Reductions In Force—layoffs, in layman's terms—are unfortunately a common occurrence during economic downturns. That misfortune is compounded by the legal pitfalls RIFs present for employers. Being prepared ahead of time can reduce your legal exposure to these risks. Here are seven tips to preparing for layoffs:

1. Layoff decisions should be underscored by legitimate, non-discriminatory business reasons—job functions and operational necessities. Relying on objective criteria is less likely to result in claims of discrimination than relying on subjective criteria. Hard data, such as production statistics, seniority or a failure to meet specific performance criteria, are always preferable to more subjective factors (such as performance evaluations or an employee's “attitude”).

2. Also take into account the Age Discrimination in Employment Act, which protects employees over age 40. Employment costs are a big part of any RIF analysis and often lead to selection of a group of highly paid (and typically older) employees. While decisions based strictly on cost are not per se illegal, salary and benefit costs are often considered proxies for age—and hence, for age discrimination claims. It is imperative to follow ADEA guidelines and any other applicable laws.

3. It's a good idea to establish an RIF committee of representatives from legally protected employee classes (e.g., age, sex or race). The committee can significantly minimize claim exposure by conferring before final decisions are made.

4. Distributors should also perform a statistical analysis to ensure that a protected class of employee is not disproportionately affected. If the statistics uncover a “disparate impact,” the RIF can be reconfigured to avoid unnecessary exposure.

5. Be sure to document the reasons underlying the RIF decision and individual discharge selections. Also conduct exit interviews and send post-termination letters setting out any other legal obligations (of which there are many). Good documentation can go a long way toward proving that layoffs were non-discriminatory and based on good business judgment. Employers conducting an RIF should “script” and document exit interviews, so no variation exists as to what was said, or by whom, about the reasons for discharge.