X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
At a work force reorganization seminar in Oakland, Fenwick & West associate Raymond Hixson Jr. was taken aback when nearly three-fourths of approximately 80 clients in the audience raised their hands in answer to his question: “How many people have been involved in a work force reduction in the last six months?” As startled as he was, Hixson, who was lecturing at the annual Northern California Human Resources Association conference in October, says he’s learned to be ready for anything in the dot-com economy. Dot-coms — young, fast and, lately, failing — are keeping Silicon Valley employment attorneys on their toes. In the past few months, they’ve had to shift gears from helping firms bolster their work forces to advising them on how to develop exit strategies for employees as the companies go out of business. Start-ups going bust are one thing, but employment attorneys say they also are busier than ever helping clients terminate employees as companies go through mergers or get acquired. Service-related and e-tail dot-coms, in particular, have been falling like dominoes since spring, casualties of low profits and venture capital caution. More than 21,000 dot-com job cuts were announced between May and October, according to outplacement firm Challenger, Gray & Christmas. By comparison, from December 1999 to April, there were slightly more than 1,000 layoffs. Lynne Hermle, who heads Orrick, Herrington & Sutcliffe’s employment practice in Silicon Valley, hasn’t seen a significant rise in layoffs among her clients, but she made a prediction. “I think it’s coming, I definitely think it’s coming, as some of our companies don’t make the grade.” But John Fox, the head of the employment group at Fenwick & West, says his firm may be seeing the beginning of a trend now. “I think people would be surprised at how many terminations we are doing,” Fox says. Last week, a dozen new terminations landed on Hixson’s desk. For the majority of the terminations, Hixson will be reviewing them and advising his clients on exit strategies to help avoid potential suits. “And it’s only Thursday, and I just got here this morning,” says the 33-year-old associate, who in a year’s time has made himself into the firm’s termination expert. Last winter, Hixson says, he worked on no more than three per week. But he gradually began to spend less time writing handbooks and structuring contracts. Internet companies that just last year were trying so hard to retain employees and trade secrets, are seemingly overnight having to let masses of people go. Consider one Fenwick & West client, whose venture capital fund dried up. “We were suing to keep [a] former employee from revealing trade secrets and also from soliciting other employees to go to the competition,” Hixson said. “And a few months later, I was advising that employer to lay off those same employees they were trying to keep.” Of course, the reductions have high-tech employment attorneys bracing for the legal fallout: wrongful termination suits. They say they are doing everything they can to help clients avoid them. Employment attorneys say that the strongest and most basic defense against a wrongful termination suit is being able to prove that the layoff was a legitimate business decision — not discriminatory in any way. “We’re telling them to stay focused on their business plans, and the layoffs will take care of themselves,” said Wilson Sonsini Goodrich & Rosati’s employment group head, Fred Alvarez. Still, lawyers say a valuable tool they use to stem wrongful termination suits remains the severance package. Workers are asked to sign a release giving them either a sum of money or an accelerated stock advance in exchange for waiving their right to sue. Such agreements are especially important in a merger or acquisition. “If you have one or two lawsuits filed, that would consume a lot of money and time, and that might put a company out of business,” says Hixson, who added that Californians are perceived as being more litigious. Baldwin Lee, a Farella Braun & Martel associate, says in the current market, dot-commers seem less enamored with stock options in their severance packages. “It used to be that stock vesting far outweighed money. Now you have people as interested in money as stock,” Lee says. “The employees are more realistic.” In cases where the company has gone out of business, employees might not get a severance package. But it doesn’t matter, because the company isn’t worth suing. “The odds are you are not going to get a good settlement,” says J. Rod Betts, statewide employment chair for San Diego’s Gray Cary Ware & Freidenrich. While job cuts may continue to rise now that the wave of dot-com euphoria has crested, employment attorneys agree wrongful termination suits won’t spike considerably as long as workers continue to quickly find new jobs in an Internet market that remains relatively strong. “If the market continues to react poorly, if people have a hard time getting jobs quickly,” Fox says, “we’ll see more.”

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]

 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.