When a company downsizes, it can feel like a civil war, with employees worried about whether they will be next on the chopping block. Such times can be hazardous for employers, which may find themselves tiptoeing through a minefield of explosive discrimination lawsuits.
In the case below, recently decided by the Tenth U.S. Circuit Court of Appeals, find out which employment discrimination claims survive and which don’t in this harrowing true tale of human drama and disappointment.
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Cast of characters
Southwestern Bell Telephone experienced a significant loss in customers after September 11, 2001. As a result, its Oklahoma construction and engineering organization underwent three separate RIFs of first-level managers.
Bell took the following approach to the RIFs. First, all first-level managers were grouped by job title and work location. Next, managers in each affected work group were placed into one of four “bands” — Bands A, B, C, and D — based on their most recent performance evaluations. Any manager assigned to Band D and some employees in Band C would be at risk for layoff. All of the managers in Band C were ranked against each other to determine a pecking order. The managers who ranked lower than the number of managers designated for retention in the affected work group were considered “surplus.”
The employees in our story survived the first two RIFs but not the third. Jamie Sanders, a 48-year-old female engineering manager, was assigned to an affected work group in the Oklahoma City area and placed into Band C based on her most recent performance evaluation. Because Bell’s area managers ranked Sanders fifth from the bottom in Band C and only four managers were designated as surplus in her group, Sanders believed she was safe from the impending layoff. However, after one of the area managers accepted a voluntary demotion to the position of engineering manager in her work group, Sanders was forced to either find work elsewhere or accept reassignment to another position in the company, which she did.
Denise Coffey, a 45-year-old female construction manager, was placed in an affected work group in the Oklahoma City area and ranked last in Band C. Of the six people ranked in that band, she was the only woman. As a result of her low ranking, Bell eventually laid her off.
Karie Brooks was one of two people in the affected work group consisting of engineering managers in the Enid area. She was placed in Band C, while the other manager, a younger man, was placed in Band B. Because of her assignment, she was laid off.
After Sanders, Coffey, and Brooks were either reassigned or laid off, they filed suit in federal district court against Bell, alleging that they were designated “surplus” because of their age in violation of the Age Discrimination in Employment Act (ADEA) and because of their sex in violation of Title VII of the Civil Rights Act of 1964. The federal district court dismissed all of their claims without a trial. The employees then appealed to the Tenth Circuit.
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Employees’ circumstantial claims misfire
The Tenth Circuit affirmed the dismissal of Sanders’ sex discrimination claim as well as Coffey’s and Brooks’ sex and age discrimination claims. Because the claims involved circumstantial evidence, the court analyzed them under the McDonnell Douglas framework.
Under the McDonnell Douglas framework, an employee must establish a basic case of sex or age discrimination. Then the burden shifts to the employer to articulate a legitimate nondiscriminatory reason for the adverse employment action. The burden then shifts back to the employee to show ample evidence that could persuade a reasonable juror that the employer’s reason is simply a cover-up for unlawful discrimination.
When an employer’s proferred reason for laying off an employee is a RIF, the employee can show pretext in several ways. She can show that her selection for the RIF is inconsistent with the reduction’s criteria articulated by her employer. Unlawful discrimination may also be inferred from other procedural irregularities in the RIF process.
The employees in this case — either individually or together — argued that the RIF was a cover-up for unlawful discrimination because:
- their qualifications didn’t warrant their placement in Band C;
- Bell inconsistently applied its ranking criteria;
- an area manager was permitted to take a voluntary demotion, which resulted in Sanders’ job loss; and
- women and older employees were disproportionately affected by the RIF.
The Tenth Circuit found that each of those arguments missed its mark.
First, the court rejected Sanders’ and Brooks’ argument that their qualifications didn’t warrant their placement in Band C relative to the qualifications of other employees placed in higher bands. The court determined that Bell could establish its own RIF criteria regarding qualifications. Because it was undisputed that Bell decided to make placement decisions based on the employees’ most recent performance evaluations and Sanders’ and Brooks’ evaluations didn’t contain comments that their performance was superior or above average (as did the evaluations of the managers placed in Bands A and B), the court found that its placement of Sanders and Brooks was justified. The court noted that it’s the employer’s perception of the employee’s performance that is relevant, not the employee’s subjective evaluation of her own relative performance.
The court rejected Sanders’ argument that the area managers didn’t apply RIF criteria uniformly when they ranked Band C of her affected work group. Because there was no contemporaneous document detailing the reasons for each employee’s particular ranking, one of the area managers provided an affidavit that explained why each employee was ranked higher or lower than Sanders.
Sanders pointed out that she had been in an engineering position longer than at least one person ranked ahead of her in Band C. However, tenure in the position was only one of the factors considered, and Bell ranked the other employee higher because he had an outside construction background and supervisory experience that enabled him to independently complete jobs, whereas Sanders wasn’t as experienced or autonomous.
The court also rejected Sanders’ argument that the voluntary demotion of one of the area managers to her work group constituted a procedural irregularity that implied pretext. Although the junior area manager participated in the meeting at which employees were ranked and later accepted a voluntary demotion that ousted Sanders, the court noted that her ranking was a unanimous decision by all area managers. Moreover, because the voluntary-demotion policy wasn’t enacted until after the ranking meeting, the area managers thought Sanders would be retained when she was ranked.
The court also dismissed the employees’ statistical evidence showing that a greater percentage of women than men were designated as surplus. Although the evidence showed that 10 of 19 women (52 percent) were designated as surplus, as opposed to 11 of 83 men (13 percent), the statistics didn’t adjust for the various performance evaluations and departmental rankings of the employees included in the statistical pool. Thus, the statistics didn’t account for nondiscriminatory explanations for the disparity in the percentage of men and women.
Finally, the court rejected Coffey’s age discrimination claim because she was the youngest person in the construction group’s Band C and there was no evidence that her band placement was determined by her age.
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Direct hit
The Tenth Circuit, however, reversed the district court’s dismissal of Sanders’ age discrimination claim because it found that she had produced direct evidence that she was designated as surplus because of her age. She testified that one of the area managers told her that she had been designated as surplus because of her age, not her job performance. While the court recognized that Bell had produced evidence that called into question Sanders’ recollection of that conversation, it concluded that a jury, not the court, should decide whether to believe her. Thus, the court permitted her claim of age discrimination to proceed to trial because she had alleged direct evidence of Bell’s consideration of age in ranking her during the RIF. Sanders v. Southwestern Bell Telephone, 2008 U.S. App. LEXIS 21568 (10th Cir., October 15, 2008).
Duck and cover
As this case demonstrates, there can be a considerable difference between the collateral damage caused by circumstantial evidence and the impact of direct evidence of discrimination. Direct evidence is analyzed differently by courts and can result in a trial even when the employee’s credibility is in doubt. Certainly Bell would have been in a better position to contradict Sanders’ self-serving claims had it properly documented the reasons behind the employees’ ranking at the time of the area managers’ meeting. By failing to do so, it left itself exposed to potential bombshells by disgruntled employees who were casualties of the RIF.
Let this be a lesson to other employers faced with the unenviable task of downsizing that fail to protect themselves with proper documentation. When considering for whom the bell tolls next, they may discover “the bell tolls for thee” in the form of an unpleasant discrimination trial.
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