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October 23, 2009
Layoffs: 10 Steps for Handling One of HR's Most Difficult Tasks

By Patricia M. Trainor, J.D.
Legal Editor

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One of the most difficult and emotional tasks for HR is to manage a layoff or reduction in force (RIF). Nonetheless, it is important that a RIF be conducted so that any potential liability for the organization is minimized. Stephen R. Woods shared 10 steps for handling a RIF at BLR's 2009 National Employment Law Update in Las Vegas this week. Woods is a shareholder in the Greenville, South Carolina office of the national employment law firm, Ogletree Deakins.

Woods acknowledged that it may not be possible for organizations to follow all of these steps because of financial or staff restrictions. However, he said that if an organization follows as many as possible, it will help the RIF go as smoothly as possible.

  1. Consider putting a freeze on hiring, promotions and transfers. Woods said that ideally such a freeze should be in place for a minimum of two months before the RIF. The benefit of a freeze is that a jury may not understand why a newly hired, promoted, or transferred employee was suddenly terminated in a RIF.
  2. Articulate the reasons for the RIF in writing. Woods suggested viewing this as the equivalent of a mission statement. A RIF may be done for a number of reasons, such as loss of business, to eliminate skill redundancy, or technological changes. During this process, employers should document the business reasons for the RIF,keeping in mind that these documents may later be trial exhibits. So, avoid comments such as, “we want to get rid of dead wood” or anything else that may suggest discrimination. The RIF should conform to the articulated reasons, not vice versa. As Woods explained, employers should not use a RIF to “clean house.”
  3. Undertake initial planning. Establish a RIF team including members of management, HR, legal, and public relations. The RIF team should be diverse in terms of experience, gender, age, race, etc. The team should develop a communications plan and begin drafting termination notice letters, forms, explanations, and releases. The RIF team should also determine the RIF criteria which may be objective (e.g., seniority, past merit bonuses, performance ratings), subjective (e.g., leadership, communication skills, performance potential), or, most, likely a combination of objective and subjective criteria. Woods recognized that in many organizations the RIF team will be HR alone. However, to the extent possible, he encouraged the use of more individuals.
  4. Select and train the decision-makers who will select employees for the RIF. First, decide whether there will be single or multiple decision-makers. Make sure that they have personal knowledge of the individuals being reviewed and selected. Here, too, it is important to strive for diversity. Also, educate these decision-makers about the Age Discrimination in Employment Act (ADEA) and the RIF 's goals.
  5. Select individuals for layoff. This process should start at the group or department level to again ensure that those making the selection have personal knowledge of the employees being considered for the RIF. Woods suggested developing special performance ratings tailored to the RIF process. This is because performance evaluations are often inflated and do not reflect an objective view of the employee. Woods also cautioned that those who complete this RIF performance rating should be given explicit written guidance.
  6. Analyze and adjust the proposed level with higher level legal review. An attorney can review the proposed layoff and determine whether the organization followed its own policies and determine whether the RIF is legal. The attorney should be given the RIF documents and other data on the employees selected for review, such as ages, gender, recent FMLA leaves, etc. Wood prefers legal review at this stage so that documents can be labeled and treated as confidential and privileged. However, if it is not possible to have an attorney conduct the review, he suggests getting someone at a high level in the organization to do it.
  7. Tie up loose ends. Woods stated that before implementing the RIF,an adverse impact analysis should be done. Any modifications to the RIF list can then be considered. Also, at this point, termination notice letters, forms, and releases can be finalized.
  8. Train all supervisors. It is important to appreciate the difficult job it will be to inform employees that the organization will be undergoing a RIF. Woods suggested developing a script for supervisors and encouraging them to practice it. Caution them against inappropriately blaming others in the company for the RIF decision and selection.
  9. Notify employees of the layoff. Woods recommended announcing the layoffs individually unless an entire facility or department is affected. Announcing layoffs should be done with empathy, but without an apology. Stress the finality of the decision, and move on to discuss benefits. You may also provide a list of open positions, if any. Woods suggested having two managers at the meeting, one who will talk to the employee and one who will take notes. If asked, and only if asked, explain the RIF selection process without making any comparisons among employees.
  10. Plan for the “second phase” of the layoff. Woods explained that employers should consider outplacement assistance, references, security, and employee assistance. He also emphasized the organization should communicate to retained employees that the layoff is over – without promising that it will never happen again.
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