This economy has hit our small retail Insurance Agency hard, we laid off an employee May ’08, another at the end of ’08, cut wages—by 15%—last May (’09) and have done many other things to cut our expenses. Unfortunately we need to lay off three more employees next week … two of the three we have chosen have “seniority” over others we are keeping however they also make a higher wage and will have a greater impact on our balance sheet (which is key!). Are we in violation of any CA law/guideline by letting go of an employee(s) that has been with our firm longer than the one(s) we are keeping?
Thank you for contacting California Employer Advisor. We appreciate hearing from you. We are very sorry to hear that your business has undergone such difficulties as a result of the economy. We understand how hard it is to make layoff decisions like the ones you’ve had to make and are making now.
Please understand that we cannot offer you legal advice here. But, we do believe that the following information will be helpful to you.
There’s no law that requires an employer to make layoffs in order of seniority. However, if the more senior employees are over age 40, or are substantially older than the less senior employees who are not being laid off, there is a high risk of being hit with an age bias claim. Under both state and federal law, the relative expense of senior employees compared to newer employees can legitimately be a consideration in making layoff decisions without violating age discrimination laws. However, this is a very fact-specific issue, and we cannot recommend taking any action on the basis of the overall cost of the employees without consulting a qualified employment attorney. While this is an added expense in tough times, it is far less costly to get good advice up front rather than defend a lawsuit later.
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Also, some employers who are concerned about age bias issues, and who are faced with a decision about who to layoff related to seniority, elect to first offer the more senior employees the opportunity to stay by taking a salary cut (to the same level as the less senior employees) due to company financial difficulties. If the senior employees accept the salary reduction, then the less senior employees would be laid off. If the more senior employees refuse to accept the salary reduction, then they do so knowing that the consequence will be getting laid off. Employers who have done this have successfully avoided any appearance that layoff decisions were motivated by age, rather than by economic necessity.
—Jessica Christensen, Esq.
California Employer Advisor