Are Your Customers RIF-Ready?

Economic uncertainty and turmoil inevitably are leading to PEO customers thinking about whether they need to downsize their workforce – and the support you provide can make or break the process. A misstep can trigger legal exposure, damaged reputations, or degraded client relationships. Here are six key things PEOs should keep in mind as customers request guidance.

STEP ONE: IDENTIFY DESIRED GOALS AND OBJECTIVES

This might be better categorized as “step zero,” because you should work with your customer to determine whether a RIF or series of layoffs is even necessary. What is their business rationale for the planned action? What is the intended result? Do they hope to achieve cost savings or improve efficiency? Are there less-drastic alternatives that would help achieve the same results (temporary furloughs, compensation reductions, worksite relocations, etc.)?

STEP TWO: MAKE INITIAL LOGISTICAL DECISIONS

Help your customer make some initial decisions about key matters like:

• How many positions to reduce
• Whether they will solicit voluntary separations
• Their RIF budget (legal fees, severance payouts, unemployment insurance, etc.)
• Timing

STEP THREE: CREATE A SELECTION PROCESS FOR INVOLUNTARY LAYOFFS

Perhaps the most scrutinized part of any RIF – and therefore the most critical – is the selection process used to determine which employees will be let go. There are a whole host of legal standards to consider in such a decision, and therefore only proceed once you have clear guidance from workplace law counsel. What criteria will be used to make the selections? Will your customer use different selection criteria for different types of jobs – such as hourly and salaried positions?

STEP FOUR: DON’T SKIP THE DISPARATE IMPACT ANALYSIS

No matter the size of your customer, they need to assess whether their selection criteria disproportionately affects protected groups (age, race, gender, etc.). And while the current administration has indicated federal agencies may not prioritize disparate impact claims, courts and state regulators will still apply this theory. Work with your customers early to:

• Collect and analyze demographic data
• Justify selection criteria (objective, documented, consistently applied)
• Adjust selections where patterns raise red flags

STEP FIVE: CREATE LEGAL DOCUMENTS

Work with legal counsel to develop applicable severance policies for your customer. These crucial documents need to take into consideration company policies, federal benefits law (ERISA), and other related factors. You also need to help develop applicable release agreements that might be used in exchange for severance benefits. There are a number of individual questions that need to be answered for each worker, focusing on vacation and other PTO benefits, retirement/severance overlap, unemployment, and other potential legal requirements depending on customer size.

STEP SIX: COMMUNICATE

Your customers may not know where to start when it comes to messaging, and might default to radio silence. But when layoffs hit, silence creates chaos. Make sure to help your customers prepare coordinated messaging. This includes preparing consistent talking points to answer questions (without avoiding the hard truths or otherwise overpromising), and ensuring all necessary documents (separation agreements, benefits info, final paychecks) are correct and timely delivered. Some RIFs will trigger federal or state laws that could impact timing and notification responsibilities, so make sure your legal counsel provides key guidance.

BONUS GUIDANCE: PEOPLE ARE WATCHING (AND FILMING)

Layoffs are no longer whispered about – they are broadcast as content. TikTok, Instagram, and YouTube are filled with viral “watch me get fired” videos – and sometimes the worst PR nightmares come from secondhand accounts. Your customer’s process needs to assume it will have an audience. That means guiding them on such concepts as:

• Avoiding impersonal Zoom firings or form emails
• Training those delivering the message on empathy, clarity, and tone
• Planning internal and external messaging to stay consistent and humane

BOTTOM LINE FOR PEOS

With mishandled customer RIFs potentially impacting the PEO’s EPLI claims experience, preparing for downsizings and ensuring strong compliance in advance is very valuable.

This article is designed to give general and timely information about the subjects covered. It is not intended as legal advice or assistance with individual problems. Readers should consult competent counsel of their own choosing about how the matters relate to their own affairs.