Have good reasons for large-scale layoffs – Legal Insight
Handling layoffs might be one of HR’s most regrettable tasks. It’s sad, uncomfortable–and fraught with legal difficulties. In these tough economic times, when job reductions are coming thick and fast, the most positive thing HR professionals can do is to ensure that layoffs are handled correctly. Pink-slipping employees is bad enough. Don’t compound the grief by opening the door for claims such as discrimination or adverse-impact lawsuits. The latter involve a group of protected employees-women, minorities, older people–who claim that they’ve been laid off in larger numbers than other groups. Tim Bland, a labor attorney with the Tulsa law firm of Ford & Harrison, offers guidelines on avoiding the most common pitfalls.
What’s the first thing HR should do when a large layoff is announced?
The first thing that any company needs to do is make sure they can explain and document the economic basis for the reduction in force. The reason for that is if they get sued for alleged discrimination, one of their defenses is that the former employee was laid off pursuant to an economic reduction in force. That’s considered a legitimate nondiscriminatory reason for discharge under our employment laws. So obviously it’s very important to have documentation or an explanation of why the reduction in force is necessary. That would include financial statements. A lot of times, especially with smaller companies, they’ll say they need an RIF for economic reasons, but when you start to look at the financial statements, there’s really not much support for that position.
The next step would be to decide–without reference to any particular employees–what positions you need to eliminate. That way, if you don’t reference any particular employees at that point, you can say you decided on the positions to eliminate without regard to anyone’s race or gender.
And the third step?
The third step would be to start looking at individual employees in the positions you decided to eliminate. Before you eliminate those positions, you’ll want to do some sort of mathematical analysis to determine whether it looks like your layoff will have an adverse impact on any kind of protected group.
Is there a magic number that triggers adverse impact?
There’s no real magic number. I’d just be wary of any situation in which a reduction in force impacted a single group more heavily than any other group. You’re looking for a large disparity between the impact on a protected group–minorities, women–and another group, regardless of percentages.
Is there one group of protected employees that tends to get hit harder than others?
In an RIF, probably the most important group to be careful of is older workers. Traditionally, older workers–considered people 40 or over–have been the ones who’ve suffered the most adverse impact as a result of economic reductions in force. Most lawsuits you see after RIFs are brought by people 40 and over who claim age discrimination. These layoffs typically impact older workers because older workers tend to have higher salaries, and when the incentive for a reduction in force is economic, it makes sense to go after the higher-paid people.
What if HR does its mathematical analysis and discovers that, quite by accident, one group is definitely hit harder than others?
Even if you do your analysis and see that one group is going to be adversely impacted, you may still have perfectly legitimate reasons for going ahead with the RIF as planned. But you need to make sure you have the back-up documentation and back-up explanation for why the group was adversely impacted. Just because it looks like one group is going to suffer an adverse impact doesn’t mean you have to change the way you’re going to handle the reduction in force. But it does mean you need a good explanation for why it happened that way.
And what would be considered a good explanation?
The primary defense is being able to demonstrate through documentation why you can live without these particular people who are going to be adversely impacted. Maybe you can show that because the economy has taken a downturn, you don’t need all these support staffers who happen to be female, You can show there’s just no work for them to do, whereas some of these other positions you didn’t lay off are still quite busy and have a lot of work to do. That’s the main thing to demonstrate: why you no longer need the people who are going to be subject to the layoff.
You say to avoid making the layoffs too individualized. But what if you need to reduce head count in a department of people who are all doing the same job? Can you pick 20 under-performers, or does that get too personal?
It’s legitimate to say that as part of an RIF you’re going to get rid of under-performing or poor employees. If you’re going to have to lay off people, you’re going to lay off the people who aren’t performing well. That’s fine as long as you don’t give the employee a false reason for the layoff. If you’re tying people being let go to being poor performers, I’d be honest with them about that: “You’re being let go. We’re having a reduction in force, and one of the reasons you were selected is that you simply weren’t meeting our performance expectations.”
Why does HR have to be so blunt?
A lot of employers, rather than confronting weak employees and discharging them, will give them a false reason–like their positions were eliminated. When you give an employee a false reason for discharge, the Supreme Court precedent Reeves v. Sanderson Plumbing now makes it much more likely the case is going to get to trial. So there’s nothing wrong with eliminating weak performers during your reduction in force, just be careful not to misrepresent how they got selected.
What about employees who’ve just returned from FMLA leave or ADA leave– do they have increased layoff protection?
Neither the FMLA or ADA is going to protect someone’s job when it’s eliminated as part of a legitimate reduction in force. But employers still need to keep in mind that employees who’ve recently been on FMLA leave or accommodated under the ADA are probably more likely to bring suits against their employer–claiming the RIF was just a pretext to discriminate against them because of their FMLA or ADA situation. I’d just make sure to carefully document why their positions, and they individually, were chosen for the RIF. All you can do, really, is make sure you have supporting documentation and a good explanation for why they were included. If you have that, you ought to be able to defend any claim they may bring.
Any final advice?
If you offer severance beyond what the employer is obligated to give–for example, severance beyond that which is specified under company policy–then the company can ask the employees to sign a release. In exchange for the extra severance, the employee will waive any right to sue the company. Those releases, if done right, will be enforceable. So before you voluntarily give employees severance benefits, I’d recommend getting a release signed.
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