Reductions in force
Reductions in force (RIFs) are business decisions to reduce the number of employees, usually in order to reduce COSTS. Also called LAYOFFs, downsizing, and even rightsizing, RIFs became a common business decision in the 1990s. Most companies and organizations have RIF policies, which are usually based on SENIORITY (i.e., last in, first out). Part of the problem is that this does not always allow a company to keep its most productive workers, and depending on EMPLOYMENT contracts, may not save the company money immediately. In addition to stipulations in employment CONTRACTS, RIFs are often subject to COLLECTIVE BARGAINING agreements. One difficulty is defining seniority, which can be interpreted based on how long a worker has been with the company or has been part of a particular organization or division within the company. Most RIF policies give termined workers first option for reemployment should the company later hire workers for the same or similar jobs. Companies considering reductions in force have a variety of alternatives to achieve the goal of reducing costs. In addition to layoffs, reductions in force can be accomplished through attrition, early retirement incentives, job sharing, part-time employment, voluntary time-off programs, and across-the-board salary reductions. After September 11, 2001, many companies, particularly in the tourism and travel industries, instituted many of these programs in order to reduce costs in a time of reduced DEMAND. Two federal programs affect reductions in force determinations. the WORKER ADJUSTMENT AND RETRAINING NOTIFICATION ACT (WARN) and TRADE-ADJUSTMENT ASSISTANCE (TAA) program. WARN requires employers covered by the act to provide 60-day advance notice of large-scale employment loss, generally resulting from plant closings and mass layoffs. WARN became law in 1989 and generally applies to companies and nonprofit groups with 100 or more employees. Hourly, salaried, and managerial workers are all entitled to notification under WARN, including when the sale of a business will result in mass layoffs of plant closings. WARN defines employment loss as
• employment termination, other than a discharge for cause, voluntary departure, or retirement
• a layoff exceeding 6 months
• a reduction in an employee’s hours of work of more than 50 percent in each month of any 6-month period.
Trade-adjustment assistance refers to governmentsponsored training programs and supplemental cash unemployment compensation provided to workers who lose their jobs due to increased foreign competition. TAA grew out of programs intended to aid Americans who were dislocated when the European Community (now the EUROPEAN UNION) was established. The first assistance program was authorized in the Trade Expansion Act of 1962; however, no assistance was actually provided until 1969. Under TAA, workers may petition the U.S. secretary of labor for assistance. The secretary must certify that workers have been or are threatened with job losses, that the firm’s sales or PRODUCTION or both have decreased absolutely, and that increased IMPORTS of articles like or directly competitive with those made by the workers or the firm for which the workers provide essential goods or SERVICES “contributed importantly” to job separation or decline. The most visible trade-adjustment assistance program is the NAFTA-TAA. Between 1994 and 1997, almost 100,000 American workers were certified for trade-adjustment assistance. This number was often used to show the adverse impact of the NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA), but TAA certification does not necessarily mean workers have been displaced, only that there is the potential for workers to lose their jobs due to imports. In NAFTA’s first three years, slightly more than 12,000 workers received NAFTA-TAA. Many workers who have lost their jobs are encouraged by state officials to apply for TAA, thereby reducing the state costs for UNEMPLOYMENT compensation.
