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What a difference a change in seasons makes. In the fall, many of America’s employment lawyers were advising corporate clients on how to beef up their work forces quickly to handle new orders. But before breaking for the holidays, many of those same lawyers were suddenly fielding an uncommon number of urgent queries from general counsel asking how to downsize safely. And what concerns employment specialists is that many companies laying off people seem ill-prepared for the possible legal ramifications. “One of my biggest problems had been how to get around a recent hire’s noncompete clause” with a competitor, says Patricia M. Lucas, chair of the litigation group at Palo Alto, Calif.’s Fenwick & West. “Now, I’m getting all these calls on how to handle laying off that company’s employees, and sometimes the call … comes at 7 a.m.” Less than six months ago, Lucas says, her billable time reflecting layoff work was negligible, but now it constitutes a third of her total billings. Garry Mathiason, a managing shareholder in the San Francisco headquarters of Littler Mendelson, is experiencing the same surge in clients seeking advice about layoffs — and too many are rushing to cut employees without proper legal safeguards, he says. The worst thing a company can do, he explains, is to lay people off so quickly that proper criteria and a rationale for the layoffs have not been established, opening up the company to possible liability. The state of the economy seems to indicate that the flood of layoffs may only get worse.A new survey conducted by Challenger, Gray & Christmas Inc., a Chicago-based employment consulting firm, says U.S. businesses predicted that in January, layoffs would total 133,713. If this proves to be true, it would be the largest monthly total since Challenger began tracking such announcements in 1993. These latest predictions appear to reflect what’s happening in many business sectors, not just among dot-coms. “My newest business is coming in all sizes and shapes,” says Lucas, whose comments are backed up by real-world events. On Jan. 4, Sears announced that it will fire 2,400 employees and close 87 specialty hardware stores. Just days before, Montgomery Ward filed for bankruptcy and said that it will let go its 28,000 employees by summer. Other planned layoffs recently were announced by General Motors Corp., Gillette Co., Union Pacific Corp., Whirlpool Corp., Bausch & Lomb Inc. and Aetna Inc., among others. LACK OF PREPARATION Mathiason says that he’s stunned by the number of mistakes he sees being made, especially by a new generation of managers who have never experienced anything but a hiring mode. In part, he attributes this to companies trying to act too quickly. One reason, he believes, is that the Federal Reserve Board’s recent decision to cut interest rates by half a point was seen by many businesses as a sign that the economy is in a true downturn and that they needed to take action. He issues these warnings to companies wanting to lay off employees: � Go slowly, and put together a plan for the layoffs that clearly explains the business rationale for the company’s reduction in its work force. � Establish criteria for evaluating employees when determining who will be laid off. This process can include a ranking system based on objective performance criteria. Mathiason cautions employers to make sure an employee’s rank coincides with his or her past job performance evaluations. � Managers who are involved in ranking must be fully informed about prohibited categories. In other words, there can’t be any suggestion that an employee is being laid off because of his or her age, race, sex or sexual orientation. In addition, he warns, after a company determines who will be laid off, the list must be examined to make sure a protected class is not overly represented. � Managers must be trained in how to do the layoffs. He suggests that managers keep meetings short and that they stick closely to the company’s publicly stated rationale. He also suggests that e-mail communication about layoffs be kept to a bare minimum since there’s a “tendency for people to start writing things that can hurt them later.” If these types of safeguards are not taken, Mathiason and other employment experts warn, lawsuits are likely because employment litigation is already a common outlet for disgruntled workers. With employment-related discrimination suits already prevalent in today’s world, the increase in layoffs opens up a new avenue for potential corporate liability. RACIAL PROBLEMS While age discrimination lawsuits were arguably the bane of downsizing employers during the last recession, in 1991, lawsuits alleging race discrimination are an added potential problem for downsizing companies today, says John C. Fox, head of Fenwick & West’s employment law practice. This is especially the case, he says, if the fired minority workers can point to a history of racial tension at the company. Sex-based discrimination claims tied to layoffs also can be expected in the coming year, he says — again, especially if sexual harassment charges have been plaguing the company. A. Michael Weber, a partner in Littler’s New York office, already sees the sudden filing of a variety of discrimination suits against companies that were actually triggered by the “squeezing of profits in a retrenching economy.” Also, he adds, watch for some downsizing dot-coms to be sued for the first time by exiting employees for allegedly being induced to take lower pay in return for worthless stock options. Vickie A. Gillio of Chicago’s Gillio & Associates says that all employers should be wary of possible test cases challenging the old “employment at will” doctrine on behalf of new classes of employees, such as independent contractors and telecommuters. SENSITIVITY TRAINING “You want the right manager” to break the news of a layoff, Lucas advises, so that the company’s message is appropriately communicated to those who are being fired, without compromising accuracy. The manager “also has to be able to handle the tough questions, like, ‘Was this really necessary?’ and ‘Why me?’ “ Mathiason notes that lawsuits challenging layoffs often center on whether the company’s overall business plan was furthered by the layoffs and how uniformly the company’s objective downsizing criteria were applied. For instance, was the downsizing committee reasonable in selecting those workers to be retained based on relative experience, skill sets and business needs? Moreover, Mathiason notes, the company’s “reasonableness” defense must be supported with carefully kept records. Meanwhile, Elaine S. Fox, a partner at Chicago’s D’Ancona & Pflaum, warns against a suddenly vulnerable company overreacting by downsizing when a less extreme remedy might do, such as encouraging early retirements or instituting a hiring/pay freeze. Rushed layoffs built on shaky reasoning, she warns, will be the hardest to defend in court.

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