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Reductions in Force (No. 42-2nd)

Product Code: CPOR01
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Corporate Practice Series Portfolio No. 42-2nd, Reductions in Force, analyzes the myriad laws that apply to an employer that wishes to implement voluntary or involuntary reductions in its employee workforce. The portfolio covers discrimination claims that can be raised in connection with such workforce reductions and the implications of such workforce reductions under labor relations laws. In addition, the portfolio addresses various issues arising under the Internal Revenue Code, the Employee Retirement Income Security Act, the Worker Adjustment Retraining Notification Act, and COBRA. Finally, the portfolio analyzes various practical issues that can arise in the course of communicating and implementing reductions in force.
Portfolio 42-2nd: Reductions in Force

I. Introduction
II. Reductions in Force: Minimizing the Risks of Age Discrimination
     A. Coverage of the Age Discrimination in Employment Act
         1. Its Purpose and Scope
         2. Theories of Discrimination
         3. Employer Defenses Under the ADEA
         4. Damages in Discrimination Actions
    B. Involuntary Reductions in Force
         1. Inferences of Discrimination in Involuntary Terminations
         2. Statements that Can Provide Evidence of Discrimination
         3. Other Specific Termination Criteria that May or May Not Provide Evidence of Discrimination
             a. Job Elimination
             b. Performance Criteria for Layoff
             c. No Special Efforts Necessary for Older Workers
             d. Age Proxies
         4. Reducing Potential Liability — a Checklist
    C. Statistical Evidence of Discrimination
         1. Disparate Impact Claims
             a. Judicial Recognition of Disparate Impact Theory
             b. Creation of Discriminatory Effect
             c. Disparate Impact and Selection Decisions
         2. Disparate Treatment Claims
         3. Age Band Analysis
         4. Analyzing Statistics Before a Reduction in Force
         5. Statistical Analysis as a Defense Against Discrimination Claims
    D. Older Workers Benefit Protection Act and Voluntary Programs
         1. Supreme Court's Decision in Betts: History Behind the OWBPA
         2. Basics of the OWBPA
         3. Rules for Voluntary Early Retirement Incentive Plans
         4. Legality of Voluntary Early Retirement Programs in Light of the OWBPA
         5. Waivers and Releases: Statutory Requirements of OWBPA
             a. Requirements
             b. Validity of Waiver Under OWBPA
III. Reductions in Force Under the National Labor Relations Act
    A. Duty to Bargain with Unions
    B. Duty to Bargain About Early Retirement Incentive Plans
    C. Duty to Bargain About Layoffs
         1. Employer Obligation to Decision Bargain
         2. Employer Obligation to Effects Bargain
    D. Unlawful Motivations for a Reduction in Force
IV. Reductions in Force: Issues Under the Code and ERISA
    A. Overview of Incentives that Can Be Offered in a Voluntary Early Retirement Program
    B. Types of Incentives
         1. Incentives Under an Existing Defined Benefit Plan
             a. Subsidized Early Retirement Benefits; Credited Service
             b. Social Security Bridge Payments; Cost-of-Living Increases
             c. Subsidized Joint and Survivor Benefits
        2. Excess Benefit Plans
        3. Supplemental Executive Retirement Plans
        4. Nonqualified Pension or Profit-Sharing Plans
        5. Additional Benefits
    C. Benefits Available in Voluntary Early Retirement Programs
        1. Qualified Defined Benefit Plans
             a. “Qualified” Plan
             b. Overfunded Plans
             c. Nondiscrimination: Three Requirements
                (1) Nondiscrimination in Contributions or Benefits
                     (a) General Test for Nondiscrimination
                     (b) Ratio Percentage Test
                     (c) Nondiscriminatory Classification Test
                     (d) Average Benefit Percentage Test
                (2) Benefits, Rights and Features
                     (a) Current Availability
                     (b) Effective Availability
                (3) Timing of Amendment
             d. Employer Discretion
             e. Anti-Cutback Rule
             f. Maximum Annual Benefit
             g. Permitted Disparity (Social Security Integration)
             h. Administrative Expenses
        2. Severance Pay Plans
             a. Severance Plan as a Pension Plan
             b. Severance Plan as a Welfare Benefit Plan
             c. State-Mandated Severance Payments
        3. Excess Plans and SERPs
             a. Excess Plans
             b. SERPs as Top-Hat Plans
        4. Nonqualified Pension and Profit-Sharing Plans
             a. Exempt from Code Requirements
             b. Subject to Certain ERISA Requirements
             c. Deductibility of Employer Contributions
        5. New or Enhanced Retiree Medical and Life Insurance Benefits
        6. Financial and Career Counseling
             a. Independence of Counselor
             b. Tax Aspects
    D. Effects of a Reduction in Force on Ongoing Plans; Liability for Severance and Retiree Medical Benefits
        1. Effect on Ongoing Plans
             a. Partial Terminations
             b. Minimum Participation Rule
             c. Cash or Deferred Arrangements
             d. Nondiscrimination and Minimum Coverage
        2. Potential Liability for Severance Benefits and Retiree Medical Benefits
             a. Severance Benefits
             b. Retiree Medical Benefits
V. Health Care: Continuing Obligations Arising from Reductions in Force
    A. Continuing Health Care Obligations Under COBRA
        1. Group Health Plans to Which COBRA Applies
        2. COBRA Qualifying Beneficiaries
        3. COBRA Qualifying Events
        4. Length, Cost and Quality of Continuing COBRA Coverage
        5. Required COBRA Notices
        6. Sanctions for Failure to Comply with COBRA
    B. State COBRA Statutes and ERISA Preemption
VI. Compliance with the Federal Worker Adjustment and Retraining Notification Act (WARN) 
Introductory Material
    A. WARN's Notice Requirement
        1. Definition of “Employer”
        2. Definition of “Affected Employee”
    B. Definitions of “Plant Closing” and “Mass Layoff”
        1. “Plant Closing”
        2. “Mass Layoff”
        3. “Temporary Employment”
        4. “Employment Loss”
        5. “Single Site of Employment”
    C. Definition of 60-Day Period
        1. The “Faltering Business” Exception
        2. The “Unforeseeable Business Circumstances” Exception
    D. Definition of “Notice”
        1. Notice to Affected Employees' Representatives
        2. Notice to Affected Employees Without Representative
        3. Notices to State and Local Officials
    E. Enforcement
        1. Employee Rights
        2. Damages
VII. Reductions in Force: Communication and Implementation
    A. Communication Issues
        1. Communication Issues with Employee Handbooks and Termination Policies
        2. Communication Issues Upon Consideration of a Reduction in Force
            a. ERISA Considerations
            b. State Law Considerations
        3. Communication Issues in Implementing a Reduction in Force
            a. Disclosure
            b. Oral Modification of a Program
    B. ERISA §510 — Interference with Protected Rights
        1. Overview
        2. Section 510 and Reductions in Force
            a. Plant Closings and Similar Cases
            b. Benefit Costs as a Factor in Layoff Decisions
        3. Avoiding a §510 Claim
        4. Section 510 and Benefit Plan Amendments
Portfolio 42-2nd: Reductions in Force

Wks. 1 Sample WARN Notice to Affected Employees' Representative

Wks. 2 Sample WARN Notice to Affected Employee Without Representative

Wks. 3 Sample WARN Notice to State and Local Officials

Wks. 4 Uniform Law Commissioners' Model Employment Termination Act

Wks. 5 Greater Washington Board of Trade Threatens State Benefit Continuation Laws

Wks. 6 Uniform Law Commissioners' Model Employment Termination Act

Kathy Davidson Ireland, Esq.
Bethesda, Maryland