Reductions in Force & Business Restructuring

Globalization, plus technology and automation, continue changing the way most of our clients do business. Work that previously required a dozen employees today needs only a few, and tomorrow may not need any. Highly skilled jobs that were exclusively US-based five years ago can now be performed elsewhere for less. Or they can be outsourced, allowing the client to focus on its core business. At the same time, many clients today confront anti-globalization challenges in the form of tariffs and other trade barriers, both in and outside the US. These drive up manufacturing costs, thus necessitating further labor cost savings. Such seemingly super-human forces have very human consequences: headcount reduction generally, managerial job eliminations as management ranks are flattened, plus job losses due to outsourcing, offshoring, or both (options without which many companies would be unprofitable or would simply disappear).

Amidst these business challenges, employers must navigate myriad federal, state, and sometimes local workforce protection laws. Non-compliance itself can generate litigation, but greater risks are posed by hasty and undocumented decision-making that can trigger class action lawsuits, wide-reaching EEOC investigations, and reputational damage.

HOW WE HELP

We help clients avoid litigation, achieve compliance, and exit employees in a fair and otherwise defensible manner. By bringing deep knowledge of the governing laws, we can also advise clients on strategic and tactical decisions.

Clients benefit from our RIF & Business Restructuring group being embedded in a full-service international law firm. We are not an island of employment attorneys in a sea of transactional lawyers. Nor do we dabble in employee benefits or executive compensation issues. We routinely tap the expertise of our Employee Benefits colleagues — some of the best practitioners anywhere. And when a client is dealing with a global reduction, they need not retain multiple firms in multiple jurisdictions, nor a firm with outposts across the globe. Rather, our International Group provides coordinated, cross-border advice so that US and non-US reductions can be synchronized to avoid miscommunication, local non-compliance, and other frequent missteps.

Our attorneys guide clients through each step of a reduction or restructuring, helping them comply with the array of laws that govern at various junctures. Early on, we advise clients on notice requirements under the federal Worker Adjustment Retraining & Notification (WARN) Act and state law analogs. This work is highly technical, and our team members are among the country’s foremost thought leaders and practitioners in this area. When a company must choose among employees to be separated, methods used and corresponding decisions typically determine a RIF’s legal consequences: whether it goes off without a hitch, or results in a demand letter plus a single discrimination charge; or whether it triggers numerous charges, a company-wide agency investigation, and an 8-figure demand from class counsel who will actually file their threatened class action. Some RIF team members have tried or otherwise defended many such cases, and now counsel clients on how to avoid them. This includes reviewing or helping design selection tools that are both objective and focused on specific skills needed in a leaner organization. We also regularly conduct a privileged statistical analysis of preliminary selections for RIF, to see whether those adversely impact certain employee groups, and if so whether that impact is explicable or otherwise defensible.

Many employers offer severance in exchange for a release in the RIF context. This makes it imperative that an employer complies with the Older Workers’ Benefit Protection Act (OWBPA). As with WARN, compliance with the OWBPA’s disclosure requirements is highly technical. Our attorneys who advise clients in this regard not only know the law, but also have the practical wisdom that comes from decades of experience. We also advise clients on whether severance should be provided under an ERISA-compliant plan, and if so what that should contain. Seyfarth prepares or revises these plans, along with executive agreements, bonus plans or policies, equity grants, and other compensation arrangements. Because post-employment medical benefits matter to many impacted employees, we advise clients regarding subsidized COBRA or other post-separation health benefits assistance.

Our clients in this sphere are as diverse as our client base generally. That said, RIF and restructuring work tends to follow larger economic trends. This does not mean reductions and restructurings cease in a strong economy. Given long-term trends like automation and globalization, RIFs and restructurings occur continuously across most industries, regardless of whether the economy is up or down at a given moment. Indeed, M&A activity in a strong economy generates reductions, as acquiring or merged companies seek to reap potential synergies that helped drive the deal. Still, certain industries experience more group separations than others. This includes pharmaceutical companies, sometimes facing patent expiration on top of competition with global generic drug manufacturers. It also includes financial services—banks, insurers, investment firms, etc. While most big banks weathered the Great Recession, many wrestle today with business models and emphasis, for example, whether to retreat from investment banking, or to shutter brick and mortar branches that see far fewer customers in-person than they used to. Many retailers face near and long-term challenges, as internet sales grow while in-store sales either decline or flat line at best. Technology is another client base disproportionally affected by change. Gone are the days when most clients either were or were not downsizing. The new normal for many clients is to downsize frequently in some areas while hiring and recruiting for others.

THE SEYFARTH EXPERIENCE

Like many of our clients, we leverage technology to provide better output more efficiently without increasing costs.

Data Analytics. To analyze adverse impact, we work directly with client data. We convert that to a format appropriate for analytics, run adverse impact using state-of-the-art proprietary software, then report statistical results in a manner readily understood by clients – all with the utmost efficiency and under attorney-client privilege.

Artificial Intelligence. To prepare separation agreement templates, we take Seyfarth-authored text and use artificial intelligence to help generate agreements with necessary state-specific release provisions, legally compliant restrictive covenants, and advantageous but appropriate choice of law language.

Staffing Models. We use creative staffing models that routinely include non-attorneys for work that is either highly technical or labor intensive. To analyze adverse impact or generate OWBPA disclosures, we use economists, statisticians and data analysts instead of attorneys. This lean, non-traditional approach not only saves the client money, but also ensures work gets done by the person most qualified to do it.

There is something to be said for economies of scale that result from decades of legal experience and corresponding collective knowledge. Seyfarth attorneys in multiple offices have advised on hundreds, and in some instances thousands, of RIFs.