What is RIF?
RIF, reduction in force, is employee termination. It happens when a business decides it has no further need for the employee’s position. If you’ve ever heard someone say that they’ve become redundant, it’s a RIF situation. This is permanent, with no hope for rehiring and is preceded by drastic conditions, such as a significant change or reduction in budget or a change in business direction.
A layoff, on the other hand, is considered temporary. If there are budgetary changes because there isn’t enough work to keep the job open, the company can lay off the employee. The company still needs the position and the employee, but it’s not feasible until the company’s situation gets better.
Then there’s the furlough. One of the best examples of the furlough is the government shutdown. If Congress doesn’t authorize spending, the agencies aren’t funded. The worker is still employed but is under a No Work Rule. Reemployment is expected in furlough schemes; it’s only a matter of time.
Key differences among RIF vs. layoffs vs. furlough
Unfortunately, many use these terms interchangeably, causing unnecessary confusion. But the impact of all three on employers and employees has a lot of legal implications.
Furlough vs. layoff
A furlough is a mandatory, yet temporary, unpaid leave from work. Not many employees know the definition of furlough, but Google searches for the term spiked during the start of the pandemic. During a furlough, companies will provide specific dates or conditions for their employees’ return. Unlike layoffs, employers continue to pay for employee benefits, such as health insurance, but not their wages. Just like laid-off employees, individuals under a furlough may apply for and get unemployment benefits.
The furlough process is faster than a layoff, which requires a host of paperwork and human resources. Laying off an employee is an expensive process. Still, if the employer realizes that the specific conditions necessary to release the employee from furlough cannot be met, then a furlough turns into a layoff.
RIF vs. layoff
RIF is a mandatory process where there’s a persistent, continuous problem with the business or a big contract ends, demanding that the company shed excess employees to continue operations. A layoff is about being strategic in human resource allocation. For example, during the holiday season, many retailers need more workers. When the season is over, they lay off the excess workforce but reserve the right to rehire them when the need arises. Like furloughs, RIFs can become permanent, which is why all of these terms are used interchangeably at times.
What does RIF mean for employers?
While a RIF is a normal and valid response to adverse business situations, all employers need to account for the legalities of this step. To run a successful RIF, HR needs to be clear on who they want to retain and remove. These ideas need to be fully vetted before implementation.
As part of this vetting process, companies need to analyze possible legal actions related to the RIF decision. This kind of internal adverse impact analysis saves a lot of time and headaches. Legal issues you need to prepare for and mitigate relate to:
The Worker Adjustment and Retraining Notification (WARN) Act is for any employer, whether they are public, private, not-for-profit or for-profit, with more than 100 full-time employees. These employers must provide at least 60 days’ notice of RIFs or layoffs. There are nuances in this Act that specify who is eligible to be covered by WARN, including strikers and part-time workers, so it’s important for employers to understand its requirements and get their communications strategy right.
ADEA, the Age Discrimination in Employment Act, protects employees 40 or older from ageism. For example, if you reduce your workforce by 100 people, a large portion of that human capital could be people who are over age 40 compared to the workers you choose to keep. This could leave you open to being sued for the unfair impact.
COBRA, which stands for Consolidated Omnibus Budget Reconciliation Act, states that employees have the right to pay for the health coverage they are going to lose due to the RIF. The maximum coverage time is 18 months. Employers need to provide the paperwork and setup directions in a timely fashion or risk legal action by the employee.
The Family and Medical Leave Act allows employees up to 12 months of unpaid leave for family situations, including taking care of an ailing parent. If the RIF happens while a person is out on FMLA, they can be terminated as long as the employer has a valid business reason that has nothing to do with their FMLA. Employers must be able to prove this reason with documentation.
The Uniformed Services Employment and Reemployment Rights Act gives employees the right to leave work to serve in the military and come back to the same employment situation they left. However, although the employer is obligated to provide the employee with at least the same pay and benefits, they can demote or terminate the employee while they’re deployed. Just as with the FMLA, the employer needs to state and support their valid business reason, which has nothing to do with the employee’s military deployment.
An employee on workers’ compensation leave can be terminated through a RIF action. This can happen as long as the employer provides a valid business reason for the termination that has nothing to do with the employee being on workers’ comp.
Certain classes of employees are protected under The Equal Employment Opportunity Commission (EEOC). Federal law states that employers cannot discriminate against employees based on criteria such as sex, race or age. This can be tricky during a RIF because, just like ADEA, the percentages of employees being terminated must be the same percentage as the overall workforce. For example, if the proportion of women in the company’s workforce is 30%, then the number of women being terminated in the RIF cannot exceed 30%. Again, this is tricky because the makeup of any company’s workforce isn’t that simple.
In an uncertain environment, it’s a good idea to have an employee termination or layoff plan that covers all of the legal bases. It’s a sensitive process, and if done with consideration, it could be a positive contribution to your company’s growth.