Organizational Furloughs, Layoffs, and Other Workforce Reductions

In this Baldwin Brief, we explore the technical, legal, and regulatory requirements underlying organizational workforce change management initiatives and evaluate the effects of organizational change management in the context of health and welfare plan administration. Then, we’ll propose and evaluate certain holistic organizational change management strategies, defining and evaluating various practical alternatives and supplemental activities that can be undertaken to mitigate employee relations issues and diminish an organization’s overall culture and functional workplace environment. Read the full brief here.

Part one: Ten tenants of organizational change management

As your organization embarks on its change management journey, remember that no two organizations are the same. What works for one entity may not work well for another. However, at the outset, there are ten tenants of successful organizational change management that all entities should keep in mind:

1. Electing a course of action
2. Considerations of employee benefit eligibility
3. Handling employee contributions and payments
4. Plan documents & policy updates
5. COBRA and ACA notifications
6. Document and archive appropriate records related to workforce reduction initiatives
7. Conduct employee education
8. Be transparent and plan for contingencies
9. Be cautious and precise when drafting severance and separation agreements
10. Understand the employment contact landscape of the organization

Part two: Introduction to workforce change management

Economic situations occasionally require employers to implement furloughs and layoffs as cost-reduction measures, frequently designed exclusively to assure organizational continuity. These types of workforce management activities have the potential to significantly burden (both financially and administratively) the resources and operational capacities of an organization. Specifically, an organization may look to implement a workforce furlough or mass layoff to accommodate current economic pressures experienced by the organization. These two terms are defined in the full brief.

Part three: Understanding federal legal and regulatory requirements

Organizational change management, by its very nature, critically impacts employee total rewards, including both compensation and employee benefit matters. Consequently, to mitigate risks and for satisfactory organizational adherence to due process and other related employee rights, employers implementing workforce change operations must comply with various laws and regulations existing at both the federal and state levels. Read the full brief here.

Part four: Change management dynamics for health & welfare plans

In the full brief, we cover:

• Treatment of medical, dental, and vision insurance benefits
• Treatment of flexible spending accounts and dependent care assistance plans
• Treatment of ancillary benefits (life insurance, disability, etc.)
• Treatment of health reimbursement arrangements
• Treatment of health savings accounts
• Treatment of accrued paid and/or unpaid time off from work
• ACA related specific furlough and layoff considerations
• ACA treatment of breaks in service respecting eligible employees
• Treatment of affordability for purposes of the ACA
• Treatment of severance pay and related taxes
• Summary of change management dynamics for health and welfare plans

Part five: Administering a holistic approach to change management

In addition to observation and compliance with the previously mentioned legal and regulatory mandates and the specific health and welfare plan considerations incorporated herein, many employers voluntarily elect to assume a holistic posture regarding organizational change management. In these circumstances, initial and ongoing evaluation of an employer’s labor and employment practices(from the employee relations perspective) are threshold and essential considerations. This includes, without limitation, evaluation of the administrative, operational, and governance related outcomes associated with a range of organizational alternatives, or compliments to, layoffs and furloughs, such as:

• Flexibility of service commitments
• Utilization of voluntary workplace leave
• Avoidance or suspension of discretionary compensation
• Modifications of entity formation & alignment
• Reduction of expenses and operational overhead
• Evaluation and evolution of specific role requirements

Read the full brief here.