Layoffs Without Lawsuits: Avoiding Litigation When Terminating Employees

Managers who approach their employees carefully in the wake of economic job eliminations may avoid legal problems later.

Phillip M. Perry, Staff Editor, Area Development  (Apr/May 09)

With the recession wreaking havoc on revenues, business owners from coast to coast are reducing employment rolls to control operating costs. Too often, though, terminations are carried out in ways that spark costly litigation.

“Given the increasing number of layoffs in recent months, there is bound to be an uptick in wrongful discharge lawsuits,” says Joseph P. Harkins, a partner in the Washington, D.C., office of San Francisco-based Littler Mendelson, the nation’s largest employment law firm representing management.

Lawsuits increase during economic downturns for three reasons. First, the fact that more people are being let go increases the pool of possible litigants. Second, a growing array of federal and state laws protects workers from discrimination during termination, providing the grounds for lawsuits. Third, many attorneys are themselves looking for more business, and thus are willing to represent plaintiffs on a contingency basis. That encourages litigation by terminated workers who see courtroom awards as valid replacements for lost paychecks.

Avoid Litigation
Discharged employees may bring two types of lawsuits. The first alleges a straightforward legal failure: Perhaps the employer has ignored a written or oral employment contract, or violated public policy in firing people for undertaking jury duty or some other federal or state mandate.

Discrimination lawsuits are more common in a recession, because many layoffs present the appearance of bias against protected groups even when no such unfairness was intended. The plaintiffs assert that terminations were influenced by age, sex, race, religion, national origin, or disability. Such cases require more time and cost to defend – and employers can be hit with huge punitive damages. You can avoid this trap by defining the goal of your work force reduction, then assuring your terminations support that goal.

“Probably the most important thing is to set an objective,” says Harkins. Perhaps your goal is a straight forward downsizing: “Do you need to reduce head count and control costs?” he says. “In that case, you need to do a ranking of all of your employees, keeping the best and laying off the worst.”

Or your goal might be more strategic. “Perhaps you decide you are not going to provide a certain service or line anymore, and focus instead on your core business,” says Harkins. “In this case, you can decide who you must let go because they do not have the skills to support your new strategy.”

Probably the most common mistake is to mix the two objectives or not have any goal beyond some panicky cost control, according to Harkins. In such cases, it’s too easy to terminate individuals without sufficient thought and without adequate documentation supporting the criteria used.

That carries strategic and legal risks: Six months down the road, you may realize you let the wrong people go. And it opens the door to charges by discharged individuals that your real goal was discrimination: You wanted to rid your workplace of individuals with characteristics protected by federal and state law.

It’s wise, then, to spend some time defining where you want to be in a year or two. “Do a strategic assessment of your business to determine longer-term opportunities you want to develop,” says Ian Jacobsen, president of Jacobsen Consulting Group in Sunnyvale, California. “Let’s say that you see a potential market for additional avenues of business when conditions improve. You will probably want to keep the people who are best for helping you grow your business in those areas as you ride out the recession.”

Keep Records
Keep careful records that show how your terminations support your goal. “You definitely want to document your reasons at the time of discharge,” says Harkins. “If you do get hit with a wrongful discharge suit, you can say `Employee A had a better set of skills than Employee B for the service we were planning to focus on in the future.’ Or, `I needed people who had two skills and Employee B was less versatile.’ Documenting this thought process at the time will make your case more credible later.”

If your goal in reducing your work force was an overall savings, this should also be documented. “What is important is your decision process at the time of the layoff,” says Harkins. “Documenting your good faith reason will help assure it remains the focus in any lawsuit.”

Once you have decided whom to let go, assess the makeup of the departing group. Does it have a higher proportion of individuals with protected characteristics than your surviving work force? If so, your layoff would seem to have what attorneys call a “disparate impact” and that can be evidence of discrimination. “If there’s no disparate impact and no appearance of discrimination, your group being laid off should look like the group in the work force,” says Harkins. Disparate impact can be harmful not only in terms of costly litigation but also in the diminished morale of people left behind and even in tarnished customer relations following news reports of discrimination lawsuits.

Treat People Well
Treating people well during termination is the right thing to do from the human point of view. It’s also smart legally. Fact is, people who are angry about how they were treated on the way out the door often sue their ex-employers.

“Discharged employees often go to lawyers because something in the circumstances of their termination made them angry or seemed unfair,” says John J. Myers, chair of the labor and employment law department at Eckert Seamans Cherin & Mellott in Pittsburgh, Pennsylvania. “Treat the departing employees with dignity. I also counsel to give employees complete explanations as to why you are terminating, as opposed to staying vague and elusive. Hopefully they will then understand why you are doing what you have done, and that reduces the likelihood of going to court.”

Indeed, attorneys suggest going the extra mile and taking a proactive stance in helping employees move on. Consider arranging for outplacement to get people focused on the future and getting on with their lives. People left unassisted are more likely to file a lawsuit as they brood on what happened.

Offer Severance Agreements
One way to help ensure you do not become the target of wrongful discharge lawsuits is to ask departing employees to sign documents that release your firm of any liability in exchange for a severance packages.

“Many times RIFs (reductions in force) are done without severance packages and corresponding releases,” says Harkins. “This is usually a mistake because most people are not looking for huge packages. They just want some transition money to take care of their families until they come up with something in a few months. Provide some transition pay and you are less likely to be the target of litigation.”

One approach is to offer “notice pay,” a week or two until the next payroll date, with no need for the employee to report to work. “If an employer can afford it, and even for a small amount of money, it is usually worthwhile to obtain a general release of legal claims,” says Harkins. “Legal consideration to support a valid release is anything of value that the employer is not otherwise required to provide. So even a day’s pay can justify a release of any discrimination or other wrongful discharge claims.”

After the Layoffs
If you’re facing the necessity of downsizing your own work force, you’re probably feeling a good deal of stress. No one wants to make a decision that will disrupt the lives of so many people, especially in today’s environment where jobs are hard to come by.

Layoffs can also affect the morale of people left behind. “Employees retained in a layoff are apt to feel `survivor guilt,’ especially if they don’t know why they were retained when their colleagues were let go,” says Jacobsen. “That’s why it is so important to explain to them the reasons that they were kept, and what they will be doing in the new, `pruned’ organization. In all probability, their jobs will change some to cover part of the work of the people who were let go. They need to understand that not all of the work that was done prior to the layoff will be done in the post-layoff business.”

To manage survivor guilt, meet weekly with the retained employees for the first month or more to find out how things are going for them. What’s working and what’s not? By solving or helping them solve problems they are experiencing post-layoff, you will ease their stress and build your relationship and credibility with them.

“One way to reduce survivor guilt is to get the remaining employees involved in the mission of cost cutting, or thinking of more efficient ways to do things,” says Harkins. “People often work off stress by feeling they are getting the business back in order.”

Also, try to stay in touch with the group that has departed. “The knee-jerk reaction is to not have your employees stay in contact with laid off people,” says Harkins. “That can be counterproductive because some of those people might reapply or they might be able to recommend someone when business picks up. You never want to burn a bridge in anything that deals with human resources.”

Stay Safe
Recessions happen. They are a fact of business life. Fortunately, they don’t last forever. You want to respond to the recession in a way that builds bridges to the future. That means conducting a layoff ethically and professionally. “Unless you plan to close your business, you want to maintain a reputation as a good place to work,” says Jacobsen. “When you survive a recession and start hiring again you want to be able to recruit the best people. And the best people will remember how you conducted your layoff.”

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Avoiding Discrimination in Layoffs or Reductions in Force (RIF)

U.S. Equal Employment Opportunity Commission


Making an Employment Decision?

Before implementing a layoff or reduction in force (RIF), review the process to determine if it will result in the disproportionate dismissal of older employees, employees with disabilities or any other group protected by federal employment discrimination laws.

  • List the employees who would be laid off or terminated based on your layoff/RIF criteria.
  • Determine whether certain groups of employees are affected more than other groups.
    • For example, to determine whether female employees may be affected more than male employees, compare the percentage of female employees scheduled for layoff/RIF to the percentage of female employees in your workforce.
  • If certain groups of employees are affected more than other groups, determine if you can adjust your layoff/RIF selection criteria to limit the impact on those groups, while still meeting your business’s needs.
    • For example, you decide to lay off the most recently hired employees due to budget constraints. Female employees account for 30% of your workforce and 85% of the employees scheduled for layoff. Determine whether you can adjust your layoff criteria in a way that allows you to meet your financial goals while also reducing the impact on female employees. For example, you might determine whether alternative layoff criteria, such as employees’ profitability, productivity or expertise, would enable you to reach the desired financial outcome and result in the layoff of fewer female employees.

This process can be complicated. You may want to consult a lawyer or contact the EEOC for assistance.

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Laid off? These are the legal rights that can protect you

Get some answers to your questions about employment law, wrongful termination, severance, and more.

Source: Monster

Dawn Papandrea, Monster contributorLaid off? These are the legal rights that can protect you

Understand what your legal rights are when you’ve been laid off.

In most cases when people are laid off, they are so shocked or emotional about the experience that they aren’t sure what to do, what their rights are, or if they might even have a legal basis to sue. As a result, they end up walking away, no questions asked—sometimes with severance pay, sometimes with nothing at all.

If you’ve been laid off, step one is to breathe. You have every right to feel stunned.

“Most employees start jobs and no one ever thinks about what’s going to happen in the event of termination,” says Christopher Davis, managing partner of Law Office of Christopher Q. Davis, based in New York.

So would you know what to do if your boss called you in to have the layoff talk tomorrow? Here’s what employment law experts say you should know.

What laws protect you during a layoff?

The default in virtually all employment situations is “at will” employment, says Marc Siegel, founder and managing partner of Chicago-based Siegel & Dolan, mediator, and arbitrator. “That means an employer can terminate you for any reason, or no reason at all, as long as it’s not discriminatory.”

If you’re in a protected class based on your age, sex, national origin, religion, or race, or if you have a disability, and you can prove that you were laid off because of it, then you might have a case.

Without getting too deep into legal jargon, here’s a quick look at some of the federal discrimination laws that cover workers.

If you’re over 40: The Age Discrimination in Employment Act (ADEA) of 1967 protects workers 40 and older. In addition, if you’re in that age category and you’re part of a group layoff, you’re also protected by the Older Workers Benefit Protection Act. This gives you 21 days to consider any severance offer, and another seven days to revoke your agreement.

If you’re part of a minority group: Title VII of the Civil Rights Act of 1964 prohibits companies from making employment decisions based on race/color, religion, sex, pregnancy or national origin.

If you have a disability: The Americans with Disability Act (ADA) of 1990 prohibits employment discrimination against those with disabilities.

Just suspecting your affiliation with one of these groups prompted your layoff isn’t enough to bring a claim, says Davis. “You have to prove ‘disparate impact discrimination,’ which involves some quick math. Has the company put a larger number of members of a protected category into the group of people being terminated?” says Davis.  

Other potentially illegal reasons for a layoff include:

If the employer violates public policy: For example, if an employee files a workman’s compensation claim or reports an illegal or unethical behavior, and then a couple of months later is terminated, that worker might be able to prove that the layoff was done in retaliation, says Siegel.

Read up on federal whistleblower laws, as well as those in your state, if you find yourself in this situation, says Davis.

If you have to take care of a family member who is ill: The Family Medical Leave Act (FMLA) entitles eligible employees to take up to 12 work weeks unpaid (26 if the care is for a service member), job-protected leave for specified family and medical reasons with continuation of group health insurance coverage.

If your employer is large: The Worker Adjustment and Retraining Notification (WARN) Act sets rules for notifying workers about large layoffs and plant closures. You must receive a written notice 60 days before the date of a mass layoff. If not, you may be able to seek damages for back pay and benefits for up to 60 days. In some states like New York, employers have to give 90 days notice.

If you think you were laid off because of any of the above reasons, consult with a local attorney to help you decide if legal action is warranted. You may also contact the Equal Opportunity Employment Commission (EEOC) to file a complaint.

What can you expect in severance?

Questions of legality aside, you might be wondering if you’re entitled to severance, and if it’s worth negotiating for a better package. First off, know that an employer is not obligated to give severance at all. “Some companies offer severance as a matter of company policy,” says Davis, “but it is discretionary.”

In larger companies, severance plans may be based on a set, standard formula, says Siegel. “Generally, you’ll see offers of one to four weeks of pay per year of service, and it’s capped at a certain number of weeks,” he adds.

The other aspect of the severance besides what you’ll be paid is what rights you’re giving up. “If you’re getting a severance, it could be that the company is trying to discourage you from consulting with a lawyer,” says Davis. Once you sign the agreement, you give up your right to sue. “That’s valuable to a company because they don’t want to have to pay lawyers or pay settlements or judgments.”

Also, be very careful about covenants that follow you, says Siegel. “If there are any post-employment restrictions about soliciting customers or working for competitors, sometimes the amounts they’re paying you might not be worth it,” he says.

Similar to a salary negotiation, you don’t necessarily have to take the first offer when you’re handed a severance. “There could be room to negotiate your severance. Every agreement isn’t just a goodwill gesture,” says Davis. “Companies do pay out more if there are legitimate legal claims, so always run it by a lawyer.”

In fact, coming away with a better severance is often a person’s best recourse rather than suing, since doing the latter can take years and require a lot of legal fees.

Under what circumstances should you sue? 

If you think you have a good case, you could go ahead and sue your employer, but bear in mind that it’s an arduous process, says Siegel. Ask yourself these questions:

What type of claim do I have, and is it worth fighting?

Of all the potential claims, Siegel finds that Family Medical Leave cases tend to be easiest to win, assuming you have good evidence. “Everyone knows someone who’s been sick, so juries are more sympathetic,” he says. In addition, the standard of proof in such cases is more lenient than in other cases.

Take age discrimination cases, for instance. Those require the higher “but for” standard of proof, says Siegel. In other words, you have to prove that “but for” your age, you would not have been terminated. Also, in age cases, even if you do win, don’t expect large payouts. The ADEA doesn’t allow for emotional distress damages or punitive damages, says Siegel.

With racial and sexual discrimination cases, the burden of proof is slightly less stringent—you just have to show race/sex was one factor in the discharge, says Siegel. The challenge is trying to get a unanimous jury to agree. If you can, though, you may win compensatory and punitive damages (which are allowed), says Siegel, especially in states like California where damages are uncapped.

How big of a layoff is it?

The more people that are being let go, the harder it’s going to be hard to show you were being targeted unless you have some pretty good evidence,” says Siegel. Unfortunately, he adds, sometimes companies use a mass layoff to let a ‘red flag’ person go—whether it’s a 65-year-old, a member of a minority group who is likely to claim discrimination, or a person who filed a sexual harassment complaint. “When they are let go with everyone else, it’s much harder to prove discrimination,” says Siegel.

Where do you live?

Depending on your state’s laws, you might have an easier time of winning a case. Siegel says generally speaking, states such as Illinois, New York, and California have stronger employee protections. Read up on your state’s labor laws via the Department of Labor’s website.

Ultimately, consulting with an attorney can help you determine whether your layoff appears to be legal or illegal, but only you can determine whether the cost of going after your former employer is worth the time and effort.

Now that you have a better understanding of your rights, should the day come when you’re laid off, you won’t be so caught off guard and will be in a better position to negotiate. If you think you might have a legal claim, be sure to work with an employment lawyer to help you walk away with a better severance or, if warranted, pursue a lawsuit.

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U.S. economy expected to lose 4.6 million travel-related jobs this year from coronavirus fallout

Total spending on travel in the U.S. is expected to drop by $355 billion for the year, or 31 percent — more than six times the impact of the Sept. 11, 2001, terrorist attacks

Source: The Washington Post

A cleaning cart at Flamingo Hotel and Casino in Las Vegas on March 13. (Bridget Bennett/AFP/Getty Images)
A cleaning cart at Flamingo Hotel and Casino in Las Vegas on March 13. (Bridget Bennett/AFP/Getty Images)

By Rachel Siegel 

March 17, 2020

The United States is expected to lose 4.6 million travel-related jobs this year as the coronavirus outbreak levies an $809 billion blow to the economy, according to startling projections released Tuesday by the U.S. Travel Association.

Furthermore, 4 million jobs have been eliminated already or are on the verge of being lost in the next few weeks, the American Hotel & Lodging Association said. In some of the hardest-hit markets — such as Seattle, San Francisco, Austin and Boston — properties are shutting down and occupancy rates are at unprecedented lows.

Total spending on travel in the United States — including from transportation, retail, lodging and restaurants — is expected to drop by $355 billion for the year, or 31 percent — more than six times the impact of the Sept. 11, 2001, terrorist attacks. The projected 4.6 million jobs lost would, by themselves, nearly double the U.S. unemployment rate, from 3.5 percent to 6.3 percent, according to the U.S. Travel Association.AD

White House expresses support for making immediate cash payments to Americans as part of coronavirus stimulus package

The travel industry is joining airlines and casinos in calling for a government rescue. On Tuesday, Treasury Secretary Steven Mnuchin said that the Trump administration wants to send direct cash payments to Americans in the next two weeks as part of a giant economic stimulus package in planning between Congress and the White House. The overall price tag of the package could be around $1 trillion.

The hotel industry is asking for $150 billion, largely in the form of direct grants, to keep employees on the payroll and small businesses afloat. The broader travel industry is also seeking an additional $100 billion, executives said on a press call. Those tallies are separate from the more than $50 billion being sought by the airline industry.

The requests were presented in a White House meeting Tuesday by industry leaders to President Trump, Vice President Pence and other officials handling the pandemic.

Chip Rogers, president and chief executive of the AHLA, said the coronavirus has had a more severe economic effect on the lodging industry than 9/11 and the 2008 financial crisis combined. In a stunning reversal, the industry is facing the possibility that half of the hotels in the United States could close this year, Rogers said.

The prospect is especially dire for the 83 percent of travel employers that, according to U.S. Travel, are small businesses.

Jon Bortz, president and chief executive of the Pebblebrook Hotel Trust and the AHLA chairman, said his company let 4,000 employees go and expects to lay off an additional 2,000 by the end of the month — representing more than three-quarters of its workforce.

Pebblebrook, which has 54 hotels nationwide, is facing shutting the doors at more than half of its properties.AD

Douglas Dreher, president and chief executive of the Hotel Group, said occupancy at some properties had dropped to the single digits and that one-third of the company’s workforce will be let go in the near term.

“It is for us the Great Depression,” Dreher said. “We need help.”

Industry leaders emphasized that government funding would need to come within days. Direct grants would go toward lost salaries and toward ensuring hotel owners can make their mortgage payments.

Marriott International said Tuesday that it was starting to furlough what it expects to be tens of thousands of employees. The hotel chain, which has nearly 1.4 million rooms and employs 130,000 people in the United States, began shutting down some managed properties last week. Those who lost their jobs will not be paid while on furlough, but they would continue to receive health-care benefits, the company said.

Headshot of Rachel Siegel

Rachel Siegel is a national business reporter. 

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Do Employees Have Any Protections From Being Laid Off?

By Lisa Guerin, ​J.D., Boalt Hall at the University of California at Berkeley

While employers are generally free to conduct layoffs at any time, even at-will employees have some protections.

In the United States, employers have a great deal of leeway in conducting layoffs. This doesn’t mean every layoff is legal, however. Employers may not discriminate based on certain protected characteristics in deciding who loses their jobs, for example. Employers also may not lay off an employee if it would violate an employment contract. And, larger employers may have to give employees notice of a layoff in advance.

Employers Must Not Discriminate in Layoffs

Most employees in this country work at will, which means they can quit or be fired at any time, with or without cause, as long as the employer doesn’t fire them for an illegal reason. One illegal reason is discrimination based on a characteristic protected under federal or state law, such as race, national origin, or gender. Employers that use the layoff process to discriminate against employees based on a protected trait can be sued.

For example, if an employer uses a layoff as a pretext to get rid of most of its female employees, that would be illegal. Whether the job action is called a termination or a layoff, it is illegal to make job decisions based on protected characteristics.

Employment Contracts May Offer Protections

Some employees have written employment agreements that guarantee continued employment for a period of time, such as one year. If you have a contract like this and you are laid off for reasons that aren’t stated in the contract, you might have a legal claim for breach of contract.

Even if you don’t have an individual employment contract, you might have other contractual protection against layoffs. If you are a union member, your collective bargaining agreement might spell out the circumstances in which you can be laid off, or the process that your employer must follow in deciding which employees lose their jobs. Talk to your union representative to find out.

In addition to the right to notice under the WARN Act and similar state laws, you have the right to any severance promised in your employer’s policies, your employee handbook, or your employment contract.

Federal Law Requires Advance Notice of Mass Layoffs

The federal Worker Adjustment and Retraining Notification (WARN) Act requires employers with 100 or more employees to give at least 60 days’ notice before conducting a mass layoff: a reduction in force in which at least 500 employees at a single job site will lose their jobs, or in which 50 to 499 employees lose their jobs if they make up at least one-third of the employer’s work force.

Employers must also give 60 days’ notice of plant closings: the shutdown of a single employment site, operating unit, or facility, in which at least 50 employees lose their jobs.

The WARN Act requires only that employers give notice; it doesn’t protect employees from layoffs, nor does it require employers to pay any severance. Some states have similar laws requiring notice, and a few require employers to pay a small amount of severance.

Your Rights in a Layoff

Even if you don’t have the right to keep your job, you might still have certain rights in a layoff. In addition to the right to notice under the WARN Act and similar state laws, you have the right to any severance promised in your employer’s policies, your employee handbook, or your employment contract. For example, if your employee handbook states that employees who are terminated will receive severance of one week’s pay for every year of employment, you are entitled to that severance pay when you are laid off.

In addition, you have the right to receive your final paycheck relatively quickly after you lose your job. Some states, such as California, require employers to provide the final paycheck immediately upon termination. Other states give employers more time: For example, Vermont requires payment within 72 hours, while New York requires payment by the next regularly scheduled payday.

You may also have the right to continue your group health insurance plan under the federal COBRA law.

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