Legal Considerations for Reductions in Workforce

June 18, 2009 Published Work
Center for Family Business, February 2009, Volume 17, Number 1

The decision to implement a reduction in force ("RIF") never comes easily to employers, irrespective of company size or nature of the business. Where a business is struggling, a RIF may be a necessity. However, even where businesses are holding their own in this troubled economic climate, they see the need to stay "lean and mean" and ready to withstand whatever 2009 may bring. Regrettably, this often means cutting back on the most significant expense -- personnel.
What are the alternatives?
Before going the "RIF Route," many employers first consider alternative arrangements. (Unless a collective bargaining agreement prohibits such alternatives.) These alternatives range from alteration of work weeks/work hours, hiring and/or salary freezes (and sometimes even salary reduction), job sharing, bonus reduction or elimination, reduction or elimination of 401K matching, cancelling costly fringe benefits, and exploring the possibility of seeking out employees who would agree to retire early in exchange for attractive packages. However, when it becomes apparent that these alternatives are either undesirable or insufficient to ensure economic needs are met, including as proactive measures to enable the company to remain competitive in a volatile market, the RIF may become the only viable option. In this event, the following factors must be considered: RIF's are fraught with legal risks; contrary to popular belief, the employer cannot simply select any employee for termination.