REDUCTIONS IN FORCE: Here We Go Again

Ashley ScheerJackson Walker L.L.P.

901 Main Street, Suite 6000Dallas, Texas 75202

214.953.6016214.953.5822 (Fax)ascheer@jw.com

June 10, 2008

Before implementing a RIF, consider other alternatives

• A reduction of work hours• A reduction of expenses• A hiring freeze• A voluntary exit incentive program

Before establishing the selection criteria the decision makers should:

• Ensure that there are no existing policies that must be followed in the selection process.

• Consider whether there are any business units and/or job functions that will be eliminated completely or outsourced.

• Consider whether the future needs of the company after the RIF will require that certain business units engage in deeper reductions.

• Consider whether to request that each separate business unit reduce a percentage of its payroll or a specific number of employees.

• Consider whether employees whose jobs have been eliminated will be retained at the expense of another employee holding a different position.

Documentation to be reviewed and considered by the decision makers include:

• The selection criteria• A listing of the job positions being

considered by decision makers as well as any job descriptions

• Personnel files of all individuals being considered including performance evaluations and any disciplinary documentation

• Informational materials from the decision makers

While not required to do so, companies will often offer severance benefits to selected

employees.

• Ensure that there are no existing severance policies.

• Identify a method for determining the amount of severance (e.g., one year of service equals two weeks of compensation).

• Determine when the severance will be paid.• Determine whether any employees affected by

the RIF have any severance rights by virtue of offer letters and/or employment agreements.

ADEA and OWBPA Requirements

• Clearly Written Agreement• Additional Consideration• Consideration Period• Revocation Period• Group Terminations

Pagliolo v. Guidant Corp.

• A lesson on how not to conduct a RIF.

Specific Carve Outs:

• FMLA• Unemployment insurance• Worker’s compensation• Administrative charges

WARN Act Requirements• Applies to employers with 100 or more

employees.• Covered employers required to give

employees 60 days advance notice of plant closings which result in loss of employment for 50 or more employees, or mass layoffs which result in loss of employment for 500 or more employees, or in loss of employment for 50 employees and 33% of the workforce.

Contents of Notice• The notice to employees who will be losing their

jobs must contain the following:– the planned action and whether it will be

permanent or temporary;– the expected date of the planned action and

the employees’ expected separation date;– an indication of whether any bumping or

transfer rights exist; and– the name and telephone number of a

company official to contact for further information.

Exceptions

• Excluded Employees• No Notice Required• Less Than 60 Days’ Notice

Avoiding Future Litigation

• Preparation for the Meeting– Plan, plan, plan

•Who will attend

•Where will meeting be held

•When will meeting be

•How will meeting be conducted

Be prepared to answer• Severance pay• Entitlement under pension and other

retirement plans• Accumulated sick and vacation pay• Eligibility for unemployment insurance• Job references• Continuation of medical benefits• Whether employee can use facilities to look

for another job• The last day of work

Success After a RIF

REDUCTIONS IN FORCE: Here We Go Again

Ashley ScheerJackson Walker L.L.P.

901 Main Street, Suite 6000Dallas, Texas 75202

214.953.6016214.953.5822 (Fax)ascheer@jw.com

June 10, 2008