By JOHANNA MARMON

Near the end of January, General Motors Corp. announced it was cutting nearly a third of its workforce - some 340 workers - at its engine plant in Tonawanda, citing a need to bring production in line with consumer demand.

The layoffs, which took effect Jan. 26, are just a few of the hundreds of thousands that have taken place across the country as the economic recession deepens and spreads into virtually every industry.

But while it seems like every news cycle is dominated by the human toll that the mass layoffs are taking, little attention is devoted to the businesses themselves - which are tasked with not only staying afloat in an uncertain economy but navigating a host of legal challenges that could arise if the layoffs aren't executed properly.

"When people lose their jobs, they might feel there's nothing to lose (and therefore) sue," says Bob Doren, a veteran labor lawyer who represents employers against employees and the government at the Buffalo office of Bond Schoeneck & King PLLC. "If a company is going to engage in a reduction in force, it must do some planning."

The first step, says Doren, is to look at alternatives to the layoffs. If they cannot be avoided, it's important to document - on paper - just why the cuts are necessary.

"Next is determining what positions will exist after the layoffs, and the criteria to determine how to select employees for layoff," says Doren, BSK's regional managing partner. "The third step is to ascertain the skills necessary for the jobs that will exist thereafter."

The point of documenting is to show that a detailed and fair analysis has been made - something that could come in handy in front of a jury. However, says Lisa Sofferin, a partner at Brown & Kelly, record-keeping can also expose a company to liability.

"The company that doesn't keep records might not be able to defend itself, but the record-keeping can bite you in the behind, such as a smoking-gun memo that shows, for example, a company terminated an employee because of age," says Sofferin, who represents both employers and employees in labor and employment matters. "Sometimes it's just circumstantial for the plaintiff and defendant ... the courts don't entangle themselves in business judgment of the company, which is why using objective criteria and being able to show layoffs were made with a plan in mind is important."

That said, a company can certainly add to its liability during layoffs. The first way, says Sofferin, is by engaging in anything that could be considered discriminatory - from targeting too many in one class of employees (such as employees of a certain, race, etc.).

"Doing it in a way that's callous and disrespectful of employees also adds to exposure," she says. "Those that are treated fairly are less apt to sue."

Indeed, says employment lawyer and commercial litigator Mark Walling, the perception of a laid-off employee is important.

"If an employee believes (a layoff) is arbitrary, that employee will file a claim of discrimination or retaliation," says Walling, a solo practitioner in Williamsville who's a former New York assistant attorney general. "It's important for there to be a rational explanation. A disproportionate impact on a particular group increases chances that a claim will be made."

For companies in layoff mode, the most important thing to do is make sure they comply with all of the relevant employment statutes, says Walling, including laws banning discrimination as well as laws protecting employees against retaliatory action.

"There's also the requirement that the employees can maintain health coverage, and companies have to make sure they comply with laws having to do with paying unemployment benefits," says Walling. "Another key issue is whether to offer severance packages ... the advantage of severance is that you can condition the severance on a waiver of any employment claims, which is another way to minimize possible exposure to lawsuits."

Doren agrees. "When employers think about preventing litigation, they have to think about the severance agreement," he says, noting that it's a simple question of economics. "The average cost of a federal-court lawsuit to get dismissed is $75,000-$120,000."

But the real 800-pound gorilla in the room? New York state's revised WARN Act, which went into effect Feb. 1 and offers broader coverage than a similar federal statute. Under WARN, an employer with at least 50 workers laying off more than 25 employees must give 90 days' advance notice of the cuts - which could be problematic for small- to mid-sized employers struggling to keep their doors open.

"The best thing for employers to do is get good legal advice," says Walling. "I can't think of a single area of law that changes as quickly as employment law.... Businesses have to be aware not just of general legal principles, but what the state of the law is at any given time."

Johanna Marmon is a freelance writer.

 

 

So you've been sued. Now what?

For employers in layoff mode, even doing everything as correctly as possible doesn't completely shield against exposure to job-related claims. Luckily, there are a few things that can be done to resolve conflict as soon as possible - without ever seeing the inside of a courtroom.

The first is to involve legal counsel early on in the process.

"It seems overly obvious, but some employers will try to save a little money in the short run by not calling a lawyer when dealing with a legal issue, and try to handle it on their own," says Williamsville solo practitioner Mark Walling. "They're documenting their mistakes every step of the way ... you don't have client confidentiality because everything's subject to discovery."

Second, the claim should be looked at from the point of view of rationality over emotion. "Unless there's a substantial chance that the claim will be quickly dismissed, mediation or other form of settlement means should be considered," says Walling.

Brown & Kelly partner Lisa Sofferin, however, whose background is in human resources, says the key is not letting things progress to the lawsuit stage in the first place - from having objective, not subjective criteria in place for determining layoffs to having attractive exit packages in place to minimize feelings of ill will.

"Have a good severance plan, perhaps outplacement counseling, maybe carrying benefits," she says. "What drives legal challenges in layoff mode is employee morale."

- By Johanna Marmon

 

 

 

Employment litigation: No uptick yet

Almost everyone has an anecdote or two about someone they know losing their job, but local attorneys say there has not yet been a subsequent rise in litigation in general.

But at Brown & Kelly LLP partner Lisa Sofferin's office, calls by both employers and employees have increased, she says. "Really, they're just looking for counsel and advice," she says. "I will encourage them to have arbitration clauses in their (employee) handbooks, so if there is a dispute, it makes a way for resolution outside of court."

To be sure, says Bond Schoeneck & King PLLC's Bob Doren, we might just be in the calm before the storm.

"It's still a little bit early to predict exactly what's going to happen, but if I go back (to past recessions), people fight harder for what they had," he says. "In general, even before the downturn, wage-and-hour class actions are the kinds of cases that have seen the highest rate of increase."

It's the "nothing to lose" attitude that might eventually end up driving claims - as well as the fact that most plaintiffs' attorneys take employment-related cases on contingency or statutory bases.

"If the plaintiff wins, the defendant has to pay the attorneys' fees for the plaintiff," says Doren. For now, only time will tell how this particular recession will play out in terms of employment-related claims.

- By Johanna Marmon