February 3, 2009Client Alert

Managing Reductions in Force or Plant Closings

We understand that times are tough. While no employer wants to reduce staff or close divisions or plants, it is becoming unavoidable for many. In these instances, the easy decision is letting go the one or two bad apples. But where does an employer go from there? What issues should a company consider when deciding who stays and who goes?

To assist employers in their decision making process, Michael Best & Friedrich is preparing a “Reduction in Workforce Handbook,” to be available shortly. This handbook discusses the various legal considerations employers must take into account before, during, and after a layoff or plant closing. Some of the legal topics discussed in the handbook include the federal Worker Adjustment and Retraining Notification Act (“WARN”) and its Wisconsin counterpart. Before conducting a reduction in force or plant closing, employers must determine whether WARN applies to them or their situation. For example, employers will have to determine if they meet the 100 employees (or 50 under state law) threshold. If WARN applies, employers must provide the 60 days notice to employees, or their union representatives, and various public officials for their “mass layoff” or “plant closing”. WARN has numerous exemptions that can apply to an employer or a set of circumstances, so employers should seek counsel first in order to avoid liability.

Other legal issues to take into consideration include compliance with the various anti-discrimination laws, including the Age Discrimination in Employment Act, Title VII, the Americans with Disabilities Act, the Family and Medical Leave Act, and COBRA. If an employer wants to provide severance and get a general release from employees 40 years or older, compliance with the Older Worker Benefit Protection Act (“OWBPA”) is also a must. The OWBPA requires certain language and time periods in releases for groups of two (2) or more employees, which is different than for single employee terminations.

In addition to the legal concerns, the handbook also highlights the human resource aspects and employee morale issues related to reductions in force. Successful management may also require employers to address the intangible costs, such as disgruntled displaced workers, survivor employee morale, and the company’s ability to attract new employees in the future. They may also have to consider the tangible costs, such as unemployment, worker’s compensation, or disability claims.

Finally, included within the handbook is a reduction in force matrix which provides sample criteria for evaluating and determining who should be laid off and who should be retained. Of course, as with any decision involving the potential for litigation, legal counsel should be contacted to discuss the specific facts of your situation. We stand ready to assist you with your needs.

If your company is interested in receiving a copy of the “Reduction in Workforce Handbook,” please contact Scott C. Beightol in Milwaukee at 414.225.4994, or; Charles B. Palmer in Waukesha at 262.956.6518, or; or Scott C. Baumbach in Madison at 608.257.3051, or

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