Understanding Reorganizations, Reductions in Force, & Mass Layoffs
October 2, 2023 | Salo Law LLC
In today's ever-changing job market, employers often undergo reorganizations, reductions in force, and mass layoffs to adapt to shifting business dynamics. While these actions can be necessary, it's crucial for both employers and employees to understand the legal aspects, employee rights, and potential pitfalls associated with such transitions. In this blog post, we will comprehensively explore the key elements related to these workforce changes.
Understanding Reorganizations and Reductions in Force
An employer reorganization, also sometimes referred to as a “corporate restructuring,” involves significant changes in a company's structure, operations, or workforce. It can encompass a range of actions, such as layoffs, mergers, acquisitions, divestitures, and changes in reporting structures. The primary goals are to improve efficiency, competitiveness, and profitability.
Employers often implement reorganizations with reductions in force, mass layoffs, and the transition of employees to new roles with different titles and changes in pay.
Reduction in Force (RIF)
A Reduction in Force (RIF) is a strategic move by employers to reduce the workforce. It involves the selective elimination of specific positions or employees based on legitimate business criteria, such as performance, skills, or seniority.
Differentiating RIF and Mass Layoffs
While both RIFs and mass layoffs involve reducing the workforce, they differ in scope and selection criteria. RIFs are selective and based on legitimate business reasons, while mass layoffs typically affect a larger portion of the workforce with less individualized selection criteria.
The WARN Act
The Worker Adjustment and Retraining Notification (WARN) Act is a federal law that requires certain employers to provide advance notice of mass layoffs or plant closures. Employers with 100 or more full-time employees must comply with the WARN Act.
Employers subject to the WARN Act must provide at least 60 days' notice to employees if they plan a mass layoff affecting 50 or more employees or 33% of the workforce (whichever is greater). Failure to comply with the WARN Act may result in penalties and liability for back pay and benefits.
Severance Obligations
Employers are generally not required by law to provide severance pay during a RIF or mass layoff. However, many employers offer severance packages as a goodwill gesture, which may include monetary compensation, benefits continuation, and job placement assistance.
The Older Workers Benefit Protection Act (OWBPA)
The Older Workers Benefit Protection Act (OWBPA) safeguards older workers during workforce changes. The OWBPA is a federal law enacted in 1990 as an amendment to the Age Discrimination in Employment Act (ADEA). The primary aim of the OWBPA is to prohibit age discrimination in employment decisions, protect older workers from being forced to waive their rights, and ensure that they receive adequate consideration and information when facing workplace changes.
If an employer offers a severance agreement to employees aged 40 or older as part of a RIF or mass layoff, the agreement must meet specific criteria, such as:
Clear and Easily Understandable Language
When asking an older worker to sign a release agreement, the OWBPA mandates that the language used must be clear, easily understandable, and written in a manner that the individual can comprehend.
Time for Consideration
Employers must provide older workers with a reasonable amount of time to consider the release agreement. Typically, a minimum of 21 days is required. However, if a group of older workers is affected by a reduction in force or other employment decision, they must be given 45 days to consider the agreement.
Revocation Period
Employees must be given a seven-day period after signing the release agreement during which they can revoke their consent. This "revocation period" allows individuals to reconsider their decision.
Waiver of ADEA Claims
If an employer requests that an older worker waives their rights under the ADEA as part of a severance agreement, they must provide clear and specific information about the job positions and ages of the individuals eligible for the program, among other details. This helps individuals make informed decisions about whether to accept the offer.
If an older worker believes they have been discriminated against based on their age, they can file an age discrimination claim under the ADEA.
Discrimination and Retaliation Concerns
Unfortunately, some employers may misuse reorganizations, RIFs, or mass layoffs as a guise to discriminate or retaliate against employees based on protected classes or protected activities. It's essential to be vigilant and recognize signs of discriminatory or retaliatory layoff selections.
In the world of employment law, circumstantial evidence plays a critical role in uncovering cases of discrimination or retaliation in RIFs and layoffs. While direct evidence may be rare, circumstantial evidence can reveal patterns and behaviors that suggest an employee was selected for reasons other than legitimate business factors.
Circumstantial evidence, often referred to as indirect evidence, doesn't directly prove a fact but allows for the inference of that fact based on surrounding circumstances.
Some examples of circumstantial evidence are:
Disparate Impact
If a workforce reduction disproportionately affects a protected group (e.g., based on race, gender, age), it can raise suspicions of discrimination, even if unintentional.
Inconsistent Application
If the employer’s layoff selection criteria is applied inconsistently, resulting in favored employees being retained or targeted individuals being laid off, it may indicate bias.
Timing and Retaliation Claims
If an employee who recently engaged in protected activities (e.g., whistleblowing, filing discrimination complaints) is disproportionately affected by a RIF or layoff, it can appear retaliatory.
Lack of Documentation
A lack of documentation and records on the decision-making process, including reasons for selecting or retaining specific employees can raise suspicions of discrimination and retaliation.
If an employee believes they were selected for a layoff due to discriminatory or retaliatory reasons, they can file a charge with the Equal Employment Opportunity Commission (EEOC) or state agencies like the Oregon Bureau of Labor & Industries (BOLI).
COBRA Statute Obligations
Employers must also adhere to the Consolidated Omnibus Budget Reconciliation Act (COBRA) when laying off employees. COBRA provides employees with the option to continue their group health insurance coverage for a limited period after termination.
Consultation with an Employment Attorney
Given the complexity of workforce changes and the potential legal implications, employees facing layoffs or offered severance agreements may benefit from consulting with an employment attorney. Attorneys can help evaluate the situation, protect employee rights, and negotiate better severance packages.
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At Salo Law LLC, Alina M. Salo specializes in helping employees navigate reorganizations, reductions in force, and mass layoffs. This firm is here to provide expert legal guidance and advocate for your rights during these challenging times. You may contact Alina directly at alina@salolawoffice.com.