It Ain't Over When It's Over

 

 

Employers who take an adverse action against a current employee who brought a complaint or participated in an investigation of a complaint by another employee may face a claim that such action was in retaliation for protected activity. Federal and state anti-discrimination laws prohibit retaliation against an employee for protected activity to the same extent as the harassment or discrimination itself.  An employee may even have a claim for retaliation where the underlying claim is resolved or unfounded.

In Burlington Northern v. White, the United States Supreme Court expanded the meaning of retaliation under Title VII in determining that the anti-retaliation provisions were not limited to those actions that affect the terms and conditions of employment. Rather, retaliation can include acts that go beyond those that are employment related, such as conduct by co-workers.

In a recent New Jersey state court decision, Fernando Roa et al v. LaFe and Marino Roa, the Appellate Division, consistent with Burlington Northern, held that the plaintiff could pursue his claims for actions that occurred after his termination ended. Specifically, plaintiffs alleged that their former employer unfairly claimed that the plaintiffs were dismissed for misconduct when they applied for unemployment benefits. In addition, Mr. Roa claimed that the company improperly cut off his health benefits, which he did not discover until after he left employment.

In addition to the conduct alleged in the Roa case, employers need to be careful of other post-employment conduct, such as negative references.

In light of the judicial expansion of the type of conduct that can constitute retaliation under anti-discrimination laws, employers who take adverse action against an employee who has complained about harassment or discrimination, participated in an investigation or engaged in other protected activity need to make sure there is no causal link. If an employee presents a performance, attendance or other issue, then managers should promptly and progressively discipline the employee and not expect to initiate such action about a prior problem following a protected complaint by the employee. Employers also should be aware of whether any employees slated for a lay-off have engaged in protected activity that could be the basis for a retaliation complaint. Such steps protect employee rights and protect employers from retaliation claims that ultimately may be more challenging to defend than the underlying harassment or discrimination allegations.

Corporate Social Responsibility and RIFs

 While some employers may be able to assert the economic downturn as a legitimate business reason for an adverse employment action or as an unforeseeable business circumstance excusing notice under WARN, others may face a heightened expectation from juries and courts to "do the right thing."  Drug companies are often challenged to forego profits in the name of corporate social responsibility when faced with demand for drugs such as Tamiflu. Will there be a similar expectation for employers to maintain employment and benefits rather than add to the swell of unemployed or uninsured? If employers may be faced with a social responsibility standard, it is even more critical that an adverse action be defensible. Employers, and those implementing the decisions, must thoroughly understand the underlying business reasons. And employers who don't "share the pain," even if complying with the letter of law, may face an unfavorable reaction to their decisions.www.leadgood.org.

For more on the idea of corporate social responsibility and ethics in business leadership, see "Is Employment a Corporate Social Responsibility?" by Jason Meyer at

Why me?

"Why me?"  It's the most basic question in challenging a RIF, but it may be harder to answer than employers think.  Poor scores or evaluations alone will not be enough.

The importance of well-reasoned RIFs is clearly demonstrated in EEOC v. Boeing Co., decided April 8, 2009.  Boeing selected two female employees, Antonia Castron and Renee Wrede,  for lay-off based on their low scores on reduction in force assessments.  The two employees then filed charges of gender discrimination with the Equal Employment Opportunity Commission (the "EEOC"), which filed suit against Boeing.   The court found that the EEOC had presented sufficient evidence to proceed with its claims based on the following:

Antonia Castron:

- Derogatory and demeaning remarks made by one supervisor, although not directed at Castron, were possible evidence of discrimination.

- Castron's former supervisor had possibly induced Castron to accept a transfer by promising that she would not be laid off during training.  However, once training was completed, her employment was terminated based on an evaluation by her new supervisor.

- The new supervisor's evaluation of Castron was suspect because he did not solicit Castron trainer's input or take into consideration her past performance.  Notably, the court considered co-worker testimony that the supervisor treated Castron unfairly.

Renee Wrede:

- One year after filing a sexual harassment claim, which Boeing substantiated, Wrede received lower scores in her RIF evaluation and was eventually terminated.

- Male employees who received lower RIF scores were not terminated, but instead found other positions in Boeing, partly due to supervisor assistance that was not extended to Wrede.

- The court noted that the fact that the same actors who ultimately downgraded Wrede's review previously gave her scores high enough to avoid a RIF could create an inference that no discrimination took place.  However, the inference in this case was weaker as applied to less overtly positive employment decisions, such as refraining from firing an employee or giving a "lukewarm" review, as compared to positive decisions such as promotion.  The court explained "[e]ven an extremely biased supervisor who would never hire or promote members of a particular protected class might still act cautiously by lowering an existing employee's scores over time."

- In some instances, the evaluators could not explain or support the downgraded scores, which were refuted by co-workers.

Employers implementing a reduction in force can learn some important lessons from this decision.  An inference of discrimination can be created  by:  a discriminatory environment based on even non-specific comments about a protected class;  assurances, such as of job security, that are later broken;  unsubstantiated negative evaluations; a disregard of co-worker assessments; and, favoritism. 

Front line supervisors must be able to substantiate their decisions objectively.  Management cannot rely on poor evaluations or RIF assessments only without testing the supervisor's decision.  Courts and juries will not accept explanations of adverse employment decisions on their face, and in the absence of credible substantiation, will attribute suspect and even discriminatory motives to employers.

Leadership Through Lay-Offs

Leaders by their actions, not their words, establish a sense of justice in the system - Max Depris.

Yes, lay-offs are about loss. But lay-offs also can also create opportunity for decision-makers, by their actions, to inspire Loyalty, Enthusiam, Achievement, and Direction - in other words, to LEAD. How?

Try bringing employees into the "world of decision-making."  Listen to what they have to say.  When cost-saving measures are needed, how can you help? For employees who are laid-off, consider outplacement services, mutually agreeable reference language, a willingness (but not a promise) to rehire, or access to company resources and networks.  For employees who are retained but may be required to assume additional responsibilities for the same or less pay, think about what else you can offer. Positive feedback? A day off? Training? Technical support? An extended deadline? Thank you?

Most employment litigation comes down to fairness.  Taking steps to establish a sense of justice in the workplace can be the best defense.

For more on leadership skills in a challenging economic climate, see "Honoring Employees in a Poor Economy - Handling Promotions and Raises" at www.menoconsulting.com/docs/HonoringEmployees.pdf.

 

Lessons from Harley-Davidson

Yesterday I attended the Jonathan R. Lax Conference on Entrepreneurship at Swarthmore College, my alma mater.  Richard Teerlink, the retired chairman of Harley-Davidson, was the keynote speaker.   During his 18 years with Harley-Davidson, Teerlink led the successful cultural transformation of the company based on the premise that "people are an organization's only sustainable competitive advantage."

Teerlink discussed the importance of creating a work environment where employees can make their best contribution.  That can  be difficult to do in this economic climate where cost-saving measures, including lay-offs, may instill fear and uncertainty in the workforce.  On the other hand, today's challenges can be an opportunity to engage and vest employees in the future of their business.  

How to develop a workforce that can create a competitive advantage?

-  Understand and communicate how each individual employee makes a difference.

-  Consider lay-off alternatives.

-  Invest in employee talent through training, continued education and wellness.

-  Consider flexible work arrangements, such as alternative schedules and telecommuting.

Trust and communication are key.  Shifting some of the burden of the business to employees may actually be a benefit if employees feel they can contribute to survival and ultimately success.

Harley-Davidson has not been immune to the decline that most businesses have suffered.  But the company has overcome similar challenges in the past, including a lay-off of 40% of the work force in the early 1980s. 

For more on the Harley-Davidson story, see More than a Motorcycle: The Leadership Journey of Harley-Davidson. search.barnesandnoble.com/More-than-a-Motorcycle/Rich-Teerlink/e/9780875849508/

RIF Alternatives

Many businesses are considering and implementing cost cutting measures as alternatives to lay-offs, including pay cuts; reduced workweeks; shorter days; elimination of overtime; reduced paid time off; travel and expense restrictions; and, reductions or elimination of benefits.  These efforts can be effective in maintaining and attracting talent and sustaining and even improving employee and public relations.  However, there are implications employers should consider.

Any adverse action towards an employee - including the above measures - can be the basis for a harassment, discrimination or retaliation claim, even if that action falls short of termination of employment.  Therefore, if an employee feels that s/he was affected because of his or her membership in a protected class (race, religion, gender, age, disability, etc.) or because s/he exercised a protected right, then the employee may have a claim for unlawful discrimination, harassment or retaliation, even though employment continues.  Employers need to make sure that they have an objective, documented business reason for implementing any cost cutting approach that could negatively affect an employee, and ensure that the measures do not have a disparate impact on any protected group.

In the event of a lay-off, employers often offer a severance package which includes a release of all claims by an employee.  Such releases can not be prospective, meaning that employees can't release future claims. Therefore, generally they are not useful where employment continues.

Employees who have a reduction in hours may be entitled to unemployment compensation. In addition, if the reduction in hours results in a loss of health benefits, an eligible employee will have a right to continue the benefits under COBRA or a state mini-COBRA, where applicable.  The applicability of the new COBRA subsidy to reductions in hours is unclear - for now reductions in hours are not covered.

In addition, when eliminating benefits for any group, employers need to make sure their practice is consistent with plan documents. An employee may assert a contractual right to coverage under plan documents, and employers can be liable for uncovered medical expenses.

There are also wage and hour considerations when pay is reduced. Employees must receive the minimum wage.  In addition, employers need to make sure the pay of salaried employees does not dip below the statutory minimum ($455 under federal law).

Before reducing pay, benefits or time off, employers should check that there are no contractual obligations to the employee, such as in an employment agreement.  Employee handbooks must contain a disclaimer stating that employees are at-will; that the handbook does not create a contract; and that the employer reserves its right to change any policies or benefits.  In some states, a handbook can create contractual obligations to maintain benefits in the absence of such a disclaimer.

If employers are implementing reduced workweeks or schedules, they should consider how they will handle moonlighting and other outside employment where those activities could interfere with the employee's job duties or pose a threat to the business.  Employers should implement policies on outside employment and conflicts of interest and restrictive covenants (such as non-compete and non-solicitation agreements) to protect their interests.

Finally, whether implementing lay-offs or other savings measures, employers should be mindful that employees may be looking for ways to protect their jobs and benefits. Unions can be an attractive alternative.  Keeping communication with employees open is critical to employee relations.

On a positive note, where implemented properly, many of these alternatives are the family-friendly options many employees are seeking.  Employers can benefit from the cost-savings, while employees may be able to benefit from added flexibilty and additional family time.

Most employees will appreciate any job preservation efforts, even if they result in a lesser economic package. However, employers need to keep the legal considerations in mind when weighing the costs and benefits of this approach.

Reductions in Force in the Unionized Environment - Traps for the Unwary

By Ian Meklinsky, Fox Rothschild LLP

In today’s tough economic times, many employers are looking to cut costs. One of the most significant cost centers for employers is its workforce. While looking to cut overhead may be a necessary evil to keep an organization afloat, employers must take careful aim when implementing a Reduction in Force (RIF) especially in the unionized environment.

 

In the unionized environment, in addition to the anti-discrimination laws that normally need to be carefully considered in developing and implementing a RIF, employers need to look to their collective bargaining agreements (CBA) and the National Labor Relations Act (NLRA) to determine if they have additional contractual and statutory obligations before developing or implementing a RIF.

 

An employer’s CBA may either restrict the organization’s ability to implement a RIF or it may provide broad discretion to the organization in this regard. Careful attention must be paid to any contractual provisions regarding management rights, seniority and layoff. CBAs may also provide for mandatory notice provisions greater to those required by either federal WARN or any state-specific mass lay-off or plant closing law. The union may have also negotiated into the CBA additional severance obligations (either with or without mandatory severance agreement language) that need to be taken into account when developing a severance pay program in the context of a broader RIF.

 

If the organization’s obligations under a CBA were not enough to trouble those developing and implementing a RIF in the unionized environment, the NLRA may place additional obligations upon the employer. For those unfamiliar with collective bargaining, employers may bargain with a union about any legal subject. Some legal subjects are permissive subject of bargaining (e.g., the inclusion of supervisors in the CBA) while others are mandatory (e.g., generally anything to do with wages, hours and other terms and conditions of employment). Depending upon the reason for the RIF, the NLRA may impose an obligation on the employer to bargain with the union before implementing the RIF (i.e., decisional bargaining) and in most cases the NLRA imposes an obligation on the employer to bargain after the decision is made (i.e., effects bargaining).

 

As to decisional bargaining, unionized employers need to understand that, in general, if a decision to layoff or close a facility is being made for purely economic reasons, it will not have an obligation to bargain with the union before making the decision to implement the decision. However, on the other hand, if the cost of labor (e.g., wages, benefits, overtime, etc.) are or could be a factor in the decision making process and the union could - theoretically – agree to concessions that would permit the employer to reduce or eliminate its planned RIF, the employer has an obligation under the NLRA to bargain with the union before making its final RIF decision. The body of case law under the NLRA in the RIF arena is vast and is not susceptible to a “cookie cutter” approach; thus, in each and every RIF situation in the unionized environment the employer should seek counsel to determine their statutory rights and obligations. In any event, regardless of whether an employer has a decisional bargaining obligation, unionized employers in the RIF setting have an obligation to engage in effects bargaining. These negotiations often focus on amount of severance and other post-employment benefits as well as possible changes to the CBA to deal with future RIFs.

 

The failure of an employer to adhere to its obligations under a CBA or the NLRA cannot be understated. Employers who fail to abide by their CBAs may subject themselves to grievances and ultimately arbitration (a non-judicial forum) and be liable for damages including back pay, benefits, and potential reinstatement for the displaced workers. Additionally, employers that take unilateral action in contravention of the CBA may also find themselves faced with an Unfair Labor Practice Charge (ULP) and have to respond to same before the National Labor Relations Board (NLRB). Finally, the failure of an employer to engage in decisional and/or effects bargaining may be met with the filing of a ULP by the union before the NLRB also opening the door for potential back pay, benefits and reinstatement obligations. Employers need to tread carefully in these waters.

Bedside Manner

Bedside manner matters.  Good bedside manner is often linked to lower medical malpractice claims against physicians.  In the context of employee terminations, good bedside manner can reduce claims as well.   The cost of a poorly-implemented RIF in terms of morale, public relations and liability can end up outweighing the economic benefits.

Justifiable business concerns regarding security of company premises, interactive systems and customer relations can result in abrupt terminations with little or no notice.  Fear of saying the wrong thing sometimes means employers provide no explanation at all.  And in light of economic conditions, severance, if any, can be well below employee expectations.  

So how to soften the blow?  National Public Radio recently profiled a reduction in force at the Bainbridge Graduate Institute ("BGI") in Bainbridge Island, WA.  Two values BGI emphasized in its lay-off process were "transparency" and "participation" - characteristics often lacking in reductions in force.  First, BGI turned to each department to trim its budget, involving employees directly in the decision-making.  Then BGI communicated the needed reductions privately and with compassion.    (Go to www.npr.org for the full story)

How can an employer show good bedside manner in the context of a RIF?

-  Notice, where possible, may give employees time to regroup and an opportunity to find other employment in a difficult market.  However, employers should monitor the activity of departing employees, including use of interactive systems and interactions with customers. 

-  Honesty is important.  Employers should communicate the real reason for the termination and why that employee was chosen.  In the context of employment claims, employees often challenge adverse actions by establishing that the reason they were given wasn't the "real" reason.  Even if the real reason is the employee's performance, it's better than sugar-coating.  The reason for the termination should be objectively supported and preferably documented (for example, performance appraisals, decline in sales).

-  To the extent possible, permit employees, at least at the management level, to participate in the process.  Employees will appreciate the opportunity to have some control over their fate.

-  Consider alternatives where possible. Will employees take reductions in pay, hours or overtime to avoid a lay-off?  Are there other cuts that can be made? Having a company holiday party contemporaneously with an end of year RIF sends the wrong message.

-  Where offering severance, try to offer an amount that reflects an employee's service to the company, such as by offering weeks of severance based on years of service.

-  At the time the separation is communicated, have on-site EAP available so employees have someone they can go to immediately.

-  Offer employees outplacement services.

There is a future after a reduction in force.  How the message is delivered sends a message itself - that can affect public relations, business development, and future recruiting.

 

Frantic Fridays

TGIF? Not anymore.  For many employers, the end of the week means another round of frantic employee terminations.  Even in the face of sudden economic downturn, reductions should not be rushed.  Employers need a game plan for the implementation of a reduction of force.

  • How will the employer notify employees?  Individually? In a group? For one multi-state RIF, a major employer communicated the lay-offs via email, followed by in-person meetings.
  • The employer needs to be prepared with Separation Agreements and General Releases if applicable.
  • Employees need to be provided with information regarding benefit continuation.
  • In some states (such as California) employees must receive their final pay and accrued vacation pay at the time of termination.  In other states, such payments can be made in the next pay period.
  • Employees should return company property (keys, badges, cell phones, blackberrys, laptops) before leaving.
  • Arrangements should be made for personal property (provide the employee with a means of carrying personal items or make arrangements for pick up or delivery).
  • The employer must make sure that its Interactive Systems are secure.  The employer should cut off an employee's access to its computer systems before communicating a termination.  Savvy employees can cause significant and wide-reaching damage in a matter of minutes.
  • Likewise, the company should make sure its physical premises are secure.  Employers should advise receptionists or security of any entry or visitation restrictions on existing employees.
  • Employers should be prepared for media inquiries.  Public relations are key to a survival of a RIF in the public eye.

Train, Train, Train

After all the high level management meetings and legal review, the implementation and communication of a reduction in force is often the responsibility of front-line supervisors.  Making sure supervisors are trained is a critical and often overlooked step in implementing a lay-off. 

Employers should take the following steps:

  • Provide the supervisor with a script communicating the reason(s) for the reduction, why the individual employee was chosen, and the nuts and bolts of the separation.  A Q & A sheet can be helpful.
  • Provide the supervisor with the necessary paperwork  (Separation Agreement, COBRA, exit interview form, etc.) in advance.  Supervisors should understand the basic provisions, including the amount of time the employee has to consider the agreement.
  • Counsel supervisors about confidentiality.
  • Caution supervisors against any reference to protected classifications or protected activities, such as comments like "you were almost ready to retire anyway" or "since you've been back from maternity leave..."  As in all employment decisions, supervisors must avoid stereotypes and assumptions.
  • Provide supervisors with responses to remaining employees.  Supervisors should not make promises of job security or continued employment.
  • Prepare the supervisor for employee challenges.   Supervisors should be able to direct employees to someone in human resources or management.
  • Keep in mind that the supervisor may be concerned about his/her job security as well.

Safe Separations

Employee separations are increasingly more frequent in today’s economic environment. At the same time, ever-expanding employee rights combined with a poor job market may make departing employees more likely than ever to sue. 

Many employers mitigate this risk by offering a severance payment to their departing employees in exchange for a release of claims and other promises by the employee.   However, too often employers take a "one size fits all" approach to separation agreements.  In order to get what they pay for, businesses need to ensure that their separation agreements are tailored to the individual circumstances and protect the company’s interest to the fullest extent permitted by applicable law.

Separation agreements should include the following key provisions:

  • Condition severance payments on a general release.
  • General releases must be state specific.
  • Releases of some claims may not be enforceable – include an acknowledgement that the employee has received everything to which s/he is entitled.
  •  Individual or group releases for employees age 40 or older must meet the Older Workers Benefit Protection Act requirements to be effective.
  • Require the employee to return all company property before receiving any payment.
  • Further protect the company with restrictive covenants and confidentiality and non-disparagement clauses.

RIF Plans

Employees who are let go into an uncertain job market may challenge terminations in the form of discrimination, whistle-blower, breach of contract and other claims.  Accordingly, reductions in force need to be well thought-out and defensible.

First and foremost, employers need a documented RIF Plan which should include:

  • the business justification for the lay-off.  Employers can look to forecasts, sales figures, overstaffing, technical changes, etc. to provide a business reason for a reduction.
  • other alternatives to achieve the goals of the reduction vs. the cost of the RIF.  Employers who can demonstrate that they explored other options will fair better in litigation and public relations.
  • objective criteria to detemine what jobs will be eliminated.  Employers should be able to provide a job analysis as to why positions were eliminated.
  • criteria for selction.  Such factors can include: sales, evaluations, discipline, customer relations, coworker interactions, ability to manage, and seniority. 
  • evaluation of employees against selection criteria.
  • ranking of employees/value to the performance of work remaining after the RIF.  What special skills and knowledge to the remaining employees have?
  • review of rankings to eliminate unfair or systemic biases
  • statistical analysis of the impact of the RIF on protected classifications.