February/March 2010 / Human Resources
Plan White-Collar Downsizing Carefully
Reductions in force frequently spawn employment litigation, but careful planning can prevent it. Ex-employees commonly cite two rationales for lawsuits: that the downsizing was unnecessary and in fact is being used to weed out employees in a protected class, and that the employer discriminated in selecting an employee for layoff.
To deal with these challenges, employers should document management’s explanation of the business reasons for the layoff and secure documents and studies establishing its economic justification. Management routinely argues that downsizing should be performance-based, not driven by length of service or years of experience. Affected employees often disagree, pointing to years of service and experience as creating the “right” to continued service. Courts generally are reluctant to second-guess an employer’s business judgment.
The author cautions against using layoffs as a way to weed out employees in a protected class or giving ratings prior to layoffs that are inconsistent with earlier performance evaluations. He suggests a “double-blind” appraisal system. The process, which begins by breaking down a job into component functions which are then weighted according to their importance, has been found non-discriminatory by federal courts when applied consistently to all similarly situated persons.
