The Low-Down on Layoffs

Back in May of 2007, Dell announced plans to lay off 8,800
employees. By October 2008, the company was embroiled in a class action
discrimination lawsuit involving former employees seeking more than $500 million
in damages. While reductions in force may allow your organization to remain
viable in difficult financial times, the failure to plan sufficiently and to
organize a layoff can spell legal trouble. Aside from claims alleging
discrimination, you may also be facing claims for breach of contract, violation
of wage statutes and even federal layoff rules (the Worker Adjustment and
Retraining Notification Act, or WARN Act). Here are a few things to consider:

1. Determine
   which jobs or job functions need to be combined or eliminated. Supervisors
   involved in the process should be directed to examine all jobs in the areas
   targeted for reduction, identifying the description of tasks performed, time
   spent on each task and other jobs in the unit that perform those tasks.
2. Develop uniform selection criteria for employees in the
   affected areas. No single set of criteria will be appropriate for every
   employer. You have a right to select the criteria, including subjective
   criteria, which will enable you to accomplish post-layoff goals. Employees
   claiming that they should have been rated higher in the criteria ratings have
   rarely been successful in their cases. Check your handbook, contracts and
   collective bargaining agreements to make sure youre complying with their requirements.
3. Train the managers. All managers involved in the layoff
   should be trained about the layoff program and the methods and procedures for
   identifying jobs and ranking employees, as well as communicating the layoff to
   the employees.
4. Evaluate, rank
   and select employees. Apply the selected criteria and determine your layoff
   list.
5. Do a
   preliminary statistical evaluation. Confidentially (and consulting with an
   attorney) check to see whether a particular class of employees may be
   disproportionately affected by the layoff. If so, you must be certain that you
   can articulate a legitimate business reason for your action and have written
   records supporting your reasoning. This step is the very challenge Dell faces
   in its discrimination lawsuit as class members allege that as a result of
   layoffs, more than 80 percent of Dells upper management is now male.
6. Consider the special cases. You also need to consider
   employees on family, medical or workers compensation leave, as well as
   whistleblowers and employees about to vest in benefit plans. These employees
   may try to complain that the layoff interfered with their protected
   rights.
7. Consider separation agreements and releases. You will
   need to decide whether to provide severance pay in exchange for a release of
   claims. Review your policies, practices, employment contracts, ERISA plans and
   collective bargaining agreements to make sure you comply with your obligations.
   There are many legal complications that must be addressed in drafting the
   separation agreement, so consult with your legal counsel about these
   requirements.
8. Legal
   requirements regarding notification of layoffs. The WARN Act requires employers
   with 100 or more employees to provide 60-days advance written notice of a
   mass layoff or plant closing to the employees, local government and union
   representatives. A mass layoff is at least 33 percent of all full-time
   employees (a minimum of 50 employees) during any 30-day period. A plant
   closing includes temporary or permanent shutdowns of a single site if it
   results in a loss of at least 50 full-time employees. There are exceptions to
   this requirement, but they are viewed narrowly.

With these considerations, you can make an informed decision
as to how best to structure your layoff and minimize the risk of a lawsuit.

This is a legal sponsored report from Lane Powell PC.

D. Michael Reilly, Director of Lane Powells Labor and
Employment and Employee Benefits Practice Group, represents small and large
employers on employment litigation and advice. His experience includes claims involving discrimination,
wrongful discharge, ERISA, race, sex, religion, retaliation and disability
claims. He can be reached at
[email protected] or (206) 223-7051.

Jennifer K. Wyatt, attorney at Lane Powell and member of the
Firms Labor and Employment Practice Group, defends employers in employment
disputes, including claims of discrimination, harassment, wrongful discharge,
and wage and hour violations. She can be reached at [email protected] or
(206) 223-7043.