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Understanding a Reduction in Force Versus a Layoff

By Michal Shinnar

What is a Reduction in Force (RIF) versus a Layoff? First, it is important to understand that these are business terms, not legal terms, and that outside of some limited exceptions discussed below, there is no legal difference between a RIF and a layoff.

In business terminology, a RIF usually refers to a specific plan to either close down an employer’s worksite; close a department; or otherwise decide to not employee a specific job category. This can include because the employer is outsourcing a job function, switching to contractors, and/or no longer has a need for that line of work. A layoff is usually a process where the employer decides to terminate an employee, and the termination is not due to a specific reason to terminate that employee (such as due to poor performance or misconduct). Usually a layoff will happen to more than one employee at a time, but even a single employee can be subject to a layoff. Often a layoff will include a decision that a certain number of employees need to be laid off for business reasons, or that there will be a layoff of 10% of employees across the board. However, layoff and RIF are not legal terms, and what one employer refers to as a layoff, another employer might refer to as a RIF.

There are times when a RIF verses a layoff may be legal terms. The federal government has specific rules and regulations governing a RIF, and more information about them can be found in this Handbook (PDF) put out by the U.S. Office of Personnel Management (OPM). State and local governments may have their own regulations, and sometimes union contracts and/or other employee contracts may specify different rules governing a RIF versus a layoff. Finally, the Worker Adjustment and Retraining Notification Act of 1988 (the “WARN Act”) is a federal law that requires most employers with 100 or more employees to provide notification 60 calendar days in advance of planned closings and mass layoffs of employees. The details of the WARN Act can be found at 20 C.F.R. § 639.

One common misperception is that if an employer decides to conduct a RIF or a layoff, the employee cannot bring claims of discrimination. Sometimes this misperception is based on the belief that a RIF or a layoff impacts many employees, and therefore cannot be shown to be discrimination against once employee. While this is true in many instances, this is not true as a matter of law, and if you believe you were subject to a RIF and/or layoff for discriminatory reasons, you should consult with an employment attorney. First, the reason that a group of employees were subjected to the RIF/layoff may have been for discriminatory reasons. One example is where the decision to include a specific employee in the RIF/layoff is due to discrimination. For example, the decision to lay off 10% of the department may not be discriminatory, but the decision to include you among the 10% may have been due to discrimination. Another example is if the employer decides to target a specific division or job for a RIF for discriminatory reasons. For example, in the case Breen et. al. v. Chao, et. al., hundreds of Flight Service Controllers for the FAA brought an age discrimination case alleging that the FAA had subjected them to a RIF due to age discrimination, including that FAA officials had described them as “the aging workforce.” (As a full disclosure, I litigated this case, and it resulted in a settlement of $43.8 million, the highest settlement against the federal government in an age discrimination case in history).

When subjecting employees to a RIF and/or layoff, employers generally require employees to sign paperwork. It is important to review it thoroughly, and it is best to contact an employment lawyer if you have any questions.

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