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Complying with Non-Discrimination Law During a Layoff

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Complying with Non-Discrimination Law During a Layoff

    WASHINGTON STATE HUMAN RIGHTS COMMISSION

    Complying with Non-Discrimination Law During a

    Layoff or Reduction in Force

    OLYMPIA HEADQUARTERS OFFICE

    711 S. Capitol Way, Suite 402

    PO Box 42490

    Olympia, WA 98504-2490

    TEL: 360-753-6770 - FAX: 360-586-2282

    Toll Free: 1-800-233-3247

    TTY: 1-800-300-7525

    Se Habla Español

    www.hum.wa.gov

Introduction

    The struggling world economy may lead to a negative impact on some Washington businesses. In case of such an impact, the Washington State Human Rights Commission (WSHRC) wants Washington businesses to be prepared to comply with

    nondiscrimination laws if businesses have to conduct lay-offs or reductions in force (RIF). The following is a guide for employers to use when considering a RIF and in implementing a RIF, from this viewpoint. Nothing in this document should be construed as encouraging a business to conduct layoffs or RIFs. This document is not legal advice. This guide focuses on anti-discrimination law under RCW 49.60 and the federal Age Discrimination in Employment Act (ADEA).

    When businesses terminate or lay off an employee, there is always the potential that the employee will make a claim of discrimination, either to the WSHRC or the Equal Employment Opportunity Commission (EEOC), or through a private lawsuit in state or federal court. An economic need to reduce your workforce can be a legitimate, non-discriminatory reason for an employment action (such as a layoff) if you are faced with a discrimination claim resulting from a RIF or layoff. However, while you are conducting the RIF, you must be sure that you take care in determining which employees will be laid off. It is a violation of the law for an employer to target women, minorities, employees who have made discrimination claims, employees with disabilities, or older workers for layoff based on their protected class. There are a variety of protected classes in Washington State. These protected classes include; race/color, creed (religion), national origin, sex (including pregnancy and maternity), marital status, age over 40, disability, use of a guide dog or service animal by a person with a disability, HIV/AIDS or hepatitis C status, sexual orientation/gender identity, and honorably discharged veteran and military status. Protected classes under federal law are; age, disability, national origin, race, sex (including pregnancy), and religion. Targeting members of protected classes with negative employment action is called disparate treatment. For example, it is illegal to target older workers for layoff because of their age.

    In addition, the U.S. Supreme Court has stated that a neutral employer policy or practice, such as a particular RIF procedure, that has a disparate impact on older workers, can also be found to be discriminatory under the ADEA. See Smith v. City of Jackson, 544 U.S.

    228 (2005). In Smith, the Court ruled that disparate impact claims are allowable under the ADEA, but that there is no liability when the disparate impact on older workers is attributable to a “reasonable factor other than age” (RFAO). As in the Smith case these

    permissible factors can include salary structures that provide bigger pay increases to newer employees. The Court also ruled in Smith that the Plaintiffs needed to identify a

    specific practice within the pay plan that has an adverse impact on older workers. It is important to note, however, that employers have the burden of proof to show as an affirmative defense that the employer relied on reasonable factors other than age when making a layoff decision. See Meacham v. Knolls Atomic Power Laboratory, 2008 U.S.

    LEXIS 5029.

    Laura Lindstrand Washington State Human Rights Commission Layoffs and RIFs Page 2 of 8 June 30, 2008

    Paying attention to these matters may help you avoid legal troubles and possible expenses nd penalties involved in a lawsuit. In general, we advocate treating all employees fairly a

    and objectively, and in a nondiscriminatory way.

    Steps to take when planning and implementing a RIF

    1. You must be able to justify the RIF and show a legitimate business need for the

    layoffs.

2. Consider Alternatives

    - Temporary shut-down

    - Reductions in overtime

    - Salary freeze

    - Hiring Freeze

    - Voluntary leave of absence

    - Shortened workday or workweeks

    - Voluntary separation program or early retirement incentive (be sure to

    seek the advice of an attorney when considering these programs)

    This list is not meant to be exhaustive, or to tell you how to run your business. It

    just provides some examples of alternatives to a RIF.

3. Make a plan:

     - Set a timeline

     - Determine numbers of affected employees

    - Determine which divisions, jobs, or functions will be eliminated or

    downsized (at this stage, never make decisions about which individual

    employees will be laid off).

    4. Gather data on your workforce: percentages of persons in protected classes and

    the ages of employees. This information will be used as a baseline to analyze the

    impact of the RIF on protected class categories, in order to insure that workers in

    a particular protected class are not more severely impacted by the RIF, and that

    older workers are not more severely impacted by the RIF. It is a good idea to

    involve legal counsel at this point and to document these reasons for collecting

    this information on the data itself. The data may be subject to discovery in a

    lawsuit, so make sure you are using it for non-discriminatory ends.

5. Inform employees about the impending RIF:

    - Give a general notice to the workforce and the Union explain if the RIF

    is temporary or permanent, when it will take place, and generally what the

    company expects to happen.

    - Abide by the Collective Bargaining Agreement if one is in place.

    - Abide by the provisions of the Worker Adjustment and Retraining

    Notification Act (WARN) if applicable (more on WARN below).

    Laura Lindstrand Washington State Human Rights Commission Layoffs and RIFs Page 3 of 8 June 30, 2008

    6. Train the managers and supervisors who will be making the layoff decisions:

    - Explain the criteria that will be used to make layoff determinations and

    how to use the criteria fairly and objectively

     - Discuss the implications of anti-discrimination laws

    - Avoid hints or statements to employees about their age and/or retirement

    status.

Choosing Individuals for a Layoff

1. Evaluate employees

    Use objective, job-related guidelines and criteria:

     - Talent and experience that is consistent with business necessity

     - Past performance

     - Special skills that are consistent with business necessity

     - Count seniority or longevity as a plus

    Conduct a pre-layoff performance evaluation

    - Rank individuals if you have reliable and objective performance related

    data

    - Rank employees within groups of employees who do similar work; be sure

    to include all employees who do the similar types of work within the same

    group (in other words, do not try to shelter a favorite employee from the

    RIF by not including them in the group that is evaluated for potential

    layoff)

2. Data used for layoff decisions

    Make sure the data used to make a decision about a particular employee is

    consistent with any previous regularly conducted performance reviews

    - for example, if the employee has always had good performance reviews

    each year, but the pre-RIF performance review is poor, this inconsistency

    will raise questions about the objectivity and accuracy of the pre-RIF

    review

    - if data is not consistent, talk to decision-making manager about the

    discrepancy to ensure that the decision it was based on objective criteria

3. Be consistent

    - apply the same procedures and criteria to everyone

    - avoid the temptation to protect an employee or certain employees from the

    layoff by not evaluating them, by not including them in the group of

    potential layoffs, or by transferring them out of a job just before a layoff;

    this is a red flag that you are treating some people differently.

    Laura Lindstrand Washington State Human Rights Commission Layoffs and RIFs Page 4 of 8 June 30, 2008

    4. Be fair and use good faith; make decisions free from any bias

     - Ensure that all of the data used in making the decision is free from bias

5. Monitor the process and the managers who make the decisions

    - Make sure that they are consistently using proper procedure and that their

    decisions are free from bias.

6. Review the impact on protected classes

    - Compare the group that is intended for layoff with the group that is spared

    from layoff.

    - If older workers or minorities rank low in the data that is gathered, then

    you may need to reconsider the system and criteria that you are using.

    - Do not just look at age 40 +, also look at 40 45, 46 50, and so on.

    7. Document the process, the criteria used to evaluate employees, the employee

    ranking if applicable, the monitoring of the process, all safeguards used to ensure

    fairness and objectivity, and the reasons that individuals were chosen for layoff

    Notice to individual employees and the exit interview

    1. Be honest, clear and direct about the reasons for the layoff; give the employee the

    same reasons for layoff as have been documented

    2. Avoid being cold or harsh; be polite, compassionate, and understanding 3. Give the employee an opportunity for questions

    4. Describe any options for re-employment, severance pay disbursement if

    applicable, job assistance programs, and the reference policy.

    Evidence that can be used in a discrimination claim to support an employee’s allegation of discrimination

Statements made by managers such as:

    - references to an employee’s age,

    - derogatory comments about older workers,

    - comparisons of older to younger workers,

    - age-related name-calling or joking, or

    - statements about wanting a “young” company image

Failure to follow the set RIF procedures, the Union contract, or employees own

    individual contracts.

    A showing that certain people were protected from the RIF or were transferred out of affected jobs just before the RIF

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    Inconsistencies between an employee’s prior performance history, prior performance reviews and/or merit raises and the employee’s pre-layoff ranking or pre-layoff

    performance review.

Statistics

    - Comparisons of the average age of employees before the RIF and after the

    RIF, overall and throughout divisions.

    - Representation of minority groups before the RIF and after the RIF,

    overall and throughout divisions.

    Potential liability in a discrimination claim

Payment of lost wages, pensions, benefits

    Payment of interest

    Reinstatement of employees

    Payment of front pay and/or paying to retrain the employee

    Payment of job search costs

    Attorney fees

    Possible class action

Other considerations during a RIF

Voluntary Separation Program (VSP)

    - A benefit of this over an early retirement incentive is that the VSP is

    offered to both newer and long-term employees

    - Be sure to analyze the protected class status of the group that is offered the

    VSP to ensure that no protected class is overrepresented in the group that

    is offered the VSP

     - Make sure that the program is voluntary

     - Be sure to consult with an attorney before implementing a VSP

Early Retirement Incentives

     - More vulnerable to age discrimination claims

     - Connect this program to years of service rather than age

     - Make sure that the program is voluntary

    - Consult an attorney regarding tax and ERISA issues before implementing

    an early retirement incentive plan

Waivers

     A release of claims against the employer in exchange for a benefit (such as

    a monetary payment)

    - Strict standards must be met under ADEA and the Older Workers Benefit

    Protection Act (OWBPA):

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    - The individual must be knowledgeable about what he or she is

    signing

    - The waiver must be voluntary

    - The waiver must specifically state that the employee intends to

    waive claims under ADEA

    - The employee must get something in exchange for the waiver

    above and beyond what they were already entitled to

    - The employee must be advised that they have the option of

    speaking with their attorney

    - The employee has 21 days to consider the agreement, or 45 days if

    the agreement is offered to a group of employees

    - After the employee signs, they have a seven day period to change

    their mind and revoke the agreement

    - If there is a group being offered the agreement, there must be a

    statement about what the eligibility factors are

    - Employees and employers should be sure to consult an attorney if they

    wish to consider a waiver.

    WARN Act

    - Applicable to employers with 100 or more employees (not counting

    employees who have worked less than 6 months in the last 12 months and

    not counting employees who work an average of less than 20 hours a

    week).

    - An employer must follow the provisions in the WARN Act for a plant

    closure, which is defined as shut down of more than 6 months, when 50 or

    more employees lose their jobs within a 30 day period at one location.

    - An employer must follow the provisions of the WARN Act for a mass

    layoff, which is defined as 500 employees at one location or 1/3 (totaling

    50 or more) of the total employees laid off at one location

    - A 60 day notice must be provided to the Union or each affected employee,

    the state dislocated worker agency (the Employment Security Department),

    and the highest elected official (mayor, city manager, county commission

    chair) for the city or county in which the business is located

    - For questions or more detailed information about WARN contact:

    U.S. Department of Labor

    Employment and Training Administration

    Office of Work-Based Learning

    Room N-5426

    200 Constitution Avenue, N.W.

    Washington, D.C. 20210

    (202) 219-5577

    For further information on non-federal matters, contact:

    Specialist Laura Lindstrand at llindstrand@hum.wa.gov; 360-586-7617

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Laura Lindstrand Washington State Human Rights Commission Layoffs and RIFs Page 8 of 8 June 30, 2008

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