This article from Wharton–“As Layoffs Spread, Innovative Alternatives May Soften the Blow“–indicates companies are looking at creative alternatives to layoffs “such as voluntary retirements or salary cuts, hiring freezes, reductions in hours, or the cancellation of business trips and/or costly perquisites.” The article also notes the trend of cutting “benefit packages and matching contributions to 401(k) plans.”
Whatever the alternatives contemplated, employers need to beware of the minefield of Section 510 of ERISA. For those not familiar with ERISA section 510, it provides as follows:
It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan. . . or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan. . .
For instance, targeting for layoff those employees who are costing the company more when it comes to health care costs or pension costs is unlawful under Section 510. Some may recall the well-known Millsap et al. v. McDonnell Douglas Corporation case in which the company was accused of seeking to maximize their pension plan’s surplus by selecting for layoff or plant closing its older, more senior employees. You can read about the millions that were recovered in that case by the plaintiffs here, here, and here.
Also, outsourcing or reclassifying employees to cut benefits costs can give rise to ERISA Section 510 claims. Read more about that topic here, here, and here.