DOWNSIZING AND AVOIDING DISCRIMINATION
By: Nathan Davidovich
Copyright: July 2018
One of an employer’s nightmares is having to downsize its labor force. A greater nightmare than that is the realization that once you have carried out a reduction in force (RIF), you have now exposed yourself to claims of discrimination as a result of the selection process. As an employment attorney who has represented both employers and employees, I would like to raise the consciousness of employers by providing some common sense tips on things that can be done to avoid discrimination claims.
Employers, sometimes due to business necessity, may be required to downsize the work force. However, an employer is not allowed, under the guise of a reduction in force, to violate Federal or State law by discriminating against a class of employees. By “class of employees” is meant a distinctive protected class such as members of a particular nationality, sex, or age. Even with the best of intentions, an employer might discriminate against a protected class by virtue of the impact of the selection process on that class. Employees over the age of 40 are protected by the Age Discrimination in Employment Act (ADEA), as well as by Colorado the Colorado Anti-discrimination Act. The older worker may inadvertently become a logical target for reduction in force because of the higher salaries normally earned by workers who have been employed for longer period of time, and who may be above the age of forty. Given that the rationale behind downsizing is to lower payroll costs, an employer must exercise careful and considered judgment in selecting employees for a layoff, where the majority of higher paid employees are over the age of 40. For example, if an employer with fifteen employees decides that five employees should be laid off and decides that the selection will be based on terminating employees who earn over $60,000.00 a year, that employer is inviting potential discrimination claims if the only five employees in that category happen be over the age of 40 years old. That is not to say that this hypothetical situation would constitute a violation of ADEA; however, on its face, it would certainly be scrutinized. It should be stressed, however, that the fact that the employee is laying off people over age 40 because of their higher salaries, that does not necessarily constitute evidence of age discrimination. The United States Supreme Court in Hazen Paper v. Biggins, 507 U.S. 604 (1993),has held that, because age and salary levels are analytically distinct, an employer can take account of one while ignoring the other, and thus it is incorrect to say that a decision based on salary is necessarily “age based.”
In order to raise the consciousness of employers facing downsizing decisions, this article will highlight some of the general provisions of age discrimination, as they might apply to a reduction in force. However, it must be kept in mind that each individual downsizing decision must be evaluated in accordance with the particular facts of the employment situation. Therefore, this article is not intended to provide legal advice specific to any particular downsizing situation. It is therefore recommended that you consult with a qualified employment attorney of your choice for specific advice needed to implement a decision for a reduction in force. If you wish to consult with the author on any matter relating to Colorado employment issues, you will be advised of the fee basis for such consultation.
AGE DISCRIMINATION IN GENERAL
Any decision that is made by an employer, affecting an employee, based wholly or partly on that employee’s age, has violated the ADEA.As is the case with many types of discrimination, age discrimination can take many different forms. Age related comments made by managers or executives preceding or accompanying the downsizing may constitute age discrimination. Even without specific comments to which one can point, there may be a pattern of different treatment for older workers. That different treatment, in the context of a reduction in force, may be the selection of older employers for reduction at the same time retaining younger employers, with less experience. Under the law, the employee selected for the RIF would not have been considered for the RIF but for comments about age, or age discriminatory actions, that might constitute a valid basis for an ADEA claim or other claim for discriminatory practices.
AT-WILL EMPLOYMENT AND REDUCTIONS IN FORCE
Colorado is an at-will employment state, and therefore, an employer has the freedom to fire an employee for any reason except an unlawful reason. The fact that an employer fires employees over age 40 due to a downsizing does not indicate that the terminated employee has been the victim of age discrimination. In practice, there is no black and white rule by which an employer can decide if age discrimination has occurred in any particular downsizing. Unless there is an employment contract limiting an employer’s right to fire employees, employers have the right to fire employees of any age, as long as the decision is not based upon discriminatory or other impermissible factors. I recommend strongly that, before any employer implements any plan for reduction in force, that a consultation with a knowledgeable employment attorney take place to guide the employer in setting up proper selection criteria. Following that initial consultation, the attorney should be involved in every step along the way, including reviewing individual files of employees selected for termination. While this will not guarantee that a terminated employee will not file a charge of discrimination, it will at least place the employer in a position of being able to formulate a reasonable factor, other than age, for the termination decision.
The ability to articulate reasonable factors, other than age, and making the selection for downsizing, is of critical importance given the law that if the employee succeeds in making a prima facie showing, the burden of production and persuasion of showing that the action taken was based on reasonable factors other than age shifts to the employer. In other words, an employer has the affirmative duty to persuasively produce evidence establishing that the decision to terminate a specific employee or class of employees was based on “reasonable factors other than age”. The employer may defend its selection decision as an affirmative defense to the employee’s discrimination claim. Therefore, by working closely with counsel, the selection process should be facially neutral, both subjectively and objectively.
HOW DOES AN EMPLOYEE PROVE AGE DISCRIMINATION?
Even without direct evidence of age discrimination, an employee can still prove the necessary elements to prevail in an age discrimination case. The U.S.Court of Appeals for 10th Circuit, in Brainard v. City of Topeka, 597 F. App’x 974 (10th Cir. 2015), has provided guidance allowing an employee, without direct evidence of discrimination, to rely on indirect proof. Under this approach, in order for an employee to establish a threshold or “prima facie” case of age discrimination in termination, the employee must prove the following four factors:
(1) The employee was a member of the protected age group, meaning that he/she was over the age of 40;
(2) The employee was doing satisfactory work;
(3) The employee was discharged despite the adequacy of his/her work;
(4) that there is some evidence the employer intended to discriminate against him/her in reaching its RIF decision.
The fourth element may be established through circumstantial evidence that the employee was treated less favorably than younger employees during the RIF. Thus, evidence that an employer fired qualified older employees but retained younger ones in similar positions is sufficient to create a rebuttable presumption of discriminatory intent.
Once an inference of discrimination is established by proof of the above factors, by the employee, the employer, in defending such a claim, must show that there were reasonable factors other than the age of the employee upon which a decision was made. Following the presentation of such evidence by the employer, the employee, in order to prevail in this type of litigation, must prove by additional evidence, that the employer’s reason is simply a pretext for discrimination. The employee only need prove that age was a determining factor in being selected for reduction. It is only after that point has been reached that the case is then submitted to a judge or jury to determine if the employee is entitled to recovery from the employer.
REMEDIES AVAILABLE TO A WRONGED EMPLOYEE
An employee, who has been a victim of age discrimination as a result of a reduction in force, may recover, under the ADEA, back wages and benefits, reinstatement to the former position, attorney fees and court costs. If the discrimination was intentional and willful, meaning that the employer was aware of the law and deliberately disregarded it, the employee may be awarded liquidated damages in the same amount as the lost back pay and benefits. Damages may be recovered for the time period of up to two years before filing suit, or up to three years in cases of willful violations of the ADEA. If the employee, for valid reason, cannot be reinstated, the court may award a dollar amount for future loss of earnings and benefits, calculated over a set number of years. Having said that, one must realize that, wherever possible, courts prefer reinstatement instead of awards for future losses. In an ADEA case, unlike other cases of discrimination, there is no recovery for emotional distress, or punitive damages. Depending on individual circumstances, an employee may be entitled to additional recoveries under state, rather than federal, law.
There are many more intricacies involved in RIF cases, other than the possibility of a violation of the ADEA, that have not been discussed in this article. Learn more about protecting your rights by selecting a competent lawyer to represent you.
Nathan Davidovich practices employment law in the state of Colorado, and he is available for consultation on any matters arising in the State of Colorado. Please contact Nathan Davidovich by email or by telephone, at the address below, to discuss the fee for representation and to schedule a consultation.
Nathan Davidovich, Attorney at Law
Davidovich Law Firm, LLC
3773 Cherry Creek North Drive
Denver, Colorado 80209
Phone: 303-825-5529/(303) TALK-LAW
Web Site: https://www.talk-law.com