RIF Overview

The recent Supreme Court case of Meacham v. Knolls made clear that an employer bears the burden when it comes to the reasonable factors other than age defense in age discrimination claims arising in the RIF context. The implications of this case make employment more of a property right, requiring a higher justification for termination and objectively reasonable selection criteria. The employer, therefore, must address certain areas to avoid RIF lawsuits, including:

  • Work environment: the employer must ensure that human resources is adequately organized and that anti-discrimination and diversity measures are in place (i.e. posted non-discrimination notice, diversity training, etc.).
  • Decision making process: the employer must have adequate job application and assignment procedures, adequate job performance evaluation system, and job opportunity training in place. 
  • Utilizing statistical analysis: statistical data can help prove an employer’s position and head off any claims that a protected group has been unfairly impacted.

When an upcoming RIF is apparent, an employer should implement a hiring freeze and consider a voluntary work force reduction plan. At all times, the employer ’s focus should remain on jobs and job functions and not the individual employee

WARN Act Overview

Generally speaking, every employer with 100 or more full-time employees is required to give 60 days advance notice of qualified plant closings and mass layoffs. The WARN Act provides detailed explanations of what types of plant closings and mass layoffs are covered, but employers can easily be confused by the statute. Employers must look back and ahead 30 days to determine whether actions both taken and planned, will, in the aggregate, reach the minimum threshold numbers for a plant closing or mass layoff. The employer must also look back and ahead 90 days to determine whether actions both taken and planned that independently do not trigger WARN coverage will trigger WARN in the aggregate if not caused by separate and distinct acts. If the WARN Act is triggered, an employer must give notice to: (1) each collective bargaining representative of the affected employees and/or directly to any unrepresented employee; (2) the applicable state dislocated worker agency; and (3) the highest-elected local official (e.g., the city mayor).

An employer may pay employees in lieu of notice, so long as the employees are not formally terminated until at least 60 days after the notice date. If an employer fails to give the required WARN notice, the employer may be liable to employees for back pay and fringe benefits for the period of violation up to 60 days. The employees may also recover prejudgment interest and attorneys’ fees. The Department of Labor, however, has no enforcement role—employees can only seek relief for WARN notice violations in district court.

Of course, there are exceptions to WARN Act liability, which include: faltering business, unforeseeable business circumstance, and natural disasters. There is also potential WARN Act reform that will make the Act more employee-friendly by requiring a 90-day notice period, expanding the Act to cover employers with 50 or more employees, and allowing for greater penalties to be assed against the employer. Retailers in multiple states should be aware that many states have enacted their WARN legislation – recently including both New York and New Jersey that have different requirements than federal law. Retailers should consider state law implications when downsizing their workforce.

OWBPA Overview

The OWBPA establishes the minimum requirements regarding age claim releases and also requires employers to provide employees affected by a RIF with information regarding the program so that potential claims under the Age Discrimination in Employment Act (“ADEA”) can be evaluated. When drafting a release agreement for an older worker (age 40+), whether in connection with a termination, severance payment, or otherwise, the agreement (among other things) must: (1) be knowing and voluntary; (2) specifically release claims under the ADEA; (3) include a “7-21” (employee is given 7 days to revoke and 21 days to review) or a “7-45” provision (employees in a RIF (of 2 more employees) are given 7 days to revoke and 45 days to review); and (4) advise the employee to consult with an attorney prior to execution of the agreement.

With regard to a RIF involving workers age 40 and over, the release agreement must include a “7-45” provision, and, the employer must inform the older worker in writing about: (1) any class, unit or group of employees covered by the program, the eligibility factors, and any applicable time limits and (2) the job titles and ages of all individuals eligible and selected for the program, as well as the job titles and ages for those individuals not eligible or selected for the program. A release that does not comply with the OWBPA does not bar an employee’s ADEA claims!