Reductions In Force: How To Stay Compliant

Ask any business leader and they’ll tell you that a reduction in force, or a RIF, is one of the hardest activities to carry out. Often times good employees are hit by these decisions through no fault of their own, and the resulting morale issues can doubly affect the workplace in a negative way. That said, there are times when a RIF is an essential part of business continuity and operations. Today we’re going to explore some of the key things to know about RIFs.

What is a RIF?

A RIF is a time when employers have to reduce their employee headcount. This can be a handful of workers or a significant population. There are a variety of reasons why these might occur. For instance, maybe the company lost a large contract or a product has not sold as well as was expected, which means the workforce planning forecast was too high.

Essentially the employer finds out that the number of workers on payroll is more than the necessary number required to continue operating the business, and those additional workers need to be identified and separated. However, it’s not as simple as seeing that there are twenty extra workers that need to go — it’s important to pick the right ones so that the company isn’t hindered by this process any more than necessary.

How To Approach A RIF Strategically

In order to make good decisions in the midst of a RIF, employers need all the data they can get. While it makes sense to use performance data to drive decisions (keeping the highest performers, of course), the reality is that doesn’t always work out as expected. What if the highest performers also earn the bulk of the compensation? Is it worth trading two lower-level workers for one higher-level worker? What about skills? Can the remaining team members fill in gaps and flex to meet the needs of the business, or do they lack the requisite skills?

Clearly the decision requires a more holistic view of employee information. Types of necessary data include:

  • Performance scores
  • Productivity metrics
  • Compensation rate
  • Protected status
  • Skills and competencies

By looking more broadly at the entire set of information, employers can make the best decision about which workers to retain.

RIF Compliance Requirements

When a RIF is being considered, employers need to ensure they comply with legal requirements. The one most specific to the RIF scenario is the WARN Act. The Worker Adjustment and Retraining Notification Act requires companies with more than 100 employees to provide 60-calendar days of notice in advance of plant closing and mass layoffs. Failing to comply with the law could cost the employer up to 60 days of back pay and benefits for each employee.

For instance, last fall in South Carolina, construction was halted on two energy projects, according to WISTV News. The day the decision was made, letters were sent to the state workforce agency explaining that 615 workers would be affected by the RIF, including the anticipated date layoffs were expected to start. A sample WARN letter template is available from SHRM for further reference.

Mitigating RIF Risks

One of the key risks of a RIF is disparate impact, meaning the decision adversely affects one protected group more than another segment of employees, even if the decision was neutral in design. A common example pertaining to RIFs is when workers are laid off based on compensation rates, which almost always hits older workers harder as they have more seniority and higher pay.

In order to mitigate this type of risk, employers should consider a few points:

  • Managers and those involved in the decisions should be very careful to avoid using any language that could be construed as negative when discussing a specific demographic (minorities, older workers, etc.)
  • The four-fifths rule provides a mathematical formula for evaluating the impact and determining if disparate impact truly occurred. Read more on this calculation on the Adverse Impact website.
  • Finally, proving the decision requires some exchange and dialogue. If a plaintiff can prove disparate impact, the employer must show how the decisions were job-related and due to business necessity. The plaintiff must then try to prove that there was another alternative option that would have met the goals without having disparate impact on the protected class.

One specific way to mitigate the risk of a RIF is by leveraging technology that supports the change, providing a high-level perspective on the outcomes of the process. For instance, does it track the workers that were reassigned or impacted by the change? Does it provide an overview of the demographics affected to help ease adverse impact concerns? Instead of attempting to manage these issues within a spreadsheet, using dedicated technology can help to intuitively avoid problem areas and highlight data points to consider throughout the process.

This is a complex issue, but think about it holistically: employers facing a RIF are already struggling with some unforeseen challenge. Making sure to lay out the reduction in such a way that it avoids legal issues and challenges is the best way to avoid further strain on the system and its leadership.

Ben Eubanks
Ben Eubanks

Ben Eubanks is the Principal Analyst at Lighthouse Research. He also founded upstartHR.com and hosts We're Only Human, a podcast focused on the intersection of people and technology in the workplace.