By Irene Bassock, Corporate Counsel
Layoffs are among the most difficult decisions an employer can face, fraught with legal, operational and emotional complexity—but failing to plan for them can lead to even greater consequences.
As economic uncertainty ripples across industries, U.S. companies are increasingly forced to consider workforce reductions. A well-structured plan not only minimizes disruption but also reduces the risk of costly legal missteps. From Worker Adjustment and Retraining Notification (WARN) Act obligations to age discrimination pitfalls under the Older Workers Benefit Protection Act (OWBPA), here’s what employers need to consider before initiating a reduction in force (RIF).
1. Plan, plan, plan!
Assemble the RIF team well before making any selection decisions. Don’t select first, then retrofit the decision to the selection. Before making any selections, employers should determine who is responsible for making the final decision, as well as the process and criteria that will be used to make the selection decisions.
2. Engage legal counsel
Engage legal counsel early in the process to assist with planning the selection approach and evaluating potential legal risks. It goes without saying that the rationale for the RIF should be documented in the event it needs to be disclosed at a later time — employers want to avoid having to recreate critical conversations months or years later and possibly after key personnel may no longer be affiliated with the employer.
3. Consider a voluntary resignation program
One way to avoid negative outcomes from a reduction in force is to determine if a voluntary resignation program is an alternative to layoffs. If that’s not possible, a company must determine how much of its workforce it needs to trim and identify the criteria that will inform that decision. It is important to make sure that the criteria is based on nondiscriminatory reasons and it does not disproportionally select any group protected by federal employment discrimination laws, such as employees with disabilities, older employees (40 or over), or employees in a minority class. Different states may have additional protected classes, so determine which rules apply in your state.
4. Weigh the impact on pensions and benefits plans
Assess how a termination would affect pension or benefit plans for the affected employees. Are employees close to being vested in pension or benefits plans? If so, it may be wise not to terminate those individuals. Further, a partial termination of a pension or benefit plan might be a reportable event under ERISA, and employers could incur substantial liability from withdrawing from a multi-employer pension plan.
5. Evaluate WARN Act requirements
The Worker Adjustment and Retraining Notification (WARN) Act is a federal law that, in general, requires employers with 100 or more full-time workers to provide 60 days’ written notice to employees before plant closings or mass layoffs.
There are many nuances regarding when a layoff qualifies as a WARN event. Examples include when a layoff of 500 or more full-time workers occurs at a single place of employment over a 30-day period, or if a company terminates 50-499 full-time workers, when that equates to 33% or more of the company’s full-time workforce, at the single site of employment. Keep in mind that if the terminations happen over a longer period of time—specifically, within 90 days—and they have the same reason for termination, it is considered a WARN-qualifying event.
In addition, many states have enacted mini-WARN laws imposing additional requirements. Yet, the COVID-19 pandemic caused some states to temporarily amend or suspend these. Before any reduction in force, employers should ensure they’re aware of what the current regulations state.
Another often-debated factor is what qualifies as a “single site of employment.” Historically, this would include mobile workers, such as bus drivers or traveling salespeople.
The pandemic shifted many employees to work remotely from their homes, so employers may believe that the single site of employment requirement of a mass layoff does not apply, and has not triggered a WARN event. While the issue is novel, at least one federal court denied an employer’s motion to dismiss and approve class certification (Piron v. Gen. Dynamics Info. Tech).
6. Understand how the Older Workers Benefit Protection Act (OWBPA) could apply
Another law to keep in mind during reductions in force is the Older Workers Benefit Protection (OWBPA) Act, which was an amendment in 1991 to the federal Age Discrimination in Employment Act (ADEA). OWBPA provides additional protections to employees over 40 from age discrimination.
During a reduction in force, if more than one employee is terminated in the same decisional group within a six-month period and offered separation pay in exchange for a release of ADEA claims, then additional requirements are imposed to employers with more than 20 employees. Some of these requirements include: providing 45 days for the employee to consider the release, providing an additional benefit to which the employee isn’t already entitled, and permitting the employee a seven-day period to revoke their acceptance after signing the release.
Employers are also required to provide a written disclosure to laid-off employees with the separation agreement, which states the criteria used to determine who was selected for layoffs and job titles and ages of all eligible or selected employees who were laid off, as well as the ages of those in the same job classification who weren’t selected for the reduction in force.
Employers often find that preparing the written disclosure is a tedious chore, revealing information that the company would otherwise maintain on a confidential basis. The risk in holding back that information comes at a cost. For instance, if an employer decides to provide the OWBPA disclosure only to employees who request it, then it may jeopardize the validity of ADEA releases received from all employees laid off in that decisional group. The disclosure must be appended to all separation agreements seeking an ADEA release in a OWBPA triggering layoff.
Some employers weigh the risk of not securing an ADEA waiver against the burden of complying with OWBPA. For instance, if the ages of the laid-off employees are the same as those retained, then the risk of an age discrimination claim may be low and the ADEA waiver may not be of much value to the employer. We strongly advise that the decision to forgo a release be evaluated on a case-by-case basis with your legal counsel.
7. Decide whether to offer severance packages
While severance packages to laid-off workers are not required under state or federal law, employers should consider that offering packages that include severance pay, employer-paid benefits for a number of weeks, and career-counseling services may dissuade employees from filing wrongful termination suits.
Avoiding risk in reductions
Having to reduce a workforce is a difficult decision for any organization, but to mitigate the risk of litigation, these factors must be carefully considered. Employers should discuss these issues with their legal and tax advisors to determine if additional precautions should be applied. Most importantly, if the group affected by a layoff includes employees in a protected class, older employees, remote workers, or could trigger a WARN event, the ramifications of not meeting these requirements can be significant, so discuss these rules and risks with your legal team at the beginning of the planning process.
Irene Bassock is senior counsel at Cohen & Buckmann, where she advises senior management, HR leaders and law firms on complex employment and executive contract matters. With more than 30 years of experience, Irene is adept at navigating internal investigations, executive employment arrangements, workforce transitions and employment issues in corporate transactions. A former in-house counsel at a Fortune 200 financial services company, Irene brings a balanced perspective shaped by advising both employers and employees. Contact Irene at irene@cohenbuckmann.com
Reprinted with permission from the June 12 edition of Corporate Counsel © 2025 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or asset-and-logo-licensing@alm.com.