As economists and pundits debate whether a recession looms for 2020, your company can take steps now to be prepared to implement reductions in force should it become necessary. This presentation will explore how to plan and execute a reduction in force to minimize business, legal and other disruptions while reshaping your workforce. Whether a recession is imminent or not, the time to plan for such a workforce event is now.

1. Reductions in Force – Be Prepared
Before a Recession Hits
Presented by: Eric B. Johnson, Partner
November 12, 2019

2. Presenter
Eric B. Johnson, Partner
eric.johnson@quarles.com
(602) 229-5425
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3. Agenda
• Alternatives to Reductions in Force (RIF)
• Types of Reductions in Force
• Discrimination Claims
• Checks and Balances on Excessive Subjectivity
• Special Issues
• Pre- and Post-Decision Communications, Termination Meetings and Outplacement
• Releases and Severance Agreements
• Background and Purpose of WARN Laws
• Notice Requirements
• Plant Closings and Mass Layoffs
• State Laws
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4. Alternatives to Reductions in Force
• Hiring/promotion freeze
• Furlough
• Temporary shutdown
• Reduction in employee hours
• Reduction in employee pay/salary
• Voluntary exit incentive plan
• Retraining
• Reassignment
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5. Types of Reductions in Force (RIF)
Two Types of RIFs
• Straight downsizing within positions
• Downsizing plus reorganization of duties for remaining employees
Balancing Act for Employers
• Maximize decision-making flexibility
• Minimize legal risk of
• Individual or class-wide disparate treatment claims
• Class-wide or single plaintiff disparate impact claims
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6. Discrimination Claims
Disparate Treatment
• Plaintiff must prove that he or she would not have been terminated "but for" his
or her protected characteristic (race, ethnicity, gender, age, etc.)
Disparate Impact
• Plaintiff must prove that a Facially Neutral Policy
• has a statistically significant disparate impact
• on a group of people, including the plaintiff,
• based on a protected characteristic (race, ethnicity, gender, age, etc.)
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7. What Counts as Age-Based Discrimination?
1. What is age discrimination?
• A plaintiff can only make out a case of age discrimination if, all else being
equal, the plaintiff would not have been terminated “but for” the plaintiff’s
age.
• How large a difference must there be between selected and non-selected
persons to raise an inference of age discrimination?
2. Decisions based on salary are not age discrimination
3. Statistical analyses must take relevant variables into account
4. Statistics might favor the employer
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8. A Facially Neutral Policy
• Does not discriminate on the basis of race, ethnicity, gender, age, etc. in
its wording or on its face
• Appears to be objective and fair and is applied equally to all applicants
and employees
• Examples:
• Height or weight requirements
• College degree requirements
• Strength tests
• Policies that base RIF decisions on performance evaluations or pre-RIF assessments
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9. Legal Framework for Disparate Impact Cases
• Plaintiff need not show intentional discrimination
• Plaintiff must point to specific discriminatory practice that
caused the statistical disparity
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10. In Non-Age Disparate Impact Cases (Race,
Ethnicity, Gender, etc.)
• Employer must show that the practice is consistent with business necessity
(job related)
• Plaintiff must then show:
• An alternative method existed to achieve the employer’s legitimate
interest
• The alternative method would have had less of a negative impact
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11. In Disparate Impact Cases Based on Age
• Employer need only show the challenged policy was based on
a reasonable factor other than age
• Plaintiff does not then get to show the availability of an
alternative with less of an impact
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12. Subjectivity in Assessing Upper Level Positions
• Courts recognize that use of subjective criteria often is
necessary and is not evidence of discrimination.
• Courts look to the procedural safeguards implemented by the
employer to ensure that subjective decision-making was not
used as a mask for discrimination.
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13. Excessive Subjectivity Can Support Both Disparate
Treatment and Disparate Impact Claims
• Difficult for plaintiffs to prove that a specific portion of the selection
procedure created a disparate impact
• Plaintiffs in individual disparate treatment cases therefore point to
alleged excessive subjectivity as evidence of the employer’s intent to
discriminate
• Plaintiffs argue that facially neutral criteria were intentionally applied in
a discriminatory fashion
• An employer’s defense is greatly aided by being able to show that checks
and balances were in place to protect against misuse of the subjective
criteria
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14. Checks and Balances on Excessive Subjectivity
1. Documentation
• Written Criteria and Guidelines
• Business Case
2. Ensure diversity of decision makers
3. Caution decision makers against using impermissible factors
4. Determine the new organizational structure first and develop
job descriptions where needed
5. Establish criteria for the type of person who likely will be
successful in the remaining/new positions
6. Use objective factors wherever appropriate
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15. Checks and Balances on Excessive Subjectivity cont.
7. Determine what "good" experience looks like
8. Pay special attention to criteria reflected in prior
evaluations
9. Agree on relative importance of the criteria
10. Give decision makers the tools they need, but not
demographic data
11. Evaluate the logical candidates against each other
12. Multiple levels of review
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16. Special Issues
1. Methods of dealing with multiple decision makers
2. Other considerations
• Business contracts or other commitments
• Collective bargaining agreements
• Employment agreements
• Discrimination (disparate treatment and/or disparate impact)
• Severance/releases
• Payment of wages
• ERISA
• COBRA
• Immigration
• Demographics
• Bumping 16

17. Special Issues cont.
3. Conducting a legal (privileged) review:
• Statistical Analysis
• Special Cases
• Protected discrimination, harassment or retaliation complaints (internal
or external)
• Recent or current protected leaves (FMLA, pregnancy, ADA, military
leave or worker's compensation)
• Whistleblower complaints
• Recent or current ADA accommodations
• Current/recent involvement as a party/witness in any litigation against
the Company
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18. Special Issues cont.
4. Dealing with concerns raised in the legal review
5. Hiring freeze
6. Statutory Notice Requirements
• Worker Adjustment and Retraining Notification Act (WARN Act)
• State mini-WARN Act (if applicable)
• Other state and local laws
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19. Pre- and Post-Decision Communications, Termination
Meetings and Outplacement
1. Communicate to employees and others in advance
2. Provide managers with relevant Human Resources information
3. Review employment agreements
4. Prepare for communication with those employees who will be
displaced
5. Termination meetings
6. Outplacement
7. Prepare for communication with employees in affected functions
who are not losing their jobs
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20. Pre- and Post-Decision Communications, Termination
Meetings and Outplacement cont.
8. Prepare for communication with employees in unaffected
functions
9. Prepare for communication with those employees who
will stay, but whose jobs will change
10.Performance standards going forward
11.Post-RIF communications
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21. Voluntary Severance Plans
1. Employers may be selective in who is offered voluntary
severance
2. Give employees time to decide
3. Encouraging employees to elect severance is not illegal
4. Be prepared to lose talented employees
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22. Releases and Severance Agreements
1. Asking employees to sign a release is not evidence of
discrimination
2. Comply with the Older Workers Benefit Protection Act (OWBPA)
when preparing a release
3. Give appropriate time to consider and revoke the release
4. Comply with the OWBPA’s additional requirements in group
termination situations
5. “Tender back” requirements are not permitted under the OWBPA
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23. Background and Purpose of WARN Laws
• Federal law enacted in 1988 and requires covered employers to
provide employees with 60-days' notice before a plant closing or mass
layoff
• Ensures affected employees and unions receive advance notice of
significant reductions in force for purpose of seeking new employment
and retraining
• Provide government entities notice so they may activate resources and
provide information concerning the labor market, job search and
placement assistance, on-the-job training, classroom training,
entrepreneurial training; and referral to basic and remedial education
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24. WARN - Covered Employers and Employees
• "Business Enterprise" employing:
• 100 or more employees, excluding part-time employees
• 100 or more employees, including part-time employees, who in the aggregate
work at least 4,000 hours per week (excluding overtime)
• Employees are considered "part-time" if they have worked either:
• An average of less than 20 hours each week in the shorter of:
• The period of employment; or
• The most recent 90 days
• Less than 6 of the last 12 months before the date on which notice
is required
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25. Notice Requirements
• Advance notice of 60 days prior to "employment loss"
• Employment loss means:
• Termination other than for cause, voluntary quit/retirement
• Layoff exceeding 6 months
• Reduction in hours worked by 50% in 6-month period
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26. Actions Triggering Notice Obligations
1. Plant Closings
2. Mass Layoff
3. Reduction in Hours
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27. Actions Triggering Notice Obligations - Plant Closings
• Notice required when 50 or more employees (excluding new
and low-hour employees) experience employment loss over
the course of either a 30-day or 90-day period because of the
permanent or temporary shutdown of a single site of
employment or one or more facilities or operating units at a
single site of employment
• Part-time employees are not counted when determining
whether a plant closing has occurred
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28. Single Site of Employment
• A "single site of employment" exists where there is :
• Single location
• Contiguous buildings or facilities
• Building or facilities in reasonable geographic proximity and
share same staff, purpose and equipment
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29. Actions Triggering Notice Obligations - Mass Layoffs
• Notice required when a RIF (other than a "plant closing") results
in employment loss (excluding new and low-hour employees) at
a single site of employment during any 30-day period or,
following the same rule as for plant closings, 90-day period for:
• At least 33 percent of the employees at the site and at least 50
employees, or
• 500 or more employees
• Part-time employees are not counted when determining whether a
mass layoff has occurred.
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30. Notice Requirements - Aggregation
• In determining whether a sufficient number of employees will sustain
an employment loss so as to trigger the notice requirement, include in
the count:
• All employment losses at an employment site, whether related or not, that will
occur during any 30-day period
• All employment losses which are related (i.e., which do not result from
"separate and distinct actions and causes") that will occur during any 90-day
period
• Traveling Employees: Will be associated with site from which work is
assigned or to which they report
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31. Notice Requirements
When Must Notice Be Given
• 60 days prior to the employment loss that triggers the notice
requirement
• WARN regulations permit specification of a two-week period
during which anticipated employment losses will occur rather
than a specific day, as long as notice is given at least 60 days
before the first day of the two-week period.
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32. Notice Requirements cont.
Who Must Receive Notice – WARN
• The employer must provide written notice to:
• The chief elected officer(s) of unions of affected represented
employees;
• All affected unrepresented employees;
• Highest local government official (municipal or county); and
• The state dislocated worker unit.
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33. Notice Requirements cont.
Which Employees Are Entitled to Notice
• All employees affected by a plant or business closing or mass
layoff must receive notice of their anticipated employment
loss. The term "employees" includes:
• Managerial and supervisory employees;
• Employers who are likely to lose jobs due to bumping rights (to the
extent they can be identified); and
• Part-time and new employees (even though they are not counted
when determining if relevant employment loss thresholds are met).
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34. Notice Requirements cont.
Which Individuals Are Not Entitled to Notice
• The term "employee" does not include:
• Business partners, or
• Consultants or contract employees who have a separate
employment relationship with another employer and are
paid by the other employer, or are self-employed
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35. Notice Requirements cont.
Contents of Notice
• Name and address of affected employment site
• Whether the planned action is permanent or temporary, and if it affects
entire plant
• Expected date of first separation and the anticipated schedule for
separations
• Whether bumping rights exist
• Job titles of all affected positions and number of individuals holding
these jobs
• Name and address of union and its chief elected official
• Name and phone number of company contact person
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36. When No Notice Or Less Than 60-Days
Notice Is Permissible
Circumstances When No Notice is Required
• Completion of particular project
• Strike or lockout
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37. When No Notice Or Less Than 60-Days
Notice Is Permissible cont.
Circumstances When Less Than 60 Days Permissible
• Unforeseeable Circumstances
• When a closing or mass layoff results from business
circumstances that were not "reasonably foreseeable" when
notice was required
• When a closing or mass layoff results from a natural disaster or
a man-made disaster
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38. When No Notice Or Less Than 60-Days
Notice Is Permissible cont.
"Faltering Business Exception"
• When, at the time notice was required, the employer:
• Was actively seeking capital or business which, if obtained, would
have enabled it to avoid or "postpone" the action, and
• The employer reasonably and in good faith believed that giving notice
would have precluded it from obtaining the needed capital or
business.
• Extremely narrow exception
• Only applies when there is plant closing, not mass layoff
• Even if 60-days' notice is not required, an employer must still give
notice "as soon as practicable."
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39. Change in Ownership/Relocation
Change in Ownership
• Seller must give notice of plant closing or mass layoff occurring prior to time of
sale
• Employees are deemed to be employees of the purchaser if terminations occur
simultaneous with or after the closing of the sale, and notice becomes the
purchaser's obligation
• Technical terminations, as employees leave the seller and are hired by the buyer,
are not "employment losses"
Relocation
• No employment loss if offered an opportunity to transfer to another site within a
"reasonable commuting distance"
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40. Potential WARN Liability
• Each affected employee is entitled to pay and benefits
for the number days notice was required up to 60 days
• Calendar vs. working days?
• Penalties of up to $500 per day
• Attorney's fees
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41. Enforcement
WARN Act
• Aggrieved party (affected employee, union, local government
official) must bring an action in federal district court to purse a
remedy
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42. State Laws
Several states have their own mini-WARN statutes and/or other
regulations relating to plant closings, relocations or mass layoffs:
• California: Facilities with at least 75 employees; mass layoff of 50 or more
employees or relocation 100 or more miles away
• Delaware: 100 or more employees (including part-time employees who
work over 2,000 per week; additional notice requirements for certain
actions and stiff penalties
• Georgia: Must provide GDOL with mass separation notice and list of
impacted employees for layoffs of 25 or more employees
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43. State Laws cont.
• Hawaii: Business with at least 50 employees; closing or partial closing or
establishment; relocation outside of HI, sale of business
• Illinois: Business with at least 75 employees; plant closing of 50 or more
employees, mass layoff of as few as 25 employees (if 33% of full-time workforce) or
250 full-time employees
• Iowa: Employers with 25 or more employees; mass layoff or business closing
impacting 25 or more employees
• Maine: Establishment with 100 or more employees; closing or relocation of
business 100 or more miles away; requires severance pay
• Maryland: Employers who lay off at least 25 employees in a single establishment
must submit list of workers to the Md. Dept. of Labor, Licensing and Regulation.
Voluntary guidelines for other reductions
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44. State Laws cont.
• Massachusetts: Notice to governmental agencies for certain relocations involving
12 or more employees
• Michigan: Voluntary guidelines for employers with 25 or more employees for
providing notice of closing or relocation
• Minnesota: Employers are encouraged (but not required) to provide notice of plant
closing, substantial layoff or relocation of operations
• New Hampshire: Employers with 100 or more employees may be required to
provide 60-days notice of mass layoff or plant closing affecting 25 or more
employees
• New Jersey: Employers with 100 or more employees; plant closing or mass layoff
affecting 50 or more employees
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45. State Laws cont.
• New York: Employers with 50 or more employees; 90-days notice for mass
layoff with as few as 25 employees if at least 33% of workforce
• Ohio: An employer who lays off 50 or more employees within 7-day period
shall provide notice to unemployment agency at least 3 working days prior
of layoff and notice to employees of eligibility for unemployment benefits
• Pennsylvania: No state mini-WARN but Philadelphia has ordinance
covering employers with 50 or more employees and doing plant closing or
relocation
• Tennessee: Employers with 50-99 employees; notice must be provided for
closing, modernization, relocation over 50 miles or layoff involving 50 or
more employees
• Wisconsin: Employers with 50 or more employees; notice may be needed
for business closings involving as few as 25 employees
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46. © 2019 Quarles & Brady LLP - This document provides information of a general nature. None of the information contained herein is
intended as legal advice or opinion relative to specific matters, facts, situations or issues. Additional facts and information or future
developments may affect the subjects addressed in this document. You should consult with a lawyer about your particular
circumstances before acting on any of this information because it may not be applicable to you or your situation.
Questions
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47. Thank You
Eric Johnson, Partner
eric.johnson@quarles.com
(602) 229-5425
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