Post Termination Issues

Downsizing, or reduction in force (RIF), is used to refer to terminations that stem from employers’ decisions to operate with fewer or different types of staff. Employers regularly decide to go out of business, close facilities, relocate, restructure, subcontract, adopt new business strategies, sell business units, and merge with or acquire other companies. These business decisions typically result in some employees losing their jobs. The law provides employees with very few options for challenging business decisions that result in employment loss.

Challenges to downsizing decisions derive primarily from the National Labor Relations Act (NLRA). The NLRA is implicated in two ways. First, downsizing might lead to unfair labor practice (ULP) charges if it is deemed to interfere with the exercise of employees’ NLRA rights or used to discriminate against employees based on their union activity. Second, employers might have a legal obligation to bargain with union representatives over decisions to downsize and their effects on employees. Relocation of work from one facility to another can also violate the NLRA if motivated by hostility toward unions.

The implementation of downsizing decisions is sometimes affected by the Worker Adjustment and Retraining Notification (WARN) Act. Employers covered by the WARN Act are prohibited from ordering plant closings or mass layoffs until the end of a sixty-day period that follows a written notice to affected employees and to state and local government officials. Affected employees are those who are reasonably expected to suffer employment loss including termination, a layoff lasting more than six months, or a reduction in work hours during each month of any six-month period.

Other measures that might be used by struggling employers—including cuts in pay or benefits, short-term layoffs, and limited reductions in work hours—do not bring the WARN Act’s notification requirements into play. Only relatively large employers are covered by the WARN Act. Specifically, employers are covered if they have 100 or more full-time employees or have 100 or more full-and part-time employees working at least 4,000 hours per week. Multiple notifications might be required under the WARN Act and it contains some rather large loopholes.