Academic journal article Economic Perspectives

A Lawyer's Perspective on Planning a Reduction in Force

Academic journal article Economic Perspectives

A Lawyer's Perspective on Planning a Reduction in Force

Article excerpt


Any assessment of the consequences of "job loss" must include an understanding of the legal context in which it occurs. This article provides a broad overview of that context relative to some key legal considerations in a reduction in force (RIF). In light of these key considerations, I then describe a practical approach to planning a RIF from a lawyer's perspective.

Greatly complicating the lawyer's approach to RIF planning is the "lottery" mentality in contemporary culture, whereby individuals who sue their former employer believe that a certain jackpot awaits them. In addition, many people seem unwilling to accept personal responsibility for their own unsuccessful job performance that leads to job loss. Even for employees who perform their jobs well, too many seem unwilling to accept the notion that in this economic system even good or excellent performers lose their jobs without a law necessarily being violated in the process.

The judicial system is not engaged in an academic endeavor to weigh and test theories in order to discover ultimate truths. Lawyers, judges, and juries have very limited time, money, and information to make important judgments that are often based on testimony from individuals with faded memories about past events. A jury must then decide whether it is more probable than not (at least 51 percent certain) that the former employee's termination violated a law.

Few life events are more devastating, emotionally and financially, than losing a job. This fact necessarily colors a lawyer's perspective on assessing potential liabilities associated with job loss. If a lawsuit proceeds to trial, jurors may have jobs, may have lost jobs, or may have family and friends who have lost jobs or may lose their jobs. Most people can at least conceive of facing a potential job loss and can imagine themselves in a situation similar to the plaintiff who lost a job. Therefore, an employer forced to defend a claim that a termination decision was unlawful must consider the emotions and perspectives of a potential jury that might judge the claim and award monetary damages if it concludes a law was violated.

Some surveys of potential jurors have indicated that an employer forced to defend a discrimination claim is at a disadvantage before ever entering the courtroom. One survey conducted by the Minority Corporate Counsel Association and DecisionQuest (1) revealed that more than 75 percent of white males, who are usually regarded as most supportive of corporations, report distrusting corporations due to events such as the Enron scandal. Further, 85 percent of the survey respondents indicated a belief that large corporations hide information about their products until they are caught by the government or in a lawsuit, and 75 percent of respondents indicated a belief that managers and senior executives are more likely to perjure themselves than lower-level employees.

Another DecisionQuest survey in conjunction with the National Law Journal (2) indicated that close to half of the survey respondents disagreed with the statement that most big companies treat all employees fairly and only 29.8 percent of agreed with the statement. Overall, 42.3 percent of respondents agreed that older workers and minorities are the first to lose their jobs in a layoff, although only 18 percent of the white respondents agreed with the statement. More than two-thirds (67.4 percent) of the respondents felt that race discrimination and gender discrimination are still present at many companies.

How do employers respond to a system of complex employment laws that are applied in a costly and challenging judicial context? They try to plan in advance so that they have the best possible chance to stay out of court or to win the hearts and minds of a judge and jury if necessary. To understand how this goal can be accomplished, one must first have a fundamental framework of some of the legal claims employers can face, and the following two sections address some key legal issues in that framework. …

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