A Primer on Reductions in Force

On Feb. 11, President Trump signed an executive order instructing agencies to begin reductions in force (RIFs). RIF is the traditional method by which agencies reduce the size of their workforce during reorganizations or budget cuts. Individuals in the private sector will likely find the RIF process bewildering: By combining a gladiator fight with a complex math problem, RIF offers employees an opportunity to “compete” for continued employment within the agency.

Many employees affected by a RIF can challenge its validity at the Merit Systems Protection Board (MSPB). One cannot easily generalize whether the Trump administration will follow the law governing RIFs. A RIF is not a governmentwide layoff; it is limited to a particular geographic area, organizational unit, and type of position. There will likely be hundreds of RIFs. The validity of each RIF, however, depends on whether the agency adheres to the arcane procedures that govern the process.          

The Executive Order

In an executive order titled “Implementing the President’s ‘Department of Government Efficiency’ Workforce Optimization Initiative,” Trump outlined two additional mechanisms by which he will seek to reduce federal employment. The order is sweeping, and its definition of “agency” suggests that it will apply to both executive departments and independent agencies. The order, however, excludes positions related to public safety, immigration enforcement, or law enforcement.

Section 3 of the executive order envisions the use of attrition to reduce the size of the federal workforce. The order states that agencies shall hire “no more than one employee for every four employees that depart.” Moreover, this section requires agencies to develop a “data-driven plan” to ensure that hires are made in the “highest-need areas.” The order requires the Department of Government Efficiency (DOGE) team lead to approve any hiring—subject to exceptions deemed necessary by the agency head. Although the team lead works with DOGE, an earlier executive order contemplates that the team lead is an employee within the agency in question—not DOGE.

Section 4 of the order instructs agencies to “initiate large-scale reductions in force.” For purposes of the RIF, agencies should prioritize “[a]ll offices that perform functions not mandated by statute or other law,” including “all agency diversity, equity, and inclusion initiatives; all agency initiatives, components, or operations that my Administration suspends or closes; and all components and employees performing functions not mandated by statute or other law who are not typically designated as essential during a lapse in appropriations.” The order envisions a sweeping reduction in the size of the federal workforce, stripping agencies to the bare minimum number of employees needed to implement the laws enacted by Congress.

How many employees might be laid off as a consequence of this order? One estimate puts the number at more than 700,000 individuals. This estimate comes from the fact that the order instructs agencies to separate employees “not typically designated as essential during a lapse in appropriations as provided in the Agency Contingency Plans.” The contingency plans provide a rough estimate of the number of employees targeted by the order. The contingency plans also reveal that the effects of the order will vary from agency to agency. For example, the Department of Justice classifies about 84 percent of its employees as essential. By contrast, the Department of Commerce classifies only about 16 percent of its employees as essential. The meaning of “essential,” however, is subject to political jockeying. Nevertheless, even a small reduction in an agency’s workforce may significantly disrupt the agency’s programs and services.

In some respects, Trump’s order is similar to one executed by President Clinton. Several weeks into his presidency, Clinton ordered each agency with more than 100 employees to eliminate not less than 4 percent of its civilian personnel. Clinton did not mandate RIF but specified that agencies should reach this target through “attrition or early out programs.” Like Trump’s order, Clinton ordered both executive departments and independent agencies to comply with the order. Yet Clinton’s aims were much more modest. Clinton hoped to reduce the size of the federal workforce by 100,000 employees (4.5 percent). Combined, Trump’s one-in-four-out requirement and the elimination of nonessential employees target close to 30 percent of the 2.3 million individuals in the civilian workforce.

The RIF Process

Agencies most commonly use a RIF when facing a reorganization, a change in the agency’s workload, or a shortage of funds. The RIF process was adopted as part of the Veterans’ Preference Act of 1944. The goal of the act was to ensure that veterans would receive preference in the event of a reduction in the size of the federal workforce. Today, a RIF is governed by 5 U.S.C. § 3502 and the Office of Personnel Management’s (OPM’s) regulations. These procedures seek to provide a fair and equitable process for determining which employees the agency will release.

During a RIF, employees compete for the positions that remain in the agency. A RIF follows an arcane set of procedures to determine which employees will be released from the agency. (Summarizing the RIF procedures is difficult because agencies may adopt slightly different procedures or be subject to collective bargaining agreements that change employees’ rights in the event of a RIF. With this caveat in mind, I summarize the general procedures and the types of challenges that may arise.)

It’s worth starting with a 30,000-foot summary of this process. The agency begins by selecting the number and type of positions to release. The initial focus of the RIF is on positions rather than individual employees. Once the agency has determined the scope of the RIF, it orders employees according to a formula that considers tenure, preference eligibility, length of service, and performance. Then the agency begins to release individuals from their positions starting from the bottom of the retention list. During this process, higher-ranked employees may be reassigned to positions occupied by lower-ranked employees.

A RIF is demoralizing. Many agencies seek to avoid a RIF using incentives that encourage voluntary separation. For example, agencies may seek approval from OPM for Voluntary Early Retirement Authority (VERA). VERA lowers the age and service requirements for retirement, enticing older individuals to retire early. Because a RIF prioritizes tenure and length of service, a RIF may result in retention of a significant number of people close to retirement over mid- or early-career employees. This imbalance creates the possibility of a workforce shortage in several years following a RIF. VERA helps overcome this problem. Alternatively, the agency may seek approval for Voluntary Separation Incentive Payments (VSIP), which authorizes agencies to offer up to $25,000 to any employee who resigns voluntarily. The deferred resignation program is distinct from VSIP but seeks to have the same effect of encouraging voluntary resignations.

The civil service statutes do not explicitly provide a right of appeal to individuals adversely affected by a RIF. OPM regulations, however, establish this right. Under 5 C.F.R. § 351.901, “[a]n employee who has been furloughed for more than 30 days, separated, or demoted by a reduction in force action may appeal to the Merit Systems Protection Board.” Understanding the possible challenges to a RIF requires a more in-depth understanding of the RIF procedures.

Justifying a RIF

Under OPM’s regulations, an agency may begin a RIF only for a legitimate reason, including reorganization, budgetary constraints, and lack of work, among others. The MSPB may invalidate a RIF if the agency lacks a bona fide, fact-based reason that it acted pursuant to one of these reasons. For example, in Losure v. Interstate Commerce Commission, an employee alleged that the agency had begun a RIF to target her personally based on her “association with the office’s operation under the former supervisors.” The MSPB determined that the agency’s RIF was based on pretext and, therefore, invalidated the RIF. MSPB explained that “the Board will not allow the circumvention of adverse action procedures where the ‘reorganization’ has no substance and is in reality a pretext for summary removal.”

Although plaintiffs may challenge the agency’s reason, the MSPB and courts are quite deferential to the agency’s determination. According to the U.S. Court of Appeals for the Federal Circuit, “[a]s long as a RIF is legitimately conducted for one of the reasons identified in the regulation, it will not be disturbed absent a clear abuse of discretion or a substantial departure from applicable procedures” (emphasis added). The MSPB is deferential to the agency’s organization and prioritization of its staff and budget. An agency may undertake a RIF if it determines that the savings could be used to address higher-priority budgetary needs. Moreover, an agency may conduct a RIF because it reasonably anticipates a shortage of funds or lack of work—even if the shortage of funds or lack of work does not exist at the time of the RIF.

Public-sector unions have sued the Trump administration, alleging that the administration has not offered a bona fide reason for these RIFs. Quoting the executive order, the complaint states that “[t]he order directs agencies to promptly engage in RIFs for none of the specified, allowable reasons, but instead for the purpose of ‘eliminating waste, bloat, and insularity.’” Yet agencies—not the president—must implement a RIF. Given the Trump administration’s reprioritization of agency activities, plan to reduce the size of the federal budget, and plan to abolish some whole agencies, many agencies will persuade the MSPB that they have a bona fide reason for implementing the RIF. The justification for a RIF will increase if Congress reduces agency budgets in the next set of appropriations.

Setting the Scope

Once the agency has determined that it has a legitimate reason to initiate a RIF, it sets the scope by making two key determinations: the competitive area and the competitive level. These two features determine which positions will be affected and where these positions will be released. Employees enjoy a substantive right to a properly defined competitive area and competitive level.

The competitive area defines the organizational units and geographic locations affected by the RIF. It can be as small as a single office within a local area or as large as the entire agency. A smaller competitive area limits the scope of the RIF so that the competition does not affect offices in other geographic areas or units. The MSPB, however, may reverse a RIF if the competitive area is too narrowly defined.

The competitive level determines which positions are subject to the RIF. Essentially, the competitive level includes interchangeable jobs that have similar responsibilities and pay. The agency bears the burden to show it properly constructed the competitive level. The MSPB may reverse a RIF if the competitive level excludes similar positions that require the same knowledge, skills, and abilities as other positions in the competitive level.

The Order of Retention, Bumping, and Retreating

To determine which employees will be released, the agency assembles an order of retention. The OPM regulations specify the formula by which agencies construct the order of retention.

The agency first groups employees into three tenure groups: (I) career employees not serving a probationary period, (II) employees in conditional or probationary status, and (III) employees in indefinite, temporary, or provisional appointments. Employees in tenure group I are higher in the retention order than employees in tenure group II and tenure group III. Once the agency assigns employees to tenure groups, the agency separates the employees into three subgroups: (AD) preference-eligible employees (for example, veterans) with a service-connected disability, (A) other preference-eligible employees, and (B) non-preference-eligible employees. Within each tenure group, employees in subgroup AD are higher in the retention order than employees in subgroup A and subgroup B. The agency then ranks employees in each subgroup by years of service, adjusted for performance. Consequently, preference-eligible employees with longer service records are the most likely to be retained by the agency.

The agency releases employees from their positions in the inverse order of retention standing. An employee in tenure group II-B is released sooner than an employee in tenure group II-AD or tenure group II-A. Likewise, an employee in tenure group II is released sooner than an employee in tenure group I regardless of their subgroup.

Released employees are not necessarily laid off. Whenever possible, the agency must reassign released employees in tenure groups I and II to a position in a different competitive level. At times, the agency accomplishes reassignment by displacing other employees. Consequently, reassignment may cause employees in lower tenure groups or subgroups to lose their jobs—even though those employees’ positions were not subject to the initial RIF. An employee whose reassignment rights were violated by the agency has a right to challenge the RIF.

Various limitations on reassignment exist. For example, the employee must be qualified for the new position. In Johnson v. Department of the Navy, the Merit System Protection Board sustained the refusal of an agency to reassign a food service worker to a security guard position because medical evidence showed that the employee did not meet the physical qualifications for the position.

The simplest way to reassign employees is to place them in vacant positions. In more complex situations, the agency accomplishes reassignment through “bumping” and “retreating.” Bumping and retreating involve the released employee displacing a different employee based on their tenure group, subgroup, or retention standing. The requirements for bumping and retreating are inordinately complex. The process has a cascading effect on the agency’s workforce and may result in a significant shuffle of employees between positions.

When employees appeal a reassignment decision, they frequently request reassignment to a specific position currently held by a different employee. For example, the employee in Tyrrell v. Consumer Product Safety Commission was displaced from her position as a project manager by another employee whose position had been eliminated following budget cuts. The agency reassigned the displaced employee to a textile technologist position, but the employee appealed her reassignment and asked to be reassigned to one of two program analyst positions that were assigned to different employees during the RIF. As exhibited by this case, bumping and retreating put employees into direct competition with one another for remaining positions.

Reassignment can result in inefficient uses of an employee’s expertise and experience. Following RIFs in the Reagan administration, thousands of employees, including public health advisers, legislative analysts, and psychologists, accepted positions as typists to avoid unemployment. Although employees must be qualified for any position they accept, many reassigned employees have talents that exceed the qualifications of their new positions.

Few of these employees have sufficient incentives to bring those talents to the private sector. Employees under age 30 are the most likely to leave federal employment, but only 7.5 percent of the federal workforce is younger than 30. A significant portion of the workforce (42 percent) is over the age of 50 and has significant incentives to remain in federal employment for its retirement and pension benefits. RIFs can produce an inefficient allocation of talent across the labor market and a reduction in the quality of government programs and services.

Consequence of RIFs

Variation across agencies and positions makes it difficult to reach general conclusions about the legality of Trump’s proposed RIF. As should be apparent, the government does not engage in governmentwide layoffs. Nevertheless, the current moment raises a few questions.

First, most federal agencies are funded through a continuing resolution that will expire on March 14. Will Congress enable the Trump administration’s efforts to dismantle the federal workforce? Congress can slash the operations and maintenance budget for agencies, triggering a RIF with or without Trump’s order. Moreover, Congress may effectively ratify the Trump administration’s efforts to abolish the U.S. Agency for International Development and the Consumer Protection Financial Bureau by defunding these agencies. Budget cuts for any agency would likely provide a bona fide reason for a RIF.

Second, the Trump administration recently instructed agencies to fire as many as 200,000 probationary employees. Some agencies appear to have fired these employees without undergoing a RIF. Are these layoffs legal? Most new hires are subject to a one-year probationary period. Probationary employees enjoy fewer rights than other employees and can be removed for inadequate performance without much procedure. Traditionally, probationary employees may appeal their removal to the MSPB only if they allege discrimination or certain procedural violations. Some probationary employees may allege discrimination on political affiliation grounds, but the blanket nature of these firings makes those arguments unlikely to succeed absent additional evidence. Nevertheless, the RIF process is intended as the mechanism for mass layoffs. Probationary employees are covered by the RIF regulations. Fired probationary employees may seek corrective action because these agencies have failed to follow the proper procedures.

Third, collective bargaining agreements may lawfully alter the scope of a RIF. For example, a collective bargaining agreement may require the agency to separate similar positions into separate competitive levels. The Tennessee Valley Authority’s collective bargaining agreement separates job steward positions into their own collective level. A collective bargaining agreement for the National Park Service requires the agency to try 10 alternative strategies for downsizing before initiating a RIF. Nevertheless, the Trump administration has made it clear that it will challenge these collective bargaining agreements. Ignoring provisions related to RIFs in collective bargaining agreements may result in additional legal challenges.

Fourth, participants in the deferred resignation program have been reassured that they are exempt from any RIF. Does this promise violate the statutes and regulations dictating the order of retention? Consider the following: Jill and Jack are in the same competitive area and level. Jill is in tenure group I-A and has not accepted deferred resignation. Jack is in tenure group II-A and has accepted deferred resignation. Ordinarily, Jill would be retained and Jack would be released during a RIF. Under the terms of the deferred resignation program, however, the Trump administration would release Jack before Jill. Allowing these sorts of contracts defeats the purpose of the RIF procedures by allowing the agency to select which employees will be retained. Indeed, the MSPB has held that an agency violates the RIF procedures when it promotes an employee so that they cannot be bumped during the RIF. These contracts seek to provide certain employees with a similar level of protection.

The deferred resignation agreements are distinct from collective bargaining agreements. Union employees agree to bind themselves to the terms of the collective bargaining agreement. By contrast, the contractual agreements arising from the deferred resignation program may interfere with the substantive RIF rights of employees who are not party to the agreement. At the moment, the conflict between the RIF procedures and the deferred resignation program is hypothetical. Agencies may avoid this conflict by waiting until Sept. 30 to initiate any RIFs. Deep budget cuts by Congress, however, may make this conflict arise sooner.

Fifth, will released employees have a meaningful opportunity to have their cases reviewed? Given the potential volume of cases, it will take significant time for the MSPB to hear appeals from any RIFs. The MSPB’s backlog may further expand if the agency loses its quorum. During the first Trump administration, the MSPB lost its quorum for five years, resulting in a record backlog of over 3,500 cases. Recently, Trump sought to fire one of the three MSPB members. A federal court has temporarily blocked that decision. Another member’s term will expire on March 1. If Trump is ultimately allowed to remove MSPB members, the agency may again lack a quorum. The management of MSPB may affect the speed at which employees have any claims reviewed.

Sixth, what effect will mass layoffs have on the labor economy? A RIF that lays off 700,000 employees would increase nationwide unemployment by about 0.5 percent. This effect, however, may be greater in localities where agencies choose to close whole offices. For example, one labor economist has concluded that Kansas City does not have enough jobs for federal employees whose jobs were already eliminated by the Trump administration. The civil service laws are attuned to this possibility. OPM’s regulations require the agency to notify the state government in which the employees are located if the agency releases more than 50 employees. These RIFs come at a moment when the elimination of federal grants threatens to displace state employees, federal contractors, and nonprofit workers. This is not to suggest that the federal government should maintain these positions for the sole purpose of protecting the labor market. Yet the federal government is so enmeshed in the modern economy that blunt and sudden shocks to its employment system will create significant ripple effects.

Seventh, what blowback will the Trump administration face for these mass layoffs? We are already seeing signs that political forces will curtail the administration’s efforts. The National Nuclear Security Administration sought to rehire dozens of employees after firing probationary employees who manage the United States’s nuclear weapons stockpile. Agency officials, however, stated that they “do not have a good way to get in touch with those personnel” who were fired. Recent firings at the Forest Service, the National Park Service, and the immigration courts will affect constituents in both Republican and Democratic districts and the president’s priorities. Political forces may limit the ability of Trump to execute such a large reduction in the size of the federal workforce.

Although unions have filed a lawsuit challenging the executive order, many of these RIFs will likely survive judicial review. The executive order instructs the agency to initiate the RIF “consistent with applicable law,” suggesting that agencies should follow the necessary procedures in implementing the RIF. Moreover, by focusing on nonessential positions “not mandated by statute,” agencies may argue that the elimination of these positions allows the agency to increase resources for essential activities. Agencies will be on stronger ground if Congress refuses to appropriate sufficient funds for personnel when the continuing resolutions expire on March 14. I do not anticipate that a court will order a complete injunction against RIFs. It may, however, reverse the RIFs performed by particular agencies based on procedural violations. The cabined nature of RIFs, however, will limit the reach of those errors. Regardless of whether these RIFs are legal, they threaten to upend administrative capacity across the executive branch.