december2022january2023 - 21

FEATURE
the complicating factors that come
with more permanent action.
There are several significant
issues that must first be addressed
in deciding upon a possible layoff
or RIF. An important and basic first
step should be to examine and
document the business case for
a layoff/RIF. Such documentamately
6% of its workforce. RE/
MAX has announced that it will lay
off 17% of its workers by year's end.
The trend of layoffs may continue
rippling through workplaces and
additional sectors such as retail,
hospitality and manufacturing
could be affected.
If the need to reduce staff
reaches your workplace, there
are a number of issues that you
must carefully evaluate before
taking action. First, you must
decide whether to furlough
employees or implement a
layoff/reduction in force (RIF).
Despite the terms sometimes
being
used
interchangeably,
there is a difference. A
furlough is an involuntary,
temporary period of reduced
hours or time off that carries
an expectation that employees
will return when business
announced it's reducing
its workforce by 13% following
recent 2% cuts. Carvana has
announced plans to cut at least 12%
of its staff, or 2,500 employees.
Mortgage startup Better.com laid
off about 4,000 people in the first
three months of 2022, and recently
followed up with another 3,000
layoffs. J.P. Morgan has recently confirmed
that it will lay off more than
1,000 employees in its home-lending
department. Real estate brokerage
Compass is laying off almost 10%
of its workforce and Redfin, another
brokerage,
is laying off approxiconditions
improve. Furloughs are
unpaid, but many employees use
accrued vacation or other paid leave.
Unemployment
benefits
also generally available to furloughed
employees.
Furloughs
permit employers to temporarily
cut labor costs but still retain trained
employees who will be needed when
business rebounds. A layoff or RIF,
on the other hand, is intended to
be a permanent termination of the
employment relationship. Unless
the expected downturn in business
is temporary, no more than several
months at most, a layoff/RIF is
probably the preferable business
decision and may alleviate some of
tion could become critical evidence
in the event of later legal claims. It
should provide a big picture summary
of the reason(s) for the layoff,
its extent, as well as the financial
impact, or more specifically the cost
of the layoff versus the anticipated
savings. The documentation should
include a description of the planning
and analysis done in considering the
need for a layoff and in particular
the proposed selection process.
In the reduction process, you
are
should look at roles or positions
rather than the individuals filling
them. Compare the various incumbents
based upon pre-determined
objective criteria that are consistently
applied. One topic of potential
legal concern in the layoff selection
process is the possibility that you
are disproportionately selecting for
employees in a protected class. One
example is a selection process that
produces a group of selectees primarily
made up of employees aged
40 and above. This could constitute
a prima facie case of age discrimination
under the Age Discrimination
Employment Act (ADEA).
Once selections for layoff have
been made,
the next concern is
whether the number of employees
laid off triggers the requirements of
the federal Worker Adjustment and
Retraining Notification (WARN) Act
or an applicable state WARN act.
The requirements of these laws
are strictly enforced. Generally,
for the federal WARN Act to apply,
the company must have at least
100 employees and the layoff must
affect at least 50 employees. State
WARN Acts may have different
Richard Alaniz is the principal at Alaniz
Law & Associates. He has been at the
forefront of labor and employment law for
over forty years representing employers in
a variety of industries. Alaniz began his
legal career in the Office of the Solicitor
of the U.S. Department of Labor, served
on the President's Cost of Living Council
during the Nixon Administration and also
held prominent posts within the National
Labor Relations Board, first in Washington
D.C. and later in Minneapolis where he
was active in the NLRB's enforcement actions
in a five-state Midwestern region.
thresholds for coverage. Because of
the complexity of steps for compliance,
this is one issue on which you
should address with the involvement
of legal counsel.
In addition to ensuring WARN
Act compliance, an employer must
also comply with the state law
requirements for final pay, accrued
vacation time, and similar matters.
This then raises the related question
of whether severance pay will
be provided to laid-off employees.
While severance benefits are often
mandated by collective bargaining
agreements, there are few statutory
requirements to offer severance pay.
If you offer severance pay, it should
without question be conditioned
upon a full release of all potential
legal claims by the employee to
receive severance pay. In the case
of employees age 40 and above,
the release must comply with the
provisions of the Older Workers
Benefits Protection Act
(OWBPA).
The advantages of obtaining a full
release of potential claims are often
well worth the cost of at least some
severance payout.
It remains to be seen whether
economic conditions will ultimately
cause significant layoffs across various
industry sectors. Hopefully we
will not see a repeat of the circumstances
that prevailed in 2008-2009.
Nonetheless, it is not too soon to at
least give some consideration to how
you would approach employee reductions
should such a need arise. ■
DECEMBER 2022/JANUARY 2023 ■ www.CPAPracticeAdvisor.com
21
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december2022january2023

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