HOME Exploring Options: Alternatives to RIF's by Preston B. Davis Pick up a newspaper or turn on the television and, undoubtedly, you will read or hear about a layoff. Unfortunately, layoffs are a reality in a bad economy. A layoff is not always necessary, however, and does not always produce the desired result – a better bottom line through reduced expenses. Layoffs often reduce employee morale, which impacts productivity, reduces profitability and indirectly may increase expenses. Just one layoff may prompt non-affected employees to search for and accept other employment if they believe they will be next. Frequently, the most marketable incumbents are long-term employees or those in highly-specialized positions, resulting in significant training costs for replacements – many of whom may be less productive. This process may impact the bottom line yet again, resulting in another layoff. Employers are also likely to reduce legal costs by avoiding or reducing layoffs. In 2008, the EEOC received a record-setting 95,402 private-sector charges of discrimination (a 15% increase from 2007), many of which were filed by employees who believed they were laid off because of their race, gender, age and/or other protected status. Regardless of the outcome, the legal costs incurred in defending a charge of discrimination and resulting litigation are significant – often more than what was “saved” through a layoff if a collective or class action is filed. Depending on an employer’s circumstances, implementing one or more cost savings alternatives may reduce enough expenses to avoid or reduce a layoff. In addition to the common cost savings of eliminating employer contributions to retirement plans and requiring employees to pay a greater percentage of their health insurance premiums, many employers would realize significant cost savings by eliminating non-essential mailings to employees and using their intranets to disseminate information, and reevaluating “essential” travel and replacing non-essential travel with teleconferencing. Freezing salaries and raises are also common cost savings alternatives to layoffs, as are restricting overtime and reducing hours. However, if an employer is considering reducing the workweek of its exempt employees (i.e., employees exempt from overtime pursuant to the Fair Labor Standards Act), it may need to reduce the employees’ salaries in order realize a cost savings. A salary reduction may be necessary because the FLSA requires that an exempt employee receive his/her salary (currently, at least $455.00 per week) for any workweek in which the employee performs any work. If and when a cost savings alternative to a layoff is implemented, use the opportunity to turn a potential negative employee response into a positive one. Whether through face-to-face meetings or an employer’s intranet, employees should be thanked for their service and informed that the economy has forced the employer to reduce costs, but that the employer is implementing the alternative in an attempt to avoid a layoff. Given the economy, many employees will be glad the face-to-face meeting or intranet message will not be their last. For more information, please contact the author at davis@elarbeethompson.com or the Elarbee Thompson attorney with whom you work. [PRINTER FRIENDLY VERSION]