Employers faced with the need to reduce employee headcount frequently struggle with the criteria used to make such layoff decisions. While layoffs based on purely objective measures such as seniority may be less vulnerable to legal claims, these methods often do not result in the employer retaining its best employees. In most cases, employers use some mix of objective and subjective criteria to rate and rank employees subject to the reduction in force decision.
Last month, a Sixth Circuit Court of Appeals decision illustrated the dangers of using a selection process that does not appear to appropriately weigh critical performance measurements. In Rachells v. Cingular Wireless Emp. Servs., LLC, the plaintiff was an African-American salesperson. After Cingular acquired AT&T’s wireless operations, Cingular decided to reduce the number of salespersons in the combined companies. Cingular developed a ranking system that looked at sales, but only those over the previous year. The company also gave substantial weight in the process to personal interviews and subjective criteria such as creating customer loyalty and “driving for results.”
The plaintiff noted that he had been the top performing salesperson in the group considered for layoff for a number of years, yet was ranked last among the salespersons, and was selected for the reduction in force. He sued, alleging race discrimination under Title VII. The Sixth Circuit reversed a grant of summary judgment for the employer, remanding the case for a jury trial. The court noted that the three highest ranking salespersons were all white, yet had sales significantly under those of the plaintiff.
The Sixth Circuit could not get past the fact that for salespersons, sales performance should be the primary factor used in determining relative merit. The court said that Cingular’s heavy reliance on the more subjective criteria raised the question of whether the plaintiff was terminated for prohibited reasons. It also noted the use of different criteria to evaluate the Cingular and AT&T salespersons, as well as testimony from other African-American salespersons alleging previous race discrimination.
When conducting a RIF, employers need to be deliberate about the process selected. While it may be appropriate to use subjective criteria in making employment decisions, these criteria need to be clearly spelled out, and backed by prior employee evaluations, performance warnings or other documentation. In the sales context, if higher performing salespersons are selected for elimination over their lower performing peers, the process used should fully explain the business reasons why this decision is made. Initial rankings and evaluations provided by line managers should be thoroughly reviewed by human resource and/or legal personnel to ensure that the selections are reasonable, and not influenced by the rater’s personal biases, and do not present any disparate impact on protected classes of employees.
Failure to think through these issues and carefully vet the RIF selections can result in costly and disruptive litigation that often consumes much of the savings realized from the position eliminations.
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