The California Department of Fair Employment & Housing released its statistics for 2008 last month, and there are some ominous signs that all employers should know:
- Complaints to the DFEH increased by more than 15% in 2008 (3,000 more complaints);
- Disability claims were most frequently filed, followed by retaliation, sexual harassment and age discrimination;
- In fact, disability claims comprised more than 36% of all claims;
- Prosecutions of employers increased by 28 percent.
California also has a disproportionate ratio of total employee complaints – one out of every 5 complaints in the country is from California.
Time to get your house in order!
And a good analysis of these statistics is found from Christopher Olmstead of Barker Olmsted & Barnier.
Age discrimination lawsuits are increasing rapidly. The trend of terminated employees contemplating and filing lawsuits are also on the increase.
If you want to terminate an employee for poor performance, then do so. But don’t use a layoff as an excuse. And if you replace a terminated employee with a younger one, make sure that you’re doing so for proper business reasons only.
Case in point: George Carras, who was in his early 60s, worked as the chief financial officer for a shoe importing business. When management said it was terminating him because of financial pressures, he offered to take a steep cut in pay, down to $60,000. The company rejected his offer and laid him off.
Then Carras found out that his younger replacement was making more than $60,000. When he sued for age discrimination, he told the court it was obvious that economics really hadn’t been the true reason for his termination. The trial court dismissed his case, but Carras appealed.
Now the 2nd Circuit Court of Appeals has reinstated the lawsuit and Carras will get a chance to persuade a jury that his former employer fired him because of his age and not because the company was having financial troubles. (Carras v. MGS 728 Lex, No. 07-4480, 2nd Cir., 2008)
Thanks to Labor Center Blog and Business Management Daily.
When laying off, or even terminating employees, the inevitable thought and process of offering a severance package comes up. Most businesses – especially small businesses, don’t have an existing written policy on severance packages. Therefore, a severance offer is not completely thought through.
I’ve had two clients in the last few weeks who needed to layoff employees and they had no existing policy. Suddenly, an issue which requires a great deal of thought had to be made immediately. There was even an article in the Wall Street Journal which addressed this.
Some thoughts on offering severance:
- Get a policy in writing now. This helps greatly with consistency and avoids any claim of favoritism or discrimination. Even if you don’t contemplate layoffs, it’s still an important item to have in place.
- When you offer a severance package for laid off employees, be consistent. An example would be two weeks of pay for each completed year of service. You can’t show better programs for more favorite employees.
- Every employment attorney I’ve worked with says the same thing – never offer money without getting a ‘hold harmless’ agreement signed by that employee. Consult your labor attorney – it’s worth the cost.
- Consider paying medical insurance for several months. COBRA now requires employers to pay 65% of existing benefits; but offering to pay all of the premiums for longer is a small cost but shows you – the employer – are trying to do the right thing.
- If you’re terminating an ‘older worker’ (someone over the age of 40), make sure the agreement contains provision required by the Older Workers Benefit Protection Act.
So your business needs to cut expenses, and downsizing your workforce is a necessary component in reduction.
But who do you lay off?
It’s a complicated task, and you need both an organizational development expert and likely an experienced employment attorney to guide you, because it’s not as simple as it seems.
For example, an older and more expensive employee may be your first choice for termination – but there are unforeseen problems. You can’t just lay off an employee for those reasons (which is why you need that OD consultant and attorney). Or, if you do, you could spend a lot more in legal fees and lawsuits than you could possibly save with the cutback.
The EEOC reports that age discrimination filings leaped 29% in the year ending September 2008. Over 25% of all EEOC claims are now age-related.
We’re presently working with a number of clients on reducing their workforce. There are a number of organizational development issues related to a RIF (such as who stays, who goes, what does the company look like after the reduction and how will all the tasks continue to be done).
But there are a number of compliance issues as well.
Baker Donelson has a good piece on some of those pitfalls.
A reduction-in-force is not simply “let’s eliminate ‘x’ number of positions”; it takes careful decision making; excellent organizational development consultation; and a good employment attorney.
When businesses get hit by a recession, employee layoffs inevitably follow. And when layoffs occurs, wrongful termination lawsuits inevitably follow as well.
Generally, layoffs should be a last resort; there are many other techniques available to reduce your payroll costs that should be strongly considered before terminating your employees.
Extreme care must be used when terminating or laying off employees. You need to consult with a qualified Human Resources expert or employment attorney.
Do you know about the WARN Act?
Do you know about the Older Workers Benefit Protection Act?
Are you completely comfortable with knowing that your layoffs will not result in a discrimination or wrongful termination lawsuit?
Extreme care. Use it in these situations.
The Age Discrimination in Employment Act (ADEA) bans discrimination on the basis of age, and age in this act is defined as any employee 40 years of age or older.
Emily Brandon, writing in usnews.com, quotes a report from Gray Hair Management, an Illnois-based outplacement firm. Gray Hair survey 900 executives to determine at what point does age begin to negatively affect hiring decisions. The executives said:
- Before age 50: 24 percent
- Between age 50 and 54: 39 percent
- Between age 55 and 59: 23 percent
- Age 60 or older: 11 percent
This is the first time I’ve seen statistics involving age discrimination by age.
Never ask a candidate how old they are. Never ask for proof of identification UNTIL AFTER a job offer has been given.
And never take any job action against an employee until you’re sure you can defend that action on the basis of business, and not a protected class such as age.