Adapted with permission from the December 2008 / January 2009, Volume 23 Number 7 issue of The Bottomline, the journal of Hospitality Financial and Technology Professionals (HFTP). Learn more at www.hftp.org.
Since the private club industry has typically seen some lag in feeling the effects of the recession, some clubs have only recently reduced staff or have yet to lay off employees. Since it may take some time to recover from this economic storm, club management may find it helpful to focus on key employment issues involved in a downsizing and the best practices for implementing a successful reduction in force (RIF) if one becomes necessary.
1. Consider RIF Alternatives. Before implementing a RIF, clubs should consider the significant advantages of implementing alternatives to an involuntary RIF, if feasible. RIF alternatives include hiring freezes, reliance on natural attrition, job sharing arrangements, reduction in hours, temporary shutdowns, voluntary leaves of absence, expense reduction campaigns, a moratorium on compensation increases, voluntary separation programs and early retirement incentives.
2. Have a Solid Business Plan. When confronted with the need to reduce the size of its workforce, a club should have a keen understanding in two areas: 1) the goals to be accomplished by the RIF; and 2) which employees and resources are needed to meet the club’s business needs in the future. This plan calls for a detailed assessment of the current workforce, required cost reductions (if any), what post-RIF structure will best serve the future needs and objectives of the club, and what employee skills and functions will be needed for the club’s survival after the RIF.
3. Paper the RIF Trail. A robust performance management system should be in operation long before an employer contemplates job cuts. Up-to-date performance appraisals provide management with the tools necessary to select employees for RIF in a fair, nondiscriminatory and legally defensible fashion. Decision-makers should be counseled that: 1) selections must be based on predetermined criteria and not upon reference to any person’s protected characteristics; 2) all RIF documentation should avoid reference to any person’s protected characteristics; 3) they should not create nor receive lists identifying employees’ ages, sex, race or other protected characteristics; and 4) they should not review disparate impact assessment data.
4. Call in the Right Troops and Consult the Lawyers. An effective RIF requires more than just a sound blueprint; it also requires effective implementation by way of careful coordination between club leaders, human resources and benefits professionals, communications staff, potential outplacement services, and experienced counsel.
5. Select Employees Carefully. Identifying employees for layoff can be the most treacherous part of the RIF process from an employee morale and legal liability standpoint. Employees terminated during a RIF may challenge their layoff under anti-discrimination and anti-retaliation statutes by arguing that the selection criteria used were unrelated to the club’s stated business goals, or that they were so subjective in nature that were tainted by improper motives or unlawful biases.
6. Be Sure to Retain Top Talent. Clubs always need their top performers even in a time of financial crisis. It seems oxymoronic to focus on retention while carrying out a RIF. However, while managers in RIF situations are required to devote significant attention to those who may be asked to leave the club, it is equally important to focus on employees selected for continued employment as they will be responsible for addressing prospective business needs of the club going forward.
7. Union Issues and Bargaining. If affected employees are represented by a union, it is vital that the employer determine the existence of any applicable labor contract provisions, evaluate the duty to bargain with unions, and avoid claims of anti-union discrimination labor contracts and other union agreements may contain provisions, restrictions and requirements that radically affect a layoff including, for example, clauses pertaining specifically to layoffs, outsourcing, work transfers, shutdowns, severance pay, selection criteria and notice requirements.
8. Install Checks and Balances. Once the initial RIF selections have been made, the list of those selected for RIF and retention should be scrutinized by upper management as well as counsel, if possible.
9. Evaluate the Impact of the Selections. Once employees have been identified for layoff, an analysis should be conducted to assess whether the selection criteria have resulted in the disproportionate termination of members of a protected class.
10. Ensure Compliance with WARN. While extremely unlikely, clubs should also determine if they are required to provide notice under federal WARN Act or state mini-WARN acts.
11. Effective Communication. Once a club has decided to reduce its workforce, how and when the decision is communicated to employees is key. Effective, clear and consistent communication by the club is pivotal to reducing claims by disgruntled employees and assuaging the anxiety of remaining employees. Every employer-employee communication related to the RIF will likely be scrutinized should litigation ensue.
12. Severance Pay and Releases. If financially feasible, many employers consider making severance benefits available to affected employees in exchange for a release of legal claims. While initially costly, these agreements are lawful and benefit the employer because they help shield the club from expensive litigation down the road, if drafted correctly.
In 2009 the U.S. observed one of the most significant reductions in the workforce ever experienced, and the economy is still at a record high level of unemployment. As the economy pulls out of the recession, it is clear things will remain rocky for the foreseeable future. While employers may not be able to avoid the continuing economic storm, they have the power to control and/or limit its damage by learning from the mistakes of others faced with the need to cut their workforce: plan ahead, document the business reasons for the layoff, and get the right people involved at the right time. You and your club leaders will be glad you did.
Resource:
Ethan Lipsig and Keith Fentonmiller, A WARN Act Road Map, 11 The Labor Lawyer 3, at 273 (1988).
Ann Marie Painter is an attorney in the Dallas office of Morgan, Lewis & Bockius LLP. She practices exclusively in the area of management-side employment law. Daryl Robertson-Pritchard is formerly with Morgan, Lewis & Bockius LLP and now serves as in-house labor counsel for JCPenney Corp.