Unfortunately, my law partner Mike Underwood was correct when he predicted in his February 1, 2008 post  “Building a Model for a Defensible Reduction-in-Force,” that economic challenges in the current economy may result in more reductions in force. The Federal Bureau of Labor Statistics report for May showed 67 dismissals of groups of 50 or more employees in Ohio. This figure was nearly double the amount of such terminations in May ’07, when the Bureau reported 34 dismissals of 50 or more. Overall, Ohio unemployment claims have more than doubled to 7,621 from 3,350 a year ago, earning Ohio the dubious ranking of having among the top 10 highest volumes of claims in the United States.

Mike’s February post described some key steps to keep in mind when faced with downsizing decisions. Here are few more:

  1. If you are planning to offer severance or some other form of consideration in exchange for releases of all claims, make sure that you do everything you can to insure that the releases fully comply with all of the requirements of the Older Worker Benefit Protection Act (“OWBPA”). There seems to be a growing trend of employees signing releases, accepting the severance pay, but then later suing the company and arguing that the releases were unenforceable because of some technical or not so technical flaw. See e.g., Commonwealth of Massachusetts v. Bull HN Information Sys, 143 F. Supp. 2d 134 (D.C. Mass. 2001) (releases that failed to identify eligibility factors used in the selection process and that included waivers of rights to file charges with the EEOC were unenforceable); Pagliolo v. Guidant Cardiac Rhythm Mgt., 483 F. Supp. 2d 847 (D.C. Minn. 2007) (releases that failed to describe the affected decisional unit with particularity, failed to disclose eligibility facts, and failed to conform with the OWBPA’s statistical formatting requirements ruled to be unenforceable).
  2. Be mindful of the decision issued just last week by the U.S. Supreme Court in Meacham v. Knolls Atomic Laboratory, 554 U.S. ___ (2008). Knolls was a federal contractor that had been ordered by the national government to reduce its workforce. Knolls instructed its managers to score their subordinates on “performance,” “flexibility,” and “critical skills.” These scores, along with points for years of service, were used to determine who was laid off. Of 31 employees let go, 30 were at least 40 years old. Meacham filed suit on behalf of himself and others selected for termination, claiming that the selection criteria had a disparate-impact on older workers. The issue decided by the Supreme Court was whether disparate-impact age discrimination claims were subject to the “business necessity” standard (generally more favorable to employers) or a “reasonableness” test. The Supreme Court ruled that an employer defending a disparate-impact claim under the ADEA bears burden of production and the burden of persuasion for the “reasonable factors other than age” defense. The majority opinion concludes with the following eye-catching observation: “[t]here is no denying that putting employers to the work of persuading factfinders that their choices are reasonable makes it harder and costlier to defend than if the employers merely bore the burden of production; nor do we doubt that this will sometimes affect the way employers do business with their employees.”

Meacham and other recent cases are likely to cause an increase in disparate-impact age claims. Therefore, it is now more important than ever that employers give careful thought to what factors they will use in making selection decisions. The more objective and job-related the factors are the better. Before any selection decisions are finalized, the employer should undertake a thorough and critical self-analysis of the preliminary statistical results. To be able to assert that the self-analysis is privileged, it should be done at the request of counsel. If the preliminary statistical self-analysis results in any areas of concern, it would benefit the employer to reevaluate the appropriateness of each of the selection criteria as well as each of the selection decisions made applying those criteria. If the employer chooses to stick with selection criteria that have statistically disproportionate results, the employer must realize that it might some day have to prove the reasonableness of its actions to a jury. In Ohio, it’s probable that at least one of those jury members will have been laid off at one time.

Here is to hoping that we post again soon about hiring decision advice.