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LAYOFFS Reductions In Force: The Importance of Keeping Your Story Straight

Oklahoma Employment Law Letter - September 2009

By Charles S. Plumb

Laying off employees can be one of the most unpleasant jobs for an employer or HR professional. Letting go of long-term employees not only generates hard feelings, but it also may result in litigation. When that happens, you are put in the position of explaining why you selected certain workers for the reduction in force (RIF). The ability to explain in a reasonable, consistent manner how the selection process was carried out can make the difference when you find yourself defending against a discrimination claim.

Gearing down for the layoff
Gear Products of Tulsa produces equipment for the forestry, construction, and utility industries. After a series of financial setbacks, the company cut costs by asking for voluntarily resignations, reducing overtime, and combining vacant positions. When that wasn’t enough, it laid off 36 employees in two successive RIFs.

After the first two layoffs, Gear Products determined it needed to eliminate at least three more employees as part of a third reduction. Gear Products’ president called a meeting with his management committee, composed of the controller, HR manager, engineering vice president, quality manager, and sales and marketing vice president. It was decided that the three workers who would be laid off would come from a pool of eight administrative and clerical employees.

The committee ranked each of the eight employees in terms of their flexibility, sense of urgency, initiative, ability to multitask, accuracy, and attitude. The three lowest-ranked workers would be laid off. The president and HR director calculated the scores and ranked the employees. They informed the committee members that Gwen Coffelt, Tharon Paup, and Carol Shuffitt would be laid off, but they didn’t divulge the scores or ranking of the other five employees — or that another employee had a lower score than Coffelt.

Gearing up for the lawsuit
Coffelt, Paup, and Shuffitt filed discrimination charges with the Oklahoma Human Rights Commission (OHRC) complaining they were selected for the layoff because of their age. They pointed out their good job performance, inasmuch as they were long-term employees and had survived two previous layoffs.

In response, Gear Products provided the OHRC with a chart titled “Overview Matrix,” which listed and described why each of the three employees was selected for the final layoff. The matrix included comments about each employee’s performance, skills, and role in the company’s operations as the basis for their selection. It was unclear who prepared the matrix provided to the OHRC during the investigation.

When the lawsuit was eventually filed in Tulsa federal court, Gear Products’ controller was questioned about the RIF decision process. He didn’t know the author of the matrix and provided somewhat different explanations on how the three women had been selected. He offered no explanation for deviating from the selection committee’s original plan to lay off the three lowest-ranking employees.

The Tenth U.S. Circuit Court of Appeals (which covers Oklahoma) wasn’t persuaded by the matrix, which was created after the fact and in response to discrimination charges filed with the OHRC by the three laid-off employees. Equally damning was the fact that the explanation for the decision-making process provided in the matrix didn’t match the explanation given by the controller during litigation. For those reasons, the court of appeals decided Coffelt, Paup, and Shuffitt were entitled to present their case to a Tulsa jury, which will decide whether age played a factor in Gear Products’ decision to end their employment. Paup v. Gear Products, Inc., Case No. 07-5164 (10th Cir., 6/19/09).

What have we learned?
Gear Products got off on the right foot when it decided to use multiple people in the ranking process. However, straying from its original decision to lay off the three lowest-ranking employees created a problem. The absence of any notes or documents by the decision-makers in the ranking and selection process — as opposed to the overview matrix created after the fact in response to discrimination charges — also put the company at a disadvantage.

Anytime your explanation for making an employment decision changes or is inconsistent with later state¬ments, it’s a problem. Gear Products would have been better served had it stuck with its original plan to lay off the three-lowest ranking employees, created a record of its decision, and provided a consistent explanation of what it did and why when it came to eliminating Coffelt, Paup, and Shuffitt’s jobs.