Laying off employees – also referred to as a reduction in force or a RIF – is one of the most difficult decisions an employer can make. Whether driven by economic conditions, organizational restructuring or pivots in business strategy, RIFs inherently create legal risks and significantly impact workplace morale. Although RIFs come with many challenges and pitfalls, employers who approach the process thoughtfully and strategically can mitigate legal risk while treating affected employees fairly and with respect. The following are some best practices for private employers to consider when implementing a reduction in force.

Clearly Document Business Reasons for the RIF

RIFs can be spurred by several reasons such as cost savings, elimination of redundant roles or operational restructuring. When the need for a RIF arises, employers should identify the legitimate business reasons driving the reduction and clearly document these reasons. This step will be critical if decisions are later challenged. Further, when selecting individuals or departments impacted by the RIF, employers should develop objective selection criteria (such as skills, performance, seniority) that align with the business rationale driving the layoffs. Employers should avoid using subjective or inconsistent criteria that could give rise to allegations of bias or discrimination.

Conduct a Thorough Adverse Impact Analysis to Avoid Discrimination

Before finalizing selections, an employer should conduct a statistical adverse impact analysis to assess whether the proposed RIF disproportionately affects employees in protected categories, such as age, race, gender and disability, as well as identify whether any selected employee is currently on or has recently taken a job-protected leave. If disparities are identified, consideration should be given to whether adjustments are warranted or if business justifications for selections are defensible.

Ensure Compliance with WARN Act Obligations and Other Notice Requirements

The federal Worker Adjustment and Retraining Notification (WARN) Act requires advance notice of mass layoffs or plant closings, depending on the size of the employer and number of affected employees. Whenever conducting a RIF (or a complete closure of the business), employers should assess whether WARN is triggered, and if WARN is applicable, the employer should take steps to ensure compliance with its timing and notice requirements. Further, it is important to remember that several states (including California, Hawaii, Illinois, Iowa, Maine, Massachusetts, New Hampshire, New Jersey, New York, Tennessee and Wisconsin) have their own state “mini-WARN” Acts that may have lower thresholds for employee and employer coverage and impose additional or different requirements than under the federal WARN Act. In addition, employers must comply with group health insurance continuation notice and coverage requirements under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) for impacted employees.

Prepare Legally Compliant Communications and Documentation

Once a list of impacted employees has been finalized, the employer must communicate the RIF to its workforce, ensuring that the messaging to employees is clear, accurate and compliant with applicable federal, state and local laws. Although not required, many employers choose to provide laid off employees with some version of an exit agreement, typically offering severance pay and sometimes benefits in return for the employee’s execution of a waiver and release of claims against the employer. If exit agreements are offered, employers should tailor them to comply with the Older Workers Benefit Protection Act (OWBPA) (for employees 40+) as well as state-specific release language restrictions and requirements. Transparent but compassionate communication with employees, both affected and remaining, will help maintain trust, salvage employee morale and reduce the risk of litigation.

Managers are frequently the face of the organization during a RIF. Accordingly, it is advisable to provide them with clear scripts or talking points, FAQs and appropriate training to ensure they deliver communications regarding the RIF accurately and with consistency while avoiding legally problematic statements. When in doubt, managers should direct employees with questions or concerns to Human Resources or legal.

Manage Potential Post-RIF Morale Dips

After a RIF, the remaining workforce may experience decreased morale, increased workloads and/or anxiety about their own job security. To the extent possible, employers should communicate openly about the future direction of the organization and offer support resources for the retained employees. In addition, employers should pay close attention to employee engagement and retention issues and address any concerns that arise in a timely and effective manner.

Every RIF is unique and will be shaped by operational needs, workplace culture and legal considerations. Employers that engage in thorough planning, maintain supporting documentation, provide transparent communication and do their legal due diligence will be better positioned to navigate the challenges of workforce reductions while protecting their organization and supporting their workforce.