As more and more companies struggle in this tough economy, many are forced to implement reductions in force (RIFs) and layoffs. Often, RIF decisions lead to litigation if not properly planned. In a recent case, the Sixth U.S. Circuit Court of Appeals held that an employer didn’t discriminate against employees based on gender even though the majority of those laid off were women. The employer had a legitimate business justification for its decision.
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Facts
Planes Moving & Storage (PM&S) provides relocation services. In 2001, PM&S initiated a RIF because of its financial condition. The company’s workforce consisted of 120 women and 86 men. The company decided to center the RIF on the customer service, credit and collections, operations, and billing departments. In those departments, 90 employees were women and only 11 were men. Men made up the majority of the workforce in the other departments, which included the warehouse, movers, packers, and drivers. The individual managers in each department determined which employees to lay off. PM&S laid off a total of 12 women and one man.
Four of the women filed suit against PM&S in federal court, alleging gender discrimination. The women claimed both disparate treatment and disparate impact. The district court granted judgment for PM&S on the disparate impact claim, and the jury returned a verdict for the company on the disparate treatment claim. The women appealed only the disparate impact verdict to the Sixth Circuit.
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Sixth Circuit’s analysis
In a disparate impact case, an employee must:
- identify the particular employment practice;
- show a disparate impact on a protected group; and
- prove that the employment practice caused the disparity.
Usually, individuals use statistics to prove a disparate impact. As in other discrimination claims, once the individual proves a prima facie (initial) case, the burden shifts to the employer to articulate a legitimate business justification for the alleged discriminatory practice. The burden then shifts back to the individual to prove there was an effective alternative to the RIF, which illustrates a pretext for discrimination.
First, the four individuals who filed the lawsuit challenged PM&S’ decision to select only the predominantly female departments for the RIF. The Sixth Circuit agreed that the department selection illustrated a disparity and that the challenged employment practice could have caused the disparity. By targeting only the selected departments, the likelihood of choosing women for the RIF was 89 percent, while if the company had used the entire company in the selection criteria, the likelihood of selecting women would have been only 58 percent.
PM&S justified its decision based on the declining business in the selected departments. The unaffected departments were made up of mostly seasonal workers who worked only during the summer moving season. Also, the warehouse had no decline in business. The Sixth Circuit found the company presented a legitimate business justification for its decision.
The employees then argued that PM&S never explored alternatives to the RIF; however, this isn’t the standard. The four women had to actually present available effective RIF alternatives. They offered no alternative to the departments that were selected for the layoff. The employees had to show that PM&S ignored obvious alternatives, and they failed.
Furthermore, PM&S had legitimate business justifications for selecting the individuals for layoff. One was proven a difficult employee, another had the lowest seniority, another had attendance problems and a past suspension because of drugs, and the last had low performance scores and management considered her rude. The Sixth Circuit therefore upheld the district court’s ruling. Shollenbarger v. Planes Moving & Storage, 2008 WL 4659763 (6th Cir.).
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Bottom line
This case illustrates the importance of proper planning during a RIF. If layoffs are necessary, odds are an employer can’t afford the cost of making a mistake. Businesses must ensure that they are able to justify their decisions. If a company can’t document and clearly explain the factual basis for the RIF, the manner of implementing it, and the reason for choosing the individuals who were laid off, it should reconsider the risks and benefits before proceeding.
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