When I was a kid, before many of you were born, there were ads during Saturday morning cartoons for a program called “RIF” -– an acronym for “Reading is Fundamental.” Started in 1966 in Washington, D.C., it is supposedly one of the oldest non-profit educational programs in existence. I mentioned RIFs in my last column, and trust me, in the corporate world, RIFs are not altruistic attempts to get at-risk youth to read.
RIF stands for “reduction in force” — i.e., layoffs, terminations, downsizing, etc. A RIF can take various forms. For example, a V-RIF, or “voluntary reduction in force,” is when a company offers early retirement or severance packages to certain employees. These are usually offered as a first attempt to reduce work force numbers, and they are the cleanest way to lower the population. At the other end of the spectrum is the I–RIF, or “involuntary reduction in force.” The term is self-defining.
I stated before that I have witnessed an I-RIF period, and that it was awful. By “awful,” I meant that seeing people let go from their jobs was uncomfortable for me, having come from private practice where such reductions were not (at the time) as publicized as they are today. My company handled the situation with as much grace as could be expected, and I honestly believed our then-CEO when she stated that the dignity of our people was at the forefront of how the reduction would take place….
All things considered, the company handled the exercise in the best way possible. People were treated with consistent respect, the action was necessary to help the company, and it was a last resort. Looking back, it reminds me of the scene in “Bull Durham” when Crash is called into the manager’s office and the manager says, “Crash, there’s nothing that a manager likes less…” And yes, it was sickening to me, or maybe maddening is a better term, to see news reporters trying to film a random unlucky employee as they exited the building.
I am sharing nothing with you that was not extremely well-publicized, or that is inside baseball. This really is a small community, and when events like these have occurred at my publicly traded company, they are usually the first or second headline of the day, and they remain in the news cycle for weeks on end. Many companies considering RIFs announce them at the beginning of a quarter to appease Wall Street unease. It is no surprise that companies in this economy have been financially stressed for several years. Cost-cutting measures range from salary reductions to pay freezes, hiring freezes, and expense reductions of all sorts. I have heard almost anything and everything in terms of cost reduction strategies from colleagues throughout the legal and business worlds. None, of course, hits harder than a RIF.
Companies should do a number of things when forced to reduce their headcount. Keeping the dignity of the employees at the fore is key. Folks are losing jobs, and it is not so cut-and-dried as to be a “there but for the grace of God” event. If you don’t have a labor and employment department in your OGC, it would behoove you to hire an expert from a local firm.
Candidly, it’s not only the employees’ dignity that must be cared for; the entity itself must ensure that it is protected against any variable of retaliation. Folks angry at losing a job may attempt to sue for wrongful termination, or worse, try to damage important infrastructure of a company. Protecting against such behavior is much easier said than done for a small company -– I am aware of a small IT company whose tech infrastructure was damaged by a laid-off worker. Though the worker faced federal prosecution, the damage was done, was costly, and will take time to repair. These costs might have been avoided if the company had taken steps, in advance, to protect itself against such attacks.
It would be a smart move to have in place a handbook of sorts for dealing with eventualities of letting people go. This is where the L&E experts come in. They are knowledgeable about the latest NLRB and EEOC rulings regarding these issues. And consistently following the state of the law to the letter can mean the difference between a painful separation period for the company and the employee(s), and a painful and litigious period. No one wants to go through a RIF process, just as no one wants to put one into action. But, as the overall business paradigm has shifted in the last five years, these cuts may become necessary at more and more companies.
Hopefully we’ve hit bottom on that issue and things will improve. But, as the business cycle comes around in another ten years or so, being prepared now for unpleasant eventualities can mean the difference between paying a severance or a judgment.
After two federal clerkships and several years as a litigator in law firms, David Mowry is happily ensconced as an in-house lawyer at a major technology company. He specializes in commercial leasing transactions, only sometimes misses litigation, and never regrets leaving firm life. You can reach him by email at [email protected].