By Howard B. Jackson
During economic down times employers must often make hard choices to reduce cost. This article discusses considerations related to several such measures, as well as some of the pitfalls that can come about where they are implemented in a manner that invites legal challenge.
Some of the most common strategies involve reducing the workforce. Three of these are furloughs, temporary layoffs, and permanent layoff/reduction-in-force. Each is discussed in turn below.
A furlough is in essence an unpaid leave of absence. The employment relationship is not severed. But the employee is not working and in most instances is not receiving pay. Employers do sometimes continue benefits during a furlough and take other measures to permit furloughed employees to receive some money. For example, the employer may allow furloughed employees to use accrued paid time off or even to borrow against as yet unearned paid time off.
The primary motivation for selecting a furlough is to maintain the employment relationship unbroken because the employer anticipates returning the employee to active employment within a reasonably foreseeable time frame. Keeping the employee in such status and providing some level of benefits and/or compensation to the employee during the furlough sends the message: We want you back!
A temporary layoff is similar to a furlough except that a layoff involves ending the employment relationship. An employer may select this option where it is less confident about returning employees to work in the future or where the employer simply does not have resources available to provide things such as continued insurance during the anticipated layoff period.
A reduction-in-force (RIF) or permanent layoff also severs the employment relationship. In this instance the employer does not anticipate recalling the employees.
Appropriate planning plays a huge role in executing an employment reduction while minimizing legal risk. A good first step involves creating an organizational chart that shows, by position and without names, the positions that will be required for the organization to operate after the reduction. This step sets the level of employment, based on business needs.
Another helpful step involves creating a spreadsheet that lists several factors the decisionmakers will use when some employees must be selected for layoff from among a group in the same department. The factors will vary somewhat by employer and industry. Common factors include attendance, performance ratings, skills possessed, and date of hire. For example, some departments may have critical skill needs that not all employees possess. Including the critical skills category on the spreadsheet helps show its legitimacy. That in turn helps the employer defend its decision where, for example, a thirty-two year old employee with four years of seniority is retained over a sixty year old employee with twenty years of seniority because the younger employee plainly has one or more of the critical skills and the sixty year old does not.
Utilizing a set of legitimate factors when selecting employees for layoff helps the organization focus on its needs and the skills and abilities of employees when making the decisions. This is best for the organization even without regard to potential legal challenge. Inevitably, when the selection process is focused on the needs of the organization, better decisions are made. As a side benefit, using such a process also helps protect against some of the pitfalls that have historically arisen in connection with employment reductions.
Another helpful step is determining the management group that will have responsibility for making the final decisions. Certainly, first-line supervisors and perhaps others should provide input and make recommendations. Having a clearly defined management group that analyzes the recommendations, and asks questions and engages in dialogue with the managers and supervisors who have made the recommendations, helps ensure that the decisions are both focused on appropriate factors and best for the organization.
One of the pitfalls that has come back to haunt employers is using the legitimate need for a reduction-in-force as a means to target certain employees. For example, the employer selects an employee, or a group of employees, who have repeatedly filed worker’s compensation claims. Or a supervisor is asked who she wants to keep and who she does not and she includes an employee on the “do not keep” list (with no use of factors for guidance) because that employee is a constant thorn in her side. You can bet that some of the “thorny” issues involve legal compliance, or requests for accommodation, or for Family and Medical Leave Act leave. Retaliation lawsuits – often successful ones – tend to ensue.
Another pitfall is lack of awareness with respect to the protected status of the employee group that is being laid off and the group that is to remain. An employer who looks at the demographics – and realizes that far more persons in a protected status are being laid off – may want to take another look at the process. It is possible that some corrections in the process or analysis should be made. On the other hand, it may be that unrelated factors are driving that result. But if the end does result include such a disparity, the employer will be in a far better position to defend if it can show that the process included analysis of why that result came about and express consideration of whether it came about based on unlawful factors or not.
In most organizations senior leadership should be sensitized to the issues. In more than one case a high ranking leader’s comments along the lines of getting rid of “deadwood” or seeking a more “vibrant and energetic” employee group (or even more obvious remarks) have been used in connection with claims of age discrimination, for example. Senior leadership, and indeed all leadership, should be reminded early on that their focus and their communications must remain on legitimate factors and that comments they may consider to be “offhand” or not serious can be used against the organization.
Last but not least, all members of management and supervision should be trained, and reminded, and reminded again, to ensure that their e-mails and other recorded communications are appropriate. Employers large and small have been hoisted on their own petard by internal e-mail messages that reference protected status or activities of employees in connection with layoff decisions. Even when the remarks were made in a joking manner, or by a rogue supervisor who played little role in the decision-making process, such messages make defending a legal challenge extremely difficult.
Every organization is different. Plans and processes must be tailored to fit. Taking the time to set out a good process and selecting the right team members to execute it can go a long way toward making and implementing the difficult decisions that must sometimes be made to help the organization survive in the short term and thrive in the future.
Wimberly Lawson Wright Daves & Jones, PLLC hjackson@wimberlylawson.com www.wimberlylawson.com