Could Layoffs Equal a Class Action?

This should come as no shock, but people don’t like to get fired. And when they do get fired, they look for someone else to blame. Guess who? “You fired me because I’m X (fill in the blank with the name of a protected class).”

That’s one lawsuit, but that’s not the end of it. The federal Equal Employment Opportunity Commission (EEOC) is now looking closely at layoffs, particularly to see if there is the possibility of a class action discrimination lawsuit. That could be big trouble.

So, how should you protect yourself? There are three key elements:

•  Methodology
•  Performance Appraisals
•  Job Descriptions

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Methodology

The most important factor for methodology is to select a sensible system for a layoff and then apply it consistently. The problem is that there are always some employees who don’t fit your system. For example, you set your layoff selection standards and then discover that if you follow them, you’ll have to fire your best salesperson.

As soon as you make an exception, you’re going to hear “You let him stay and you fired me—it must be because I’m X.” You’ll try to justify your actions, but you’ve blown your credibility because you didn’t follow the system.

That’s why it’s important to think things through and do some analysis after making your tentative selections to see if there is any adverse impact on members of any protected classes. If so, and especially if there is any doubt about the method you used or the backup documentation, you may want to rethink.

Face it, if you can see adverse selection, so can the EEOC and so can your employees’ attorneys. Many experts recommend that your pre-layoff analysis be carried out with your attorney so it can receive protection under attorney-client privilege laws.

Seniority is often considered the “safest” way to go. There’s little subjectivity involved, and employees and courts understand the system. It appears to be “fair.”

However, using seniority often won’t leave you with the critical staffing needed to move ahead. In that situation, you need other criteria. Performance is often a criterion, but for that to stand up in court, you’ll need a good performance appraisal system that is consistently managed.

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Performance Appraisals 

Most organizations have performance appraisal systems, but most of them aren’t very convincing in court:

• Virtually everyone gets a rating of “satisfactory” or better. (We all know that “satisfactory” means “poor,” but that’s a hard sell in court.)
• Managers and supervisors often have had no performance appraisal training.
• Typically, the ratings are highly subjective.
• Almost everyone gets a raise and a bonus.

The bottom line is that, in many cases, appraisal systems aren’t very consistent or reliable, and that means trouble if you are sued. The best advice is to review your appraisal system now and get it in shape before you have to demonstrate its fairness in court.

Consider the following:

• Check out the system itself. Do you set clear goals, and do appraisals measure and reward against the goals?
• Train supervisors and managers. To obtain consistency, give all appraisers guidelines and practice.
• Establish a review system so HR can see if there are aberrations.

In the next CED, we’ll look at job descriptions, examine the third element in preparing for layoffs, and introduce a permanent job descriptions solution.

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