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Managing Exposure to ADEA Liability in Executing Layoffs

Date: Mar 12, 2009

Recently, the Wall Street Journal reported that more workers are filing claims of age discrimination in the aftermath of the wave of layoffs that are taking place across the country. The Journal report cited soon to be released EEOC statistics showing a 29% spike in age claims filed in FY 2008 over FY 2007 (24,600 vs. 19,103), compared with a 15% spike in discrimination claims overall. Yet these statistics reflect reaction to layoffs that occurred before the major financial failures of last fall began to be felt throughout the economy, and the charge data for the period post September 30, 2008 will not be made available until March 2010. We should take it as a given that age claims have continued to rise and could ultimately spell major trouble as businesses try to recover their footing.

Although employers may have little time to react to drastically changing economic conditions, it is always important to take the time to develop a well reasoned business plan for selecting employees for layoff, and for documenting selection decisions. For example, if a decision is made to cut headcount by 10% across-the-board, and the selection decisions are left to departmental managers, it is important for those managers to articulate non-discriminatory criteria for making the cuts and to apply those criteria in a fair and transparent manner.

Plaintiffs' attorneys are likely to attack the selection process if the decision makers are permitted to make layoff decisions based on purely subjective criteria. While seniority is the most objective of all retention criteria, and the least likely to engender discrimination claims, using length of employment as the sole criterion for retention can undermine the ability to operate the business successively going forward because seniority does not always correlate with the right skill and performance sets. For that reason, many managers prefer to base retention and layoff decisions on production or sales statistics, with ties in ranking decided by seniority. Whatever criteria are used by the selecting officials, their decisions should be reviewed by knowledgeable EEO personnel to ensure that the criteria are non-discriminatory, and that otherwise neutral criteria do not have adverse impact on members of an EEO protected category.

Regardless of the care taken in planning a layoff, out-of-work employees may file a charge anyway. Two strategies are particularly effective in reducing discrimination charges stemming from layoff. The first is to provide affected employees with a meaningful internal appeal procedure that allows them to air their concerns and argue why they should have been retained over someone else before managers and individuals outside their own chain of command. If the independent panel ratifies the original managerial decision, it is more likely that a judge or jury will do the same.

The second strategy is to offer additional severance in exchange for a general release of claims arising out of employment and termination of employment. To obtain an enforceable release for workers over 40, the employer must comply with the requirements of the Older Workers Benefit Protection Act (OWBPA). This means disclosing the job titles and ages of all individuals who were considered for layoff (including the job titles and ages of all retained employees), providing affected individuals with a "plain English" release that meets the requirements of the OWBPA, and allowing them at least 45 days to consider the terms of the release plus an additional 7 days post signing to revoke their acceptance.

In this age of tight legal budgets, some employers may opt to have counsel review only the terms of the release to make sure it will be enforceable under applicable law, but experience teaches that it is money well spent to have experienced employment counsel review the entire layoff process before selection decisions are announced. If problems are detected, counsel may offer suggestions to reduce or eliminate exposure to discrimination claims. The front end investment can yield substantial returns in terms of the time and money saved from future litigation.