The Michigan Department of Career Development, Workforce Transition Unit, is responsible for administration of the Rapid Response program under the federal Workforce Investment Act (WIA) of 1998. Rapid Response services are designed to help workers who have been displaced as a result of a mass layoff or permanent business closing to obtain suitable employment as quickly as possible.

Michigan’s dislocated worker program provides layoff aversion assistance, rapid response, pre-layoff activities, and linkages to re-employment services available through the Michigan Works! Service Centers and the Michigan Unemployment Agency.

Layoff Aversion
Plant closings and mass layoffs can occur for a variety of reasons in periods of both economic expansion and decline. These may include financial difficulty, mergers and acquisitions, loss of markets, consolidations, foreign competition, product or service obsolescence, shift in parent company focus, or other factors. Corporate conglomerates frequently close or sell plants or facilities which may be profitable, but not profitable enough. They may sell or close operations which no longer meet their core business application or which are viewed as excess capacity to their overall operations. Labor management issues may contribute to a decision to locate the facility elsewhere.

When a closely held business is sold, a loss of jobs may occur if the new owner restructures the company. An owner’s retirement can precipitate a business closing in the absence of a successorship plan.

Once a company announces its intentions to close or substantially downsize, the decision is usually final and irreversible. However, there are occasions when the decision can be changed. Over the past 25 years there have been hundreds of examples of companies that were scheduled to close, but were kept in operation because of a response initiated by one or more interest groups such as employees, management representatives, government and community groups, and labor organizations. These responses have included management or employee buyouts, sale to other parties, and business restructuring. It is important to be aware that there may be opportunities to save jobs and avoid resulting hardships imposed on individuals and communities when a plant or business closes.

Early response is critical. An important initial step in Rapid Response is to assess the reason for the plant closing or mass layoff. If there is an indication that the business closing or mass layoff might be averted, the Workforce Transition Unit can provide technical assistance to interested parties to investigate possible layoff aversion strategies. This can include undertaking a pre-feasibility study for a company or group, including the workers, to purchase the plant or company and continue operations. Layoff aversion initatives are authorized and may be funded under the Workforce Investment Act.

Pre-feasibility Studies
A pre-feasibility study can assess whether it is possible to continue the business operation and under what conditions. It can provide objective evidence that there is no likelihood of the business reopening (or not closing). If the study proves negative, it can help to expedite the commitment of workers to seek new employment.

Outside consultants are usually retained to conduct the pre-feasibility study. To be effective, a pre-feasibility study must be performed in a timely manner and usually completed within 30-45 days. The process should be sensitive to the needs and interests of workers and should involve both labor and management in a union shop.

Basic questions which should be answered in the pre-feasibility study include:

• Are the present owners amenable to a buyout?
• Is the firm organized for a smooth transition?
• Are the products or services in a declining, stable, or growing market?
• Can the facility be an efficient producer in its industry?
• How does the plant’s profitability compare to its competition?
• Has the physical plant been maintained in satisfactory condition?
• What is the potential for the plant to exist either as an independent firm or as a subcontractor?

The pre-feasibility study will assess basic elements of the business, including study methodology, organizational analysis, market analysis, operations/manufacturing analysis, financial analysis, legal analysis, and conclusions. It will examine the applicability of employee ownership and whether an Employee Stock Ownership Plan (ESOP) would be appropriate as an equity-sharing and tax-favored financing strategy.

Adequate Lead Time is Essential
For a layoff aversion effort to succeed, there must be sufficient time to organize an effective response. Generally, six months or more is needed to complete a business turnaround or buyout. Management and employees should be mobilized to pursue the effort. The firm must have a realistic potential to be viable, and key management and hourly personnel must be retained for the business to continue.

Layoff Aversion Is a Cooperative Effort
For further information and/or assistance with pursuing a layoff aversion strategy, please contact the Workforce Transition Unit at (517) 373-6234 (voice) or 1-888-605-6722 (TTY). A Workforce Consultant from the Workforce Transition Unit will team with a Michigan Economic Development Corporation Account Manager and local economic development specialists to assist with the turnaround effort. The team can assess the situation and determine if a pre-feasibility study or other strategy is warranted. Layoff aversion assistance can also be accessed through the Michigan Economic Development Corporation at (517) 373-9808.