When layoffs can lead to age discrimination

Layoffs are stressful for everyone involved.

In theory, all employment decisions should be based on ability alone. However, we can be prone to use age as a proxy for ability.

Is the older worker more valuable because they need less training and have more experience? Are they less valuable because they have less energy and concentration? What about the higher salaries, benefits and insurance usage oftentimes associated with older employees?

Many employees also believe organizations will lay off its more highly paid employees to save costs.

Even for the most careful managers, these considerations can be very difficult to set aside when it comes time for downsizing. They can even be unconscious. However, the law is clear that old age may not be a “motivating factor” in these decisions.

Objectivity, but …

Even good faith efforts at objectivity can give rise to a challenge of discrimination.

In one case called Meacham v. Knolls Atomic Power Laboratory, an employer seeking to reduce its workforce rated its employees using three categories: performance, flexibility, and criticality.

Through this assessment, 31 employees were identified to be let go. All but one were older than 40. The employees challenged their terminations, and the case was litigated all the way to the U.S. Supreme Court.

A key question in the case was whether the employer could show its disproportionate layoff decision was “based on reasonable factors other than age,” which the Supreme Court ultimately held was the employer’s burden to show it relied on other factors that were not age-related.

The Meacham case warns that even the most methodical layoff strategies will not necessarily insulate an employer from liability if they result in a disparate impact on older workers.

Although subjective factors such as “flexibility” or “teamwork” still can be considered in making a decision, the use of such hard to quantify criteria must be studied to ensure they are truly “reasonable” under the specific circumstances to ensure that they do not unconsciously disadvantage older workers.

Steps to take

What are some steps a business or city should take to avoid the lurking danger of age-based downsizing?

1. Be honest in performance reviews.

Make sure your managers conduct regular performance reviews using objective standards for evaluation and ensure that they are completed accurately.

Additionally, under the “same-decision defense” recently recognized by the Iowa Supreme Court in Hawkins v. Grinnell Regional Medical Center, a careful record of performance failures may be enough to spare an employer from damages liability in the event age is indeed found to have been a motivating factor in an employer’s decision to terminate.

2. Base decisions on positions not people.

Layoff decisions must be based on job titles, not on specific employees.

3. Have a review process in layoffs.

You should have written reduction-in-force policies to guide your company’s decision-making process using objective criteria, such as written performance reviews.

4. Consult an attorney or human resources consultant.

Hire an attorney or HR consultant to assist management in the layoff process.

Employers should view all layoff decisions and actions through the lens of potential litigation. Your attorney also will be able to advise you with regard to some of the layoff’s collateral considerations, including the Family and Medical Leave Act, workers’ compensation and benefits issues.

5. Reduce your risk by negotiating a severance agreement.

Consider reducing any exposure by offering laid-off employees a severance package that releases all claims against the company. Money spent on a settlement package now may be a lot cheaper than the cost of litigation later.

Wilford H. Stone is a lawyer with Lynch Dallas in Cedar Rapids. Comments: (319) 365-9101; wstone@lynchdallas.com