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Proceed with Caution When Rehiring Laid-Off Employees

by Kara Shea

One hopeful sign that our economy is perhaps inching back in the right direction is the number of calls I’ve received in recent weeks from clients inquiring about hiring back employees let go during a reduction in force (RIF). Some employers have told me they’re contemplating bringing back certain positions, or even entire work groups. That’s wonderful news for my clients as well as for all the folks out there who need jobs. But as with any employment action, rehiring and recall decisions come with consequences. So if you’re in the position of needing to fill jobs following a downsizing, here are some things to keep in mind.

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Employers frequently ask me what obligations they have to former employees following a RIF. Do you have to hire the same employee to fill a reinstated position that was eliminated? Or more generally, do you have to give preference to former employees when you screen applicants for newly created positions? It depends.

If portions of your workforce fall under a collective bargaining agreement (CBA), the CBA’s provisions addressing layoffs and recalls will control. Likewise, governmental entities may be bound by rules granting rights of recall in certain situations. Generally, however, there’s no “right of recall” for non-union employees who have been downsized or laid off by private employers.

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An employer’s first step when hiring after a RIF is to look at its policies. Does the company have a written severance policy or layoff/recall policy? If so, the employer needs to follow its own policy. Next, think about the representations made to employees whose positions were eliminated. Did the employer give them any indication, either orally or in letters, memos, or e-mails, about what the company would do about their jobs should economic circumstances change? Did the employer (or management representatives) make any promises of reemployment or preferential treatment? If so, the company needs to consider whether it’s representations to departing employees created rights where none existed otherwise.

Let’s say you merely told employees their jobs were being eliminated because of the economic downturn but made no other statements about your intentions. Under those circumstances, an employer has no further obligations to former employees once the employment relationship ends. You aren’t required to bring back the same employees to fill their old positions or to give any sort of preferential treatment to your former employees when you’re screening applicants. But does that mean you’re now able to start from scratch and cherry-pick a new workforce? (Because, let’s face it, you really don’t want to take back some of the folks you let go.) There are risks to going “off script” when ramping back up after a layoff.

Here’s an example of what I mean. Because of decreased customer orders, one of my clients laid off about 30 percent of its workforce earlier this year. To reduce its exposure for wrongful termination claims as much as possible, the employer elected to make layoff selections in each job group based solely on seniority. That resulted in some great employees, as well as some not-so-great employees, being let go. When orders increased later in the year, the employer asked me if it had to hire employees back in order of seniority. I advised the employer to proceed with caution. Why?

Well, let’s say the three people laid off in one job group were a 25-year-old white man and two septuagenarian minority women. Let’s say the white man was the least senior of the three, but also the best worker. In that situation, you should think twice about skipping over the two more senior employees and hiring back the employee you really want. Doing that might make it look like the seniority criteria you used for the layoff were a sham designed to allow you to get rid of the “dead weight” while ultimately keeping a young white male employee.

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That’s particularly true if the layoff was short-lived. In that case, you’ve effectively blown a previously airtight defense to wrongful termination claims based on the layoff. See my point? It’s best to seek out experienced legal counsel when you’re making these tough calls.

Kara Shea is an editor of Tennessee Employment Law Letter and a partner with Miller & Martin PLLC, practicing in the Nashville office. She can be reached at (615) 244-9270.