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HR a Key to Warding Off Class-Action Suits After Layoffs

Mass layoffs offer fertile ground for large-scale lawsuits because they involve significant numbers of people who often are confused and upset.

April 4, 2008
Related Topics: HR Services and Administration, Layoffs, Discrimination and EEOC Compliance
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With large-scale layoffs still looming, the potential for class-action lawsuits grows.

    It also bolsters the Equal Employment Opportunity Commission’s stated goal to make good on its intent to increase the number of class-action lawsuit filings.

    "The EEOC will be looking for class-action potential in every complaint it receives," says Matt Halpern, a partner at Jackson Lewis, a national workplace law firm.

    Mass layoffs offer fertile ground for large-scale lawsuits because they involve significant numbers of people who often are confused and upset, Halpern says.

    For the companies scaling back their workforces, it means HR leadership must implement sound workforce reduction tactics to protect the company.

    One measure is to analyze whether reductions will have an acute effect on particular groups, such as women, aging workers and minorities. The study should be taken before the layoffs begin so companies can lessen the impact, according Kurt Ronn, president of HRworks, an Atlanta-based recruiting firm and consultancy.

    "We understand there will be times when an adverse impact is unavoidable," says Dianna Johnston, an EEOC spokeswoman. "What we will be looking for is that a company made good-faith attempts to avert a fallout."

    Often, the problems in workforce reductions rise when people don’t see logic in why they were laid off and others kept their jobs. People draw their own conclusions, Halpern says.

    "Some may even think they are being discriminated against, which could then lead to a formal complaint with the EEOC," he says.

    When it’s possible, companies should rely on seniority to determine who gets laid off. It’s the safest and most objective method, Halpern says. It’s also the easiest one to explain to employees.

    Sometimes the determining factor is a performance appraisal, which is fine as long as the company can show documentation of reviews from before the layoffs, Halpern says.

    Companies also may choose to eliminate workers based on skill sets. In this instance, employers need to justify why it makes strategic sense.

    "Perhaps a new technology is being adopted, making certain technical skills desirable," Halpern says.

    Regardless of which workforce reduction method is chosen, it is critical for companies to offer a cohesive explanation so employees aren’t confused as to why they were laid off.

    "It is something very basic, but many companies don’t do a good job at it," Halpern says.

    Strong communication strategies could help companies avoid legal headaches during a period of intensified scrutiny.

    EEOC investigations will probably be more thorough and effective than previous layoff cycles, experts say. Since the EEOC announced its strategy to increase the number of class-action filings two years ago, its employees have received extra training, while coordination and information-sharing practices have been improved.

    Cases are no longer investigated through headquarters. Instead, field agents with greater expertise and flexibility are taking over. What’s more, performance goals and financial rewards have been adopted to ensure employees are looking for systemic discrimination.

    It adds up to one thing for employers: cover your bases before downsizing, Ronn says.

    "This is a different EEOC than what we are used to," Ronn says. "I think we will be seeing significant class-action activity in the coming years."

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