It’s no easy task, they note, stressing that layoffs gone wrong can trigger discrimination lawsuits, wrongful discharge claims and disparate-impact class actions.
“Nobody wants to have to be the undertaker, but that’s sometimes how we feel,” said Anthony Oncidi, a partner in the Los Angeles office of New York-based Proskauer Rose, who gets a call every other day from clients contemplating layoffs.
“I just can’t believe how many calls we’re getting about layoff issues,” he added. “We used to get them maybe once every six to nine months. Now, it’s every other day.”
Oncidi’s firm is not alone.
Attorneys say they’re being called upon to assist in an economic crisis that’s much deeper than recessions of the past. During the 1990s, it was the energy and real estate markets that slumped. In 2001, following the Sept. 11 terrorist attacks, the airline and tourism industries and dot-com companies suffered. Now, it’s the entire business world.
“This time around, it’s everyone — small employers, medium employers and extremely large employers,” said Mark Cheskin, a partner in Washington-based Hogan & Hartson’s Miami office who heads the firm’s labor and employment practice in Florida.
“There is more of a survival mentality I’m hearing from our clients in having to do these layoffs,” he said. “In the past, it may have been to make a leaner operation, or to make more profits. What I’m hearing now is they’re necessary for survival.”
Cheskin said he’s noticed another alarming trend: employers planning reductions in force (RIFs) — the legal term for layoff — in anticipation of things getting worse.
“I’ve been doing this for 21 years, and have been involved in a number of RIFs. I’ve never seen employers before make this decision because of a firm belief that things are going to get worse, not better,” Cheskin said.
Those fears accompany some grim statistics. The unemployment rate just hit 6.5%, which is the highest it has been since March 1994.
September saw 2,269 mass layoffs affecting nearly 236,000 workers, the worst since September 2001, a month that experienced substantial job cuts due to the Sept. 11 terrorist attacks. And during the past six months, more than 1 million Americans have been laid off, with more layoffs anticipated in the months ahead.
“Virtually no segment of Corporate America is going to be spared,” said Reed Smith partner Sara Begley, who is helping employers navigate through layoffs. She warned that poorly planned layoffs can trigger lawsuits.
“A RIF carried out without proper planning will undoubtedly land an employer in court on the basis of some brand of wrongful discharge,” she said.
There’s plenty of litigation already out there reminding employers of the legal dangers of layoffs.
Last month, a group of female former top executives at Dell Inc. sued the computer giant for $500 million in damages, claiming that they were singled out during recent layoffs. Chapman v. Dell Inc., No. CV 08 4945 (N.D. Calif.).
In New York, a software developer filed a lawsuit on Nov. 5 over the mass layoffs at Lehman Brothers Holdings Inc., claiming the investment bank laid off information technology staff without the required notice. In re Lehman Brothers Holdings Inc., No. 08-13555 (Bankr. S.D.N.Y.). The suit seeks class status on behalf of 1,000 workers.
And Sprint Nextel Corp. settled a class action last year for $57 million involving claims that it targeted more than 1,000 older workers during companywide layoffs. Williams v. Sprint/United Mgmt. Co., No. 2:03-CV-02200-JWL-DJW (D. Kan.).
To avoid such litigation, Cheskin recommends that employers answer a simple question: Do your layoffs pass the sniff test?
“If something smells bad, it needs an explanation,” Cheskin said. “Look at the demographics within each unit suffering layoffs. Make sure it doesn’t look like a minority or an age group or a gender is being singled out.”
He added: “If a manager can’t explain why the numbers look wrong, they’re not going to be able to explain it to a jury.”
Barry A. Guryan at Epstein Becker & Green, who has given presentations to employers planning to downsize, said that there are several laws of which employers must be mindful to avoid litigation and government investigations. They include:
• Laws that require proper notification to those affected by layoffs, such as the federal Worker Adjustment and Retraining Act (WARN), which requires employers to give workers 60 days’ advanced written notice of job terminations.
• State and federal laws that protect certain categories of employees from discrimination, whether intentional or unintentional. These laws can be invoked if a layoff has an adverse impact on a particular protected class of employees. The categories can include African-Americans, Hispanics, the elderly and the disabled.
• Laws that protect older workers from being forced to waive their rights or from being coerced into taking “voluntary” layoffs.
“The main thing is planning,” said Guryan, who stressed that, if a business is going to downsize, “it is prudent to have a documented business justification.”
That’s a lot to be mindful of, plaintiffs’ lawyers concede, readily admitting that their management-side opponents have a lot on their hands.
“They are trying to do it right. I give them credit for that. I think most firms are trying to adhere to the law with regard to these layoffs, and there are a lot of tripwires in there,” said Chicago employee-rights attorney Charles Siedlecki, who has been bombarded with calls from people who have been laid off and want to know whether they have a legal claim.
“More often than not, there isn’t a claim,” Siedlecki said. “People are hurting all over the place.”
Plaintiffs’ attorney Andrew Friedman of Helmer & Friedman in Los Angeles said that his law firm also is getting swamped with calls from laid-off employees.
“We’re just about completely underwater,” said Friedman, whose caseload has tripled since March. “There are a number of people who are calling or e-mailing us who want to know if their employer did anything wrong. Some of them are being laid off. Some of them are being outright fired.”
Friedman said that, in several cases, he’s spotting age discrimination practices, whereby employers are laying off older workers, then replacing them with younger workers. He believes that some employers are using the economic downturn as a pretext to get rid of employees they don’t like.
But there also are cases in which he can’t find anything wrong, Friedman said.
“The worst part for me is hearing the calls from people who have been at companies for 30, 35 years who are being laid off, and there’s nothing I can do to help them,” Friedman said.
Ronald Schwartz of Chicago’s Katz, Friedman, Eagle, Eisenstein, Johnson & Bareck is experiencing another kind of frustration. He’s seeing clients who are being offered questionable severance packages, he said, but they’re afraid to challenge their employer.
“I’ve had several situations in the last month or so where people come in, they pay me for a consultation, and I say, ‘You have a good claim,’ and they say, ‘You know what, I’m just going to take what they’re offering.’ ” Schwartz said. “ It’s frustrating, and I think people are scared.”
Schwartz doubts he’ll see a boom in business in the near future. “Times are hard and employers are less likely to negotiate,” he said. “And employees are scared.”
A ‘Darwinian time’
Still, employee-rights attorney Bill Amlong at The Amlong Firm in Fort Lauderdale, Fla., believes that employers are going to slip up. “This is a very Darwinian time, and there are going to be people who will be let go, and people who need to be let go if the company is going to survive,” Amlong said. “But the aim needs to be to keep the people who are the best qualified.”
This is where Amlong believes that companies are likely to get into trouble. He said front-line supervisors who are in charge of deciding which employees stay and which go are likely to let personal agendas get in the way. They’ll use this situation to get rid of good employees whom they simply don’t like.
“Make sure that they have somebody double-check their recommendations on who needs to go,” he said. “Because I think what you’re going to find here is that discrimination is not going to be coming down from the top, but I think it’s going to be the petty tyrant who now has life-and-death power over his employees.”