Key Points

• Reductions in force can be accomplished through voluntary employment terminations (such as offering early retirement incentives), involuntary terminations or both. They should be designed and implemented in a nondiscriminatory and nonretaliatory manner.
• Employers should review severance pay policies as well as incentive and equity compensation plans and arrangements. If a severance plan is not already in place, consider implementing one.
• A WARN Act (or similar state law) analysis will determine whether advance notice of employment termination is required.
• Assess whether a RIF must be disclosed on an SEC Form 8-K, and assess the impact on key employees and stakeholders.

Reductions in force (RIFs) are making headlines as companies trim their worker ranks in the face of a weakening economy. Employers must decide whether to implement voluntary or involuntary RIFs (or both); the considerations for each vary greatly. We take a high-level look at the options, next steps and other considerations for companies anticipating downsizing.

Option 1: Voluntary RIFs

Voluntary RIFs include offering current employees severance pay or “buyout” programs, early retirement packages, job sharing agreements and/or reduced workweeks. If the employee does not voluntarily agree to accept the offer, he or she can continue working, unless the employer also conducts an involuntary RIF.

Why voluntary RIFs? These types of reductions may make it easier for employers to obtain releases of...

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