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6 février, 2008 16:08

Michael P. Maslanka

Texas Lawyer

February 6, 2008

You don't need a weather vane to know which way the wind is blowing, and you don't need a Wall Street Journal subscription to know we're in a recession. Yes, there is a dispute about whether this is so, but disaster -- when you're in its midst -- is hard to detect.

So, what's the smart general counsel to do? Recession plan now, not later. Recession planning translates into one thing: more work for fewer employees, which requires firing people (not, as one executive insisted on testifying, "right-sizing the company," although I was able to talk him out of that).

Here is the big idea: Whiteboard the organization and the positions you want to see, without talking names. Decide why the organization must look like this (in specific terms, not barroom generalities). Because jobs will be eliminated, there will be new positions, old positions with different duties and/or modified positions. Prepare new job descriptions accordingly, and use them in deciding who goes and who stays.

If this sounds like a cookbook recipe, it is. It's time-tested and useful to keep the best employees. I have tried numerous reduction-in-force (RIF) cases to juries. They understand the idea of keeping the best talent but will reject an employer's arguments -- and be angered by them -- that the "company was losing money, so employees had to go."

One added twist: The U.S. Supreme Court just agreed to hear Meacham v. Knolls Atomic Power Laboratory, a key RIF cases involving the Age Discrimination in Employment Act. According to 2nd Circuit's opinion, the employer conducted a RIF, rating employees on "flexibility" and "criticality" of skills. Thirty-one employees were fired, 30 of whom were older than 40. The employees sued and won a large jury verdict. That verdict was set aside on appeal, because it was the employees' burden to prove the employer's reasons for terminating them were unreasonable, not the employer's burden to prove affirmatively that its actions were based on reasonable factors other than age.

The high court will decide whose burden it is, but Corporate America will do cheerleader pyramids for the 2nd Circuit's view in Meacham: "Any (system that makes employment decisions in part on such subjective grounds as flexibility and criticality may result in outcomes that disproportionately affect older workers; but, at least to the extent that the decisions are made by managers who are in day-to-day supervisory relationships with their employees, such a system advances business objectives that will usually be reasonable." Translation? When it's Discrimination vs. Efficiency, efficiency wins.

Don't forget one important thing with three key aspects: Lives are affected by these decisions, not just return on investment, so be transparent on the whys and hows of the overall RIF decision; pay attention to the emotional needs of the remaining employees (survivor guilt is real and debilitating); and demonstrate concern for the toll on those making the decisions or communicating them (I have sat with more than one crying manager).

What of the departed? Severance or no severance? Release or no release? Here's the drill: If offering two weeks severance only, forget the release, and just give the money. A release offered and refused is admissible as evidence of consciousness of guilt. Releases must follow the intricate details of the Older Workers Benefit Protection Act (OWBPA). Like landing a jumbo jet, the law leaves no margin for error. If severance for a release involves more than two employees, an employer must tell employees who was considered for termination (by name and job title), and who was spared and who was not. Why? The OWBPA acts as a consumer statute, requiring employers to provide information to employees so they can make a considered decision on whether to take the money and sign or reject the money and sue. Biggest employer error? Failing correctly to identify the "decisional unit" -- that is, who was in the termination-considered group. The key consequence if the employer does not follow the OWBPA? A signed release does not a bar to suit make.

A more fundamental release challenge is that lawyers assume one size fits all; they believe a release used 10 years ago is good to go for today, and they try to sound smart by drafting densely written, 20-page releases. It's as if there was one release drafted in the misty past, handed down from generation to generation, and used again and again without question. Here's the deal: Make it simple with bullet points and check marks, and boil it down to a few pages. The goal is to get the employee to sign it, not show legal virtuosity. Write in active voice, not passive. Releases saying that the employee has been advised to consult an attorney are invalid; the release must say that the company advises the employee to consult. Think ahead: Extinguish any outstanding issues on reimbursements owed and commissions due; but don't extinguish all obligations, such as an existing covenant not-to-compete, with a merger clause.

Recessions trigger issues under the Worker Adjustment and Retraining Notification Act (WARN). Employers must give employees 60 days' notice, subject to a mass layoff if the job loss is for at least 50 employees at a single site and at least 33 percent of the employees at that site. The biggest mistake employers make? Failure to understand the aggregation rule whereby smaller employment losses over a 90-day period may be "aggregated" to constitute a mass layoff. The key consequence for violating WARN is that if an employer fails to give 60 days' notice it is on the hook for 60 days' compensation to unnotified employees. Any loopholes? The U.S. Department of Labor says an employer may pay in lieu of notice -- that is, pay employees their full salary and benefits for the 60-day period instead of giving them notice and waiting around for two months.

Capitalism depends on "creative destruction," or so the theory goes. But the theory does zero to lessen its sting. Years ago (or what now seems years ago) I closed a law firm. Kaput. One of the things I learned is that decision-makers' intentions count -- to clients, employees, vendors and, perhaps most importantly, to yourself. Keep that in mind, legally and humanely, in recession planning. You'll be glad you did.

Michael P. Maslanka is the managing partner of Ford & Harrison in Dallas. His e-mail address is mmaslanka@fordharrison.com>. He is board certified in labor and employment law by the Texas Board of Legal Specialization. He writes the Texas Employment Law Letter.

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