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With the slowdown in the 2001 U.S. economy has come a tidal wave of employee layoffs. Emerging companies as well as established high-tech stars have announced widespread reductions in force (RIF). Of course, when contemplating a RIF, companies always should consult counsel who specialize in employment matters. The RIF process is laden with traps. There are steps that companies can take to help to avoid them. COMPLY WITH WARN The Worker Adjustment and Retraining Notification Act, 29 U.S.C. �� 2101-2109 (WARN), which applies to enterprises that employ 100 or more employees, requires employers to give 60 days’ notice of a plant closing or mass layoff. WARN provides that a covered employer cannot order a plant closing (defined as an employment loss at a site for 50 or more full-time employees during any 30-day period) or mass layoff (a RIF that results in employment loss at a site for one-third of the employees, equaling 50 or more people or at least 500 employees) without giving 60 days’ notice to affected employees or their union representatives, as well as to state and governmental agencies. WARN will not apply in most situations in which a successor offers employment to the affected employees. See Alter v. SCM Office Supplies Inc., 906 F. Supp. 1243, 1249 (N.D. Ind. 1995) (holding that employees who obtain jobs after submitting applications to and interviewing with the acquiring company did not suffer an “employment loss” as defined by WARN); see also International Alliances Theatrical & Stage Employees v. Compact Video Services, 50 F.3d 1461, 1468 (9th Cir. 1995) (holding that WARN is not necessarily triggered even if the buying corporation modifies its employment terms and conditions to make them less favorable than conditions existing under selling company’s policies). WARN contains several potential snares for employers. Its regulations are highly technical and require strict compliance. For example, WARN’s “faltering company exception,” available to employers actively seeking inputs of capital that would allow them to avoid the layoff, will apply only if the employer strictly complies with its provisions. See, e.g., Alarcon v. Keller Indus., 27 F.3d 386 (9th Cir. 1994). Another example: employment losses that occur in two or more groupings and do not meet the minimum numbers must be aggregated if they occur within a 90-day period. Thus, a second layoff that follows closely on the heels of the first may trigger WARN liability. For a violation period, WARN awards affected employees up to 60 days of lost wages and benefits. It also imposes a $500 per day civil penalty, and provides access to private federal actions and attorneys’ fees for a prevailing party. COMPLY WITH OWBPA The Older Worker’s Benefits Protection Act (OWBPA) amended the Age Discrimination in Employment Act with 1990 to specifically prohibit employers from denying benefits to older employees. Under OWBPA waivers of federal age discrimination claims must be “knowing and voluntary.” 29 U.S.C. � 626(f)(1). Thus, OWBPA requires that: (1) the language of the age claim release refer specifically to ADEA claims; (2) the release be given in exchange for consideration beyond that to which the employee is already entitled; (3) the release expressly provide that the employee is advised to consult with an attorney before signing the waiver; (4) the employer give the employee adequate time to consider the waiver before signing it, with a minimum of 21 days for an individual termination, or at least 45 days in the case of a group termination like a RIF; and (5) the employer give the employee seven days after signing to revoke the release. A material change in the offer to employees restarts the time period; a nonmaterial change does not. In the case of a group exit incentive program like a RIF, the employer also must disclose specific information such as the job titles and ages of all employees eligible for or selected for the RIF, as well as of those not eligible or selected for layoff. See 29 U.S.C. � 626(f)(1). An employer may revoke the offer during the 21- or 45-day review period if it wishes to do so. Failure to comply with these requirements results in the employee’s ability to keep the severance pay, while having the right to sue the company for age discrimination under federal law. TRAIN DECISIONMAKERS Providing RIF decisionmakers with even a few hours of training can reduce the likelihood of employment litigation. At the very least, RIF training courses can and should cover the following: (1) how to apply RIF selection criteria correctly and uniformly (this training should include a discussion of the need to avoid the impulse to protect favored employees); (2) how to communicate the termination decision appropriately and sympathetically; (3) the danger of “stray remarks,” comments (often intended to be humorous) that relate to legally protected criteria (such as employees’ ages or retirement, or the new opportunities that they will have to spend time with their children or manage their disability needs; and (4) how to handle difficult issues such as employee anger, requests for additional severance benefits, etc. Many of these issues are easily avoided, and they are among the incendiary factors leading to litigation. MAKE SURE THAT RELEASE AGREEMENTS ARE SOUND Employers typically seek releases of employment claims in exchange for providing severance benefits. The provisions in such releases fall into two general categories: (1) the basics, which ensure that the release is lawful and releases employment claims effectively; and (2) advanced or supplemental provisions meeting other business needs of the company. The OWBPA requirements discussed previously fall into the first category, as do provisions stating that the employee intends to release potential claims (which should be listed specifically and more generally), language encouraging the employee to obtain the advice of counsel (and stating that the agreement is voluntary) and the inclusion of statutes stating that employees are waiving all claims (such as California Civil Code � 1542, which should be included to release accrued but unknown claims). Falling within the second category are matters such as nondisparagement clauses, lawful nonsolicitation clauses barring solicitation of customers or employees, and provisions encouraging and reminding employees of their obligations under confidentiality or intellectual property agreements. Employers also may wish to include noncompetition provisions (where they are lawful, which they typically are not in California) and attorneys’ fees provisions for prevailing parties in disputes over the release. BE ESPECIALLY CAREFUL WITH TECHNOLOGY RIFS Particularly in high-tech and emerging companies, age discrimination is the eternal RIF bogeyman. Employers should take steps to ensure that age discrimination does not taint (or appear to taint) the RIF process. First, ensure that the RIF criteria are as age-neutral as possible. Be alert for criteria directly tied to skill sets for changing products and technologies; such criteria often are associated with employees who have graduated from college recently. Second, as suggested previously, train decisionmakers on applying RIF criteria fairly. Watch for inconsistent treatment, and ensure that decisionmakers are not favoring some employees (especially their proteges, who may tend to be younger employees). Third, encourage decisionmakers to avoid joking remarks that may suggest discrimination (such as those that comment on retirement plans, health or time spent with children). See, e.g., Rollins v. Techsouth Inc., 833 F.2d 1525 (11th Cir. 1987) (holding an employer liable for age discrimination where managers joked about employee’s age and her work with a “bunch of babies”); Dominguez-Cruz v. Suttle Caribe, 202 F.3d 424 (1st Cir. 2000) (holding that stray remarks such as “old fart” are admissible to show age discrimination). Fourth, avoid differing explanations of the selection criteria; decision-makers should be trained on how to explain the reason for the selection decision to employees who are laid off without extensive discussion or explanation. Fifth, ensure that responses to administrative charges from Equal Employment Opportunity Commission or state agencies accurately reflect the facts. A plaintiff may argue that discrimination should be inferred from discrepancies between the response to the charge and the position the company takes in later court proceedings. Finally, ensure that decisionmakers perform the appropriate analysis. Adverse impact and other statistical analysis is most helpful in identifying age issues if it is broken down into bands (such as 40 to 49, 50 to 59, 60 to 69) rather than broad categories like “40 and over” and “under 40.” For example, the simpler analysis might not red flag as being potentially problematic an employer’s selection of all four employees over age 65 but only several employees under age 39. INCLUDE A COMPLAINT PROCESS Nothing in the law mandates an internal appeal or complaint procedure for RIF issues; nonetheless, it is often a good idea to create one. Maintaining a simple process that encourages employees to speak with a human resource or employee-relations manager may allow an employer to flush out actual or perceived unfairness in the RIF process — something that may help the parties to resolve the issue long before the costly litigation stage. Those who serve as the internal appeals managers should have good listening and people skills, and should be trained in how best to accomplish their investigation and other duties. PREPARE All too often, RIFs result in litigation. Be prepared for this unfortunate possibility by ensuring that documents regarding the process are carefully maintained, preferably with the legal department. Privileged documents in particular, such as statistical analyses, should be privately and confidentially maintained. Inform managers that they shouldn’t discuss the termination. Lynne C. Hermle is a partner in the Employment Law Department of Orrick, Herrington & Sutcliffe’sMenlo Park, Calif., office and an editor-in-chief of the Start-Up and Emerging Companies newsletter. She may be contacted by e-mail at Lynne C. Hermle.

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