit ability to do this, such as CBAs and other contracts/policies

6 Options in Lieu of Layoff Reduced Work Schedules/ Furloughs FLSA exemption issues: Full work weeks off Ensure no work is performed during that period! Consider written agreement certifying no work will be performed Potential WARN issues (50% reduction of hours for 6 months or more = employment loss)

7 Options in Lieu of Layoff Reduced Work Schedules/Furloughs, cont.. Reduce salary and work hours Communication Approaches: formal acknowledgement by exempt employees State law considerations Example: California Contractual and/or policy limitations Morale/communication issues Benefits- save cost with less long-term damage if and when business conditions improve

8 Options in Lieu of Layoff Required Use of Vacation/PTO Range of approaches: Encourage but not require use of vacation Require use of vacation prospectively Require use of vacation retroactively Review applicable state wage payment or other laws

9 Freezes Consider freezes on Salary Hiring Pre-layoff promotion and transfer Post-layoff hiring Provides more justification for RIF based on business considerations.

10 VESP s and VERP s

11 Voluntary Exit Incentive Programs Benefits Cause less damage to employee morale. If employer is restricted from laying off employees by collective bargaining agreements or related labor concerns. Exit incentives often secure voluntary resignation of individuals the employer wants to layoff but cannot layoff legally or safely. Carrot and stick motivational approach

12 Voluntary Exit Incentive Programs General Considerations Minimum age requirements are typically ok (even if > 40) Maximum age requirements may violate ADEA Who programs are offered to Can generally limit to active employees with some exceptions for legally-protected leaves such as FMLA, USERRA Allows you to target by specified organizational unit, job title, or job class Must be reviewed for ERISA and tax code implications Be cautious of no rehire policies- EEOC s recent challenges as applied to voluntary exit incentives

13 Voluntary Exit Incentive Programs Types Traditional Exit Incentives Voluntary Resignation Programs Offered without regard to eligibility for retirement benefits but often include features that make them more attractive to targeted ages Ex. Extension of retiree health benefit coverage commencing at age 50 instead of 55 (most desirable to ages 50-54). Voluntary Retirement Programs Induce retirement at earlier age by augmenting existing benefits Some examples in legislative history: flat dollar amounts, service-based benefits (i.e. $2,000 x years of service), % of salary, flat dollar increases in pension benefits, etc. Employment Contract Buy-outs

14 Planning and Executing Your Reduction in Force

15 Select Your Team Identify potential members of the RIF team Supervisors/line management Upper management/owners HR Communications/public relations Diversity committee Consider involvement of counsel (in house vs. outside counsel)

16 Preparing Supervisors for Their Role Who Should Be the Communicator? 83% of employees rank supervisors as the most believable source of information. Immediate supervisors are most often in the best position to communicate information to employees. But only if seen as genuine and approachable.

17 Legal Considerations for a RIF Managing legal risks associated with RIF requires careful planning & documentation Business Rationale: Identify and document underlying business reasons and objectives Involve counsel for privilege purposes (See Williams v. Sprint, 230 F.R.D. 640 (D. Kan. 2005)) Provide instruction against sending s/generating documents which are not privileged Potential Reasons: Loss of business, funding, profits Changes in technology, products, services, facilities, increased efficiency

18 Determine Your Decisional Unit Identify affected department(s) Identify targeted positions Do not make individual selections yet Understand importance of crafting an appropriate/strategic decisional unit and advantages surrounding the same

19 Develop Your Selection Criteria Pick a model Choose and document criteria for model use Objective over subjective Define criteria Weigh criteria

20 Objective Criteria Skills-based performance ratings Job functions Seniority Education/certifications Attendance records/disciplinary records Past merit bonuses Any objective measurements of productivity

21 Subjective Criteria Performance assessment Performance potential (in current job and others) Leadership Communication skills Fitting in -type criteria

22 Performance as a Factor If performance is used to select individuals for layoff: Do not rely on past performance evaluations and performance ratings as they tend to be inflated Develop special performance ratings Give explicit guidelines to supervisors completing the evaluation form Push down process to supervisor level to minimize potential for class-based treatment

23 Identify and Train Your Decision-Makers Select appropriate individuals (they will be your witnesses) Direct supervisors Department heads Provide written guidance and training Use multiple decisionmakers, if possible, and diversify team

24 Apply Selection Criteria Independently apply selection criteria Consider use of legal counsel Document application of selection criteria with supporting comments Do not deviate from selection criteria Consider diversified appeal review board (i.e. Elrod advantage) Conduct adverse impact analysis- challenge questionable decisions

25 Communicating the Decision How do you prepare for the meeting? Develop and rehearse a script- creating evidence Have documents and final paychecks ready Severance agreement, cover letter, out-placement program information, benefits and COBRA information, EAP information, etc. Stress finality when decision is being communicated Explain final pay, benefits, unemployment and severance offer Explain selection procedure, only if asked, but avoid comparisons

26 Notify Employees- All About the Approach Importance of empathetic approach- dignity and respect Importance of communication of clear decision Individual face-to-face meetings Discuss options- transition programs Discuss possibility of re-hire Thank employees

27 Notify Employees - Other Considerations Determine if security will be necessary and take appropriate steps Plan steps for return and protection of confidential information Prepare for press Meet with retained employees to instill confidence

28 Severance and Separation Agreements

29 Severance Packages Severance pay Years of service and/or salary based Existing policy or practice Other benefits commonly offered Employer paid health insurance continuation (but see definition of participant) Life insurance Outplacement assistance Pension plan enhancements

30 Severance Packages, cont.. Careful planning 409 A considerations ERISA Plan considerations Benefits of ERISA plan Deferential standard of review State law claims preempted Federal court jurisdiction Limitation of damages Jury trials typically not available May not be able to save claims based on selection criteria but sometimes can (ex. change in control provisions) COBRA subsidies

31 Release of Claims Determine scope of release Avoid: Covenants not to file EEOC/state agency charges The general all charges concern Release of right to challenge document s compliance with OWBPA notice and other requirements

32 OWBPA Must reference ADEA Average person must be able to understand Strict compliance required May not waive future claims May not be conditioned on wages or benefits already owed Advise employee in writing to consult attorney Doing this wrong has severe consequences Time Periods 45 Days 21 Days 7 Days

33 OWBPA Carefully draft OWBPA disclosures to affected employees and have reviewed by counsel. Place As of date on disclosures. Strict compliance is required or consequences can be disastrous. For example, in Kruchowski v. Weyerhaeuser Co., employer misidentified decisional unit by including in disclosures persons who were not really in that group. Court found that providing inaccurate information about the decisional unit made waivers not knowing and voluntary. Result: all waivers invalid and Company was forced to defend age discrimination class action.

34 Worker Adjustment & Retraining Notification Act (WARN) Covered employers Triggering event- 50 or more employees Plant closing Mass layoff (at least 50, at least 33% unless over 500) What is a single site of employment? What is an employment loss? Not included- discharge for cause, voluntary departure, retirement, relocation exception 30-day and 90-day aggregation rules Exceptions/reduction in notice period Unforeseeable business circumstances Faltering company

35 Worker Adjustment & Retraining Notification Act (WARN) Notice Requirements Alternative: pay and benefits in lieu of notice (3 rd circuit-60 business days) Damages for non-compliance Back pay and benefits, including expenses that would have been covered State law WARN? Longer notice requirements (i.e. NY-90 days) Lower thresholds (i.e. NH, NY- 25+ employees) Proposed Legislation- Forewarn Act 90 days notice, lower thresholds, stricter penalties

36 Bankruptcy Issues Automatic stay of litigation (except for ULP charges or other proceedings by government for public purpose) Discretionary lifting of automatic stay Litigation against individuals is not stayed (FLSA example) Non-dischargeable debts- willful or malicious injury Priority claims- unpaid wage claims (general claim sufficient/ lawsuit not necessary); post-bankruptcy violation WARN damages WARN notice- applicable when employer continues to run the business ( debtor in possession ) but not when trustee has sole function of liquidating/winding up the business

37 Bankruptcy Issues Collective Bargaining agreement considerations Move to reject/modify by providing union with proposal and confer in good faith Opportunity to move bankruptcy court to set aside and interim relief Right to strike for non-rla labor if bankruptcy court approves rejection of agreement Withdrawal liability issues

38 NLRA Issues Duty to bargain over decision if underlying reason is based on labor costs. If decision is based on factors unrelated to labor costs, such as market factors or outmoded facility, no duty to bargain over decision. Duty to bargain over effects- affirmative obligation. Employer s duty is fulfilled when it advises union that plant shutdown is imminent. Union has obligation to demand bargaining sessions.

39 e-discovery Ensure that underlying electronic data used in the Reduction in Force process is preserved in its native form Make sure that communications, any electronic production and financial information, etc., is preserved

40 Questions? THANK YOU FROM OGLETREE DEAKINS