Like the rest of the industry, Acme is having a rough go of it these days. Sales are off by a mile. In expectation of an economic turnaround, plant layoffs have been surgical in nature, but a day of reckoning is approaching. There’s truth in the adage that nothing happens until somebody buys something. And that absence of buyers has affected Acme’s production area in general and, in particular, Paco Belle, an ethnic minority production technician with 13 years of perfectly adequate service.
Acme closed the calendar year with dismal results, which was the motivation for management to schedule, sometime during the coming year, a major workforce reduction, rumors of which had been on the grapevine for some time.
During a mid-April weekend, Acme held its 32nd annual golf outing, which was part of a marketing strategy to engage customers in one-on-one conversations with all ranks of Acme employees. It was at this major Acme event that Paco sustained an injury. When he was able to return to work a week later, he informed Acme’s HR department that he was going to file a worker’s comp claim because attendance at the outing was mandatory.[pullquote]
In early May, Acme informed 25% of the employees, Paco among them, that they were in line to be terminated at the end of the month as part of the workforce reduction. A few days later, Acme informed this group that they were eligible for participation in the Acme Termination Bailout Plan, which would grant five days of full pay for each year of continuous employment. To cash in on the plan, however, everyone needed to file a Termination Bailout Claim Form, which included a release of any claims arising out of the mass termination.
Acme sent the paperwork to Paco’s residence. The third week of May, Paco returned the claim form to Carrie Oakey, Acme’s HR person. On it, Paco checked the box indicating he was being terminated for an inability to perform his work assignment because of his injury. The next day, Carrie told Paco that she couldn’t process his claim because he erroneously checked the injury/illness box instead of the box indicating the force reduction option. Carrie gave Paco a second blank Termination Bailout Claim Form and asked him to complete it that week.
Instead, Paco’s attorney sent Carrie a letter informing her that Paco had no plans to relinquish any of his rights and that the release he already executed was null and void. The letter also threatened a discrimination suit if Acme didn’t pay Paco his severance.
Acme’s legal department responded with its own letter and included another blank release form to notify Paco’s attorney that participation in the severance plan was conditioned on Paco executing the release properly. Acme also asked Paco’s attorney whether Paco would be going forward with his discrimination suit. If so, the letter said, Paco wouldn’t be entitled to any severance. Acme never received a reply.
One year later, Acme was in court defending itself against Paco’s claim of discrimination and retaliation, and a demand for full severance benefits.
How could this situation have been avoided? What’s an appropriate timing for announcing a mass layoff? What’s a fair interval between the announcement and the departure? Should every employee be obliged to attend what’s basically a company-sponsored marketing event?
An academician says:
I think holding a golf outing so that customers can meet employees — or vice versa — is plain silly. Most golf outings (at least those run by marketing people) are intended to entertain the customer with plenty of food, drink, golf, prizes, entertainment. Sometimes they throw in a celebrity or two. It’s just a fun time, an opportunity for salespeople and execs to make some customer contacts and maybe generate some sales. I don’t see how making it mandatory for every employee to show up (do they get paid to show up?) for the event in any way makes it a better event or leads to more sales. Better to stick with the old tried and true method of shmoozing the customer with ample booze, food and golf.
How to conduct layoffs? My advice would be to do it as quickly as possible. Workers probably know that layoffs are coming and that the company is losing money (apparently the golf outing didn’t work). I’d announce the layoffs on Friday, and let the laid off people go on Friday. I don’t see the logic of keeping around those who know they are losing their jobs next week or next month. You aren’t going to get much productivity out of them during the interim, and they might show their unhappiness in ways that are detrimental to the company. And, make sure the departing employees are given a good explanation why layoffs are needed and, if possible, why they are the ones to go.
Severance pay, outplacement services and paying for retraining are great ways to show a company’s appreciation for past services and to leave a positive attitude in the minds of some of the laid off employees. A display of such generosity also adds to the morale of the workers who are staying on, as they know the company “takes care of employees,” even in tough times. I’d also keep the terminated employees informed about company status if there’s any chance of rehiring them. Better to rehire a former experienced, productive worker than to try your luck with someone new and untested.
As to Paco’s legal efforts against Acme, who knows? That’s a good problem for the lawyers to sort out.
Professor Homer H. Johnson, Ph.D.
Loyola University Chicago
An attorney says:
The situation Acme found itself in isn’t unusual in this era of economic turmoil. When employers are faced with a workforce reduction, they need to select employees to be terminated with a view toward defending potential claims such as Paco’s.
While an employer has every right to terminate employees who aren’t needed to run the business, it needs to be prepared to defend a claim that a particular employee was selected based on his age, race or some other protected category, including exercising the right to file a workers’ compensation claim. Most non-union employers select their poorest performing employees for termination in a workforce reduction. Ideally, performance evaluations should support the selection of an employee as one of the poorest performers.
For example, if Acme decided to reduce the lowest performing 25% of its workforce and all of those employees received a “needs improvement” rating on their performance review last December, including Paco, his retaliation claim wouldn’t have much to stand on. On the other hand, if Paco were rated “exceptional” in December, Acme might have some trouble justifying his termination as one of the lowest performing employees.
With respect to Paco’s refusal to sign a release, employers who have no existing policy requiring the payment of severance pay normally condition the payment of severance on an employee signing a release. An employee who doesn’t sign a release doesn’t get any severance pay. It’s as simple as that. While it might be discrimination, it is not illegal discrimination, and Acme is perfectly free to require a release as the quid pro quo for the payment of severance pay.
On a final note, depending on the number of employees that Acme terminated, 25% of the workforce is a sufficient number to trigger coverage under the plant closing laws of some states. Those laws typically require that employees receive 60 days notice prior to a termination due to a large-scale workforce reduction or a plant closing.
Julie Badel, partner
Epstein Becker & Green, P.C.
A plant engineer says:
Acme could and should have avoided this situation. First, Acme should never require employees to attend outings. When attendance is required, Acme becomes responsible for the safety of employees at the outing. This places Acme in a weak position from a safety standpoint. In Acme’s plant, the employees are taught safety and should have meetings about safety and how to work safely in the plant. When the same employees are out of their normal work environment, they will have a tendency to forget about plant safety outside of the plant. Acme has a better chance of maintaining employee safety inside of the plant and very little control of safety outside of the plant.
If you want customers to associate with your employees, bring your customers to the plant and then go play golf. Acme should also determine the return on investment. How much business does Acme gain or retain by having the golf outing? Does it really make a contribution to the bottom line?
Acme shouldn’t announce a mass layoff in advance. The company has every right to layoff without advance notice. Business conditions change and Acme or any other business shouldn’t be forced or expected to announce layoffs in advance. Acme should (for the sake of decency) pay the severance due to the years of “perfectly adequate” service Paco Belle has given to the company.
Jeffrey L. Strasser
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