Employee Lawsuits a New Sign of the Times

The New York Times published an article with a headline that made me, as a business owner, uneasy; and, it made me, as an attorney, worried for my clients.  The article was entitled Layoffs Herald a Heyday for Employee Lawsuits and it informs us that as more workers are being let go due to the economy and corporate layoffs, they are more inclined to sue their former employers for having been unfairly or wrongfully dismissed.

The Texas Workforce Commission is displaying this quote on its unemployment insurance web page – “The Texas Workforce Commission is experiencing extremely high call volume. Many states across the nation are facing the same challenges due to recent federal extensions of unemployment insurance benefits. Due to the increased calls and workload, and the difficulties that customers are having reaching staff, TWC will not penalize claimants when they are unable to reach us in a timely manner.”

Headlines like these, coupled with statistics from a recent Society for Human Resource Management (SHRM) poll, tell us unequivocally that many of us will be impacted – 60% of employers are likely to institute layoffs this year, and 48% have done so in the past year.

With that in mind, I thought it appropriate to provide some suggestions for employers who are considering workforce reductions.

While a reduction in force (RIF) may be an appropriate and effective means for controlling costs, Employers must make such decisions with a variety of employment laws in mind; namely, Title VII, the ADEA, FMLA, and WARN.  Failing to account for these and other federal and state employment laws will cause you problems.

While not an exclusive or exhaustive list, employers considering workforce reductions might consider keeping these suggestions in mind:

• Consider Alternatives

• Are there are alternatives that can be initiated, such as a hiring or salary freeze, partial compensation through State programs such as Shared Work, forced time off, or a voluntary resignation program?

• Ensure state statutory compliance

  Understand that a layoff could trigger additional obligations under state laws involving wage payments, insurance and severance benefits, among other things.

• Create a plan that maintains business operations and upholds workforce morale

  Take care to evaluate job functions and skills in order to decide whether they are essential or could be consolidated or eliminated.

• Assess impact, if any, on benefit or retirement plans

  Determine whether the vesting of pension or benefit plans will be triggered by a layoff, which under some plans could cause an employer to incur liability.

• Reflect on Texas WARN Act and contractual obligations

  Understand that WARN (the federal Worker Adjustment Retraining and Notification Act) requires specific timing and notice conditions to be met and a failure to comply can result in a class action lawsuit.

• Create a Plan for the Selection of Impacted Employees and Work that Plan

  Plan your work and work your plan – prioritize your selection factors based on objective factors, such as seniority and length of service, performance, and/or elimination of unnecessary job classifications and then review those initial selections to see if your choices will disproportionately impact minorities, women, or workers 40 years of age or older.

• Plan to Utilize Release Agreements

• Releases agreements can help Employers reduce exposure to claims of discrimination; however, strict compliance with statutory obligations is critically important to the effectiveness of any such agreement.

In general, pre-planning is the best option.  The bottom-line for Employers is to recognize that in times like these, employees who are let go are more willing to file suit.  Taking appropriate steps now to mitigate your issues and using objective and quantifiable criteria for your decisions can help you in defending against such claims.