Outsourcing and Divestments: A Global Discussion of Employer Considerations
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
1/30/2018
Outsourcing and Divestments: A Global
Discussion of Employer Considerations
Moderator:
Kim Pilcher, Exxon Mobil Corporation
Panelists:
Scott Baken, Jackson Lewis
John Sander, Jackson Lewis
Jonathan Spitz, Jackson Lewis
Latasha McDade, Exxon Mobil Corporation
©2017 Jackson Lewis P.C.
Decision to Outsource
Watt Corporation is a large oil and gas company based out of Houston, Texas
with approximately 50,000 employees worldwide in the Americas, Europe,
and Asia‐Pacific. As the industry gets more and more competitive, Watt
Corporation is trying to think of ways to be more effective and of course
profitable. The CEO has heard the word “outsourcing” thrown around and
has come to you for further information? So, what should you tell him?
The CEO asks, “What are some of the primary reasons that companies decide
to outsource. What should I consider?”
He then says, let me ask this a different way, “Why shouldn’t I do this?”
2
11/30/2018
What Happens to the Employees
The CEO then tells you, “Based on everything we have discussed to date, we should
outsource the Information Technology Division and Building Maintenance Services
Division. What options to I have with the employees currently performing in the
role?”
Internally Re‐deploy to Other Functions
Transfer/Transition to Proposed Service Provider
Layoff or Reduction in Force
3
Employee Transition
4
21/30/2018
Transfer/Transition to Proposed Service Provider
UNITED STATES
No federal U.S. law specifically facilitates or precludes outsourcing
Accomplished by separation/re‐hire, sometimes called “re‐badging”
Negotiated agreement between customer and proposed service
provider establishes terms and conditions of employee transition
EUROPE
Transfer of Undertakings Protection of Employment Act (“TUPE”)
applies when there is a transfer of an economic entity which retains
its identity
Provides that employees currently performing the work activity must
automatically transfer to the service provider with no change in
existing terms and conditions of employment in an outsourcing
5
Transfer/Transition to Proposed Service Provider
Offers of Employment
Service Provider shall offer employment to all In‐Scope Employees, and such
offers of employment shall be effective as of the Closing Date. For each In‐
Scope Employee who becomes an employee of Service Provider pursuant to
this Agreement, for a period of no less than [months] following the Closing Date
(the “Bridge Period”), Service Provider shall ensure that the terms and
conditions of such In‐Scope Employee’s employment (i.e., the
compensation/salary and benefits) will remain [comparable] [comparable in the
aggregate] [identical] [market] to those immediately in place for such In‐Scope
Employee prior to the Closing Date.
Service Provider shall, at least [days] prior to the Closing Date, provide
Customer with a true, complete, and accurate (a) list of all In‐Scope Employees
who were offered and have accepted Service Provider’s offer of employment
and (b) a list of In‐Scope Employees who were offered, but have not accepted
such offer of employment.
6
31/30/2018
Transfer/Transition to Proposed Service Provider
Recognition of Service
In‐Scope Employees who become employees of Service Provider pursuant to this Agreement shall receive
credit for their service with Customer for all reasons to include, but not limited to, vesting, eligibility,
severance, and benefit level purposes under all of Service Provider’s employee benefit plans, policies, and
programs.
Note: Service Provider should consider scenarios where employee could become retirement eligible
immediately upon transition
Reduction in Force Post Transition
If, after the Closing Date, Service Provider implements a selection process for retention,
appointment, reduction in force, job elimination, redundancy or similar purposes, then Service
Provider undertakes to procure that the In‐Scope Employees are given an equal opportunity to
retain their positions as is afforded all other potentially impacted employees of Service Provider.
Service Provider undertakes to procure that, for the Bridge Period, Service Provider will apply
redundancy/severance terms and conditions at the [same / identical / similar / % ] for an affected
In‐Scope Employee as the most recent either contractual or non‐contractual
redundancy/severance terms applied by Customer as detailed in Exhibit X.
Note: Service Provider will likely try to negotiate reimbursement for post transition redundancies so
consider cost if prior service with Customer is recognized for all benefit plans
7
Transfer/Transition to Proposed Service Provider
In‐Scope Employees on Disability
Any In‐Scope Employee who is on short‐term disability or other leave of absence at the
time of the Closing Date shall receive an offer of employment from Service Provider,
such offer of employment being contingent upon their return to work within [# days /
months] after the Closing Date, or at such later date according to applicable laws,
statues, or regulations governing the In‐Scope Employee’s leave of absence. As to such
In‐Scope Employees, Service Provider agrees to comply with all applicable laws relating
to employees on such leaves of absence. Service Provider agrees to indemnify
Customer from any liability of any kind based upon the failure to accommodate or
properly extend an offer to any such In‐Scope Employee, provided Customer has
provided all relevant information requested by Service Provider with respect to such
In‐Scope Employee.
Note: Can negotiate immediate employment before return to work from leave
8
41/30/2018
Transfer/Transition to Proposed Service Provider
Indemnity
Customer shall discharge all Employment Liabilities for the In‐Scope Employees arising prior to the
Closing Date for such In‐Scope Employees and shall indemnify, defend and keep indemnified Service
Provider against all such Employment Liabilities.
Service Provider shall discharge all Employment Liabilities for the In‐Scope Employees arising on or after
the Closing Date for such In‐Scope Employees and shall indemnify, defend and keep indemnified
Customer against all such Employment Liabilities.
“Employment Liabilities” means all salary, pension, and benefits payments, judgments, settlements,
awards (including back pay awards granted retroactively for accrued but uncollected salary), severance,
redundancy, or termination payments, wages and/or fringe benefits, reinstatement, damages (including
damages for unfair dismissal and termination), losses, compensation, charges, liabilities, fines, penalties,
interest claims (including taxes and all related interest and penalties incurred directly with respect
thereto) and all other amounts, however described or denominated, and all related reasonable costs,
expenses and other charges, including all attorneys’ fees and reasonable costs of litigation, hearings,
proceedings, internal and external investigations, document and data productions and discovery,
settlements, judgments, awards, awards of attorneys’ fees, interest and penalties, however described or
denominated, arising out of or in any way connected with the employment of the In‐Scope Employees.
9
Transfer/Transition to Proposed Service Provider
Labor Relations
Effective as of the Closing Date, Service Provider shall, as applicable, when required by law, negotiate
and engage with applicable labor unions, works councils, or similar labor organizations representing In‐
Scope Employees who become employed by Service Provider and shall comply with all applicable laws
with respect to collective bargaining. Note: Can be more specific if CBA has successorship language
Independent Contractor
Nothing in this Agreement including the Exhibits attached thereto will be deemed to create an
association, partnership, joint venture, agency or employer and employee relationship between
Customer and/or its Affiliates, on the one hand, and Service Provider and/or its Affiliates, on the other
hand. The relationship of employer and employee shall not exist between Customer and/or its Affiliates,
on the one hand, and Service Provider and/or its Affiliates or any of the In‐Scope Employees, on the
other hand, once they become employees of Service Provider.
Third Parties
Nothing contained herein shall create a benefit for any third party. No right is created to bring an action
to enforce any terms, provisions, or undertakings of either Service Provider or Customer contained
herein by any third party, including but not limited to any In‐Scope Employee.
10
51/30/2018
Global Issues
11
Transfer of Undertaking
EU Directive on Transfer of Undertakings (2001/23/EC)
as transposed into national law by EU member
countries. UK law (“TUPE”) considered one of the most
employee-friendly
Basic concept: when there is a transfer of a business
activity organized around a grouping of resources, the
rights and obligations arising from employment contracts
transfer from the transferor to the transferee for at least 1
year. Note that share acquisition generally does not
alter employee contractual obligations and is not a
transfer of undertaking
Similar concepts in some countries outside the EU
12
61/30/2018
Transfer of Undertaking—Main Features
Employment contract rights such as salary, holiday, overtime
allowances, length of service entitlements, rights against unfair
dismissal transfer from transferor to the transferee. Pension rights can
be excluded
Transferee must continue to comply with collective agreements
covering the transferred employees
Employee representation arrangements remain in place if transferred
activity retains its autonomy
Liability falls on transferee, although member states may make
transferor and transferee jointly liable
Transfer itself not valid ground for dismissal, but economic, technical or
organizational change in workforce may be, depending on local law
Obligation to inform affected employees of transfer and its
reasons/implications, and to consult if restructuring or similar measures
contemplated
In some countries, employee right to object to transfer
13
Is This A Transfer of Undertaking?
“Undertaking” requires organized grouping of resources,
with aim of pursuing an economic activity, which retains
its identity after transfer. Here, requirement is probably
satisfied in outsourcing of IT or building maintenance.
Even a single employee cleaning a bank has been held
to be an undertaking.
“Transfer” requirement is multifactor analysis based on
type of undertaking and similarity of activities before and
after. Satisfied if service provider will pursue basically
same activities
Affected personnel must be “employees” (e.g. not
independent contractors)
Transfer must be within EU
14
71/30/2018
Information and Consultation
Information and Consultation Directive (2002/14/EC)
requires information and consultation processes whether
by works council or otherwise
European Works Council Directive (2009/38/EC)
requires information and consultation of a pan-European
works council for companies which meet the threshold of
1000 employees within the EU and 150 employees in at
least 2 member states
Outsourcing may be a significant organizational change
or restructuring requiring information/consultation, totally
apart from the requirements of transfer of undertaking
Considerable variation by country, with particularly
strong works councils in France, Germany, Netherlands
15
Wrongful or Unfair Dismissal
In almost every country outside the US, employees are
protected from dismissal without cause.
In theory, redundancy or economic rationale may justify
termination and lead to no severance or limited
redundancy severance
In reality, redundancy may require showing of economic
necessity, redeployment efforts, selection rules,
reemployment rights which the company is unable or
unwilling to make
Job loss based on outsourcing for economic advantage
but not necessity may in many jurisdictions be
considered a dismissal without cause
16
81/30/2018
Exposure in Wrongful Dismissal Claims
Notice periods (typically from a week to several
months, except where notice is main form of
compensation e.g. Canada, Belgium)
Statutory or CBA severance
Damages or termination indemnities
In some jurisdictions, reinstatement
Where job loss meets statutory threshold
requirements, collective dismissal requirements
of information/consultation, government
notification or approval, social plans
17
Labor Issues
18
91/30/2018
To Bargain or Not to Bargain
Since my Building Maintenance Services Division has union electrical
workers, do I have to bargain this decision? Do I have to pay severance?
Any other issues with union relations?
Decisional Bargaining
Effects Bargaining
Successorship
Joint Employer, Single Employer, Alter Ego
19
Decision Bargaining
• When subcontracting or carrying out a RIF, the Company must bargain over
whether the subcontracting/RIF will occur or not.
• When is it not required? (e.g. a change in the scope/direction of enterprise)
• Decision bargaining may cover the union’s offer to cut wages, change staffing, or
otherwise effectuate cost savings or efficiencies in an effort to persuade the
employer not to subcontract/commence the RIF.
• If the parties cannot come to an agreement during decision bargaining, can the
subcontracting/RIF move forward?
20
101/30/2018
Effects Bargaining
• Definition: bargaining over the effects of the subcontracting/RIF.
• The bargaining still occurs prior to the effective date.
• Examples of effects bargaining subjects:
• Providing bumping rights, severance benefits or outplacement assistance.
• Effects and decision bargaining do not always go hand‐in‐hand. The Company is
almost always obligated to bargain over the effects of its decision.
• Exceptions: Waiver? Prior agreements? Other exceptions?
21
Successorship
• A successor is obligated to recognize and bargain with the union that
represented the predecessor’s employees.
• Three‐factor test:
• Whether the business is essentially the same;
• Whether the same employees are doing the same jobs, in the same
working conditions, under the same supervisors (“substantial continuity”);
and
• Whether the new entity provides the same services to the same customers.
• Generally, the successor is not bound to assume the predecessor’s CBA.
• However, what if there is a “perfectly clear successor”?
22
111/30/2018
Joint Employer/Single Employer/Alter Ego
• The Union may allege a subcontractor and the Company are “joint employers.”
• Joint employers are jointly/severally liable for NLRA violations.
• It just became harder to establish a joint employer relationship (Hy‐Brand).
• Alternatively, the Union can allege a “single employer” relationship
• Generally, restricted to two related entities (e.g. a subsidiary and parent)
• Requires showing highly interrelated operations, common management,
common ownership/control and centralized control of labor relations.
• The Union may allege a subcontractor and the Company are “alter egos.”
• Alter egos have substantially identical management, business purposes,
operations, equipment, customers, supervision and ownership.
23
Other Labor Considerations
Aside from requesting bargaining, what are some other ways a Union
can respond to an outsourcing plan/RIF?
Pursuing a Grievance/Arbitration
ULP Charge
Court Action
Collective Action
24
121/30/2018
Other Labor Considerations
• Grievance/arbitration
• Whether and how a grievance proceeds will largely depend on whether and
how the CBA addresses the outsourcing/RIF issue.
• ULP charge
• An NLRB charge may allege a unilateral change and/or anti‐union animus.
• Court action
• The Union can sue in federal district court under the LMRA, Section 301;
• NLRB actions can be reviewed in federal circuit courts.
• Collective action
• e.g. strikes and/or other work stoppages, boycotts, petitions, public
relations (news coverage), soliciting political pressure, to name a few.
25
Preventing Co-Employment / Joint Employment
• SP professional should at all times supervise, manage, direct and/or control
their Employees
• SP professional should not exclusively provide services to Customer
• SP professional should not have Customer assets (cell phone/lap top)
• SP professional should not have a workstation for his/her exclusive use
• SP professional shall receive guidance from SP management
• SP professional should not be at Customer’s office every day (8 AM – 5 PM)
• SP professional should be allowed to visit office as needed to ensure needed
service is properly provided
• SP professional should have limited access to the floors (only to those needed)
• SP professional should have a limited time access badge to the building
26
131/30/2018
Reductions in Force
27
Implementing Reductions in Force
So, the CEO does not think employee transfer/transition works for Watt
Corporation in the U.S. and wants to simply implement a layoff and
procure a service provider to do the work. How does he accomplish
this?
Worker Adjustment and Retraining Notification Act
Older Workers Benefit Protection Act
28
141/30/2018
WARN ACT
29
Worker Adjustment and Retraining Notification Act
Will a sufficient number of layoffs occur at one or more single sites of employment to trigger
the federal WARN Act’s 60-day written notice requirements? (Note: Additional or different
requirements may apply under state “mini-WARN” statutes.)
WARN requires covered employers to give 60 calendar days’ advance written notice of
either a “plant closing” or a “mass layoff” at a single site of employment to:
All affected employees (including supervisors and part-time employees), OR
If the employees are unionized, their international and local union officials, AND
The State Dislocated Worker Unit, AND
The chief elected official of the unit of local government in which the plant closing or
mass layoff will occur.
Part-time employees are not counted to determine if WARN is triggered, but must
receive WARN notices if they are affected by a “plant closing” or a “mass layoff.”
Under WARN, part-time employees include employees who: (1) work an average of less
than 20 hours per week; or (2) who work more than 20 hours per week but have worked
less than 6 months during the 12-month period prior to the required notice date.
30
151/30/2018
Worker Adjustment and Retraining Notification Act
A “plant closing” is a permanent or temporary shutdown of a “single site of employment,”
or one or more “facilities” or “operating units” within a “single site of employment,” that
results in an “employment loss” for at least 50 full-time employees in a 30-day period.
A “mass layoff” is any reduction in force, other than a plant closing, which results in an
“employment loss” at a “single site of employment” during a 30-day period for either: (1)
at least 50 full-time employees, if those employees comprise of at least one-third of the
workforce at the site; or (2) at least 500 full-time employees regardless of their
percentage of the workforce at the site.
A “single site of employment” may be (1) a single location, or (2) a group of contiguous
(adjacent) locations, or separate buildings/areas within reasonable geographic
proximity, that are used for the same purpose and share staff, equipment or other
operations.
An employee suffers an “employment loss” if: (1) the individual's employment ends for any
reason other than a discharge for cause, voluntary departure, or voluntary retirement;
(2) the individual is placed on a layoff exceeding 6 months; or (3) the individual's working
hours are reduced by more than 50% during each month of any 6-month period.
31
Worker Adjustment and Retraining Notification Act
Calculating WARN
• Successive layoffs can be aggregated during a rolling 90‐day period.
• Look ahead 30 days and behind 30 days of the date on which separations are
expected to occur to determine whether employment actions both taken and
planned will, in the aggregate for any 30‐day period within that time frame,
reach the minimum numbers for establishing a plant closing or a mass layoff and
thus trigger the notice requirement; and
• Look ahead 90 days and behind 90 days of the date on which separations are
expected to occur to determine whether employment actions both taken and
planned, each of which separately is not of sufficient size to trigger WARN
coverage, will, in the aggregate for any 90‐day period, reach the minimum
numbers for establishing a plant closing or a mass layoff and trigger the notice
requirement.
32
161/30/2018
Worker Adjustment and Retraining Notification Act
Contents Of WARN Notices To Employees Or Their Unions
• The name and address of the employment site where the plant
closing or mass layoff will occur, and the name and telephone number
of a company official to contact for further information;
• A statement as to whether the planned action is expected to be
permanent or temporary and, if the entire plant is to be closed, a
statement to that effect;
• The expected date (or 14‐day period) of the first separation and the
anticipated schedule for making the separations; and
• The job titles of positions to be affected and the names of the
workers currently holding affected jobs.
20 C.F.R. § 639.7(c).
33
Worker Adjustment and Retraining Notification Act
Contents Of WARN Notices To Employees Not Represented By a Union
• A statement as to whether a plant closing or a mass layoff will
occur;
• A statement as to whether the planned action is expected to be
permanent or temporary and, if the entire plant is to be closed, a
statement to that effect;
• The expected date (or 14‐day period) when the plant closing or
mass layoff will commence and the expected date (or 14‐day
period) when the individual employee will be separated;
• A statement as to whether or not bumping rights exist; and
• The name and telephone number of a company official to contact
for further information.
20 C.F.R. § 639.7(d).
34
171/30/2018
Worker Adjustment and Retraining Notification Act
Required WARN Notices to Government Entities
The notices separately provided to the State Dislocated Worker Unit and to the
chief elected official of the local governmental unit must contain:
• The name and address of the employment site where the plant
closing or mass layoff will occur, and the name and telephone number
of a company official to contact for further information;
• A statement as to whether the planned action is expected to be
permanent or temporary and, if the entire plant is to be closed, a
statement to that effect;
• The expected date (or 14‐day period) of the first separation and the
anticipated schedule for making separations;
• The job titles of positions to be affected and the number of affected
employees in each job classification;
• A statement as to whether or not bumping rights exist; and
• The name of each union representing affected employees, if
applicable, and the name and address of the chief elected officer of
each union.
20 C.F.R. § 639.7(e).
35
Worker Adjustment and Retraining Notification Act
WARN Exceptions
• Three exceptions allow employers to give less than 60‐days’ written
WARN notice, with an explanation for the reduced notice period.
• Faltering Company (Plant Closings Only)
• Employer is actively seeking capital or business when notice is due
• Realistic opportunity exists to obtain financing or business which,
if obtained, will enable employer to avoid or postpone shutdown
• Good faith belief that giving notice would preclude employer from
obtaining financing or business
• Natural Disaster
• Plant closing or mass layoff is the direct result of a natural disaster
• Floods, earthquakes, storms, droughts, tidal waves
• Disaster may preclude full or any advance notice, but notice must
be provided in advance of or after employment loss
36
181/30/2018
Worker Adjustment and Retraining Notification Act
WARN Exceptions
• Unforeseeable Business Circumstances
• Plant closing or mass layoff is caused by business circumstances
that were not reasonably foreseeable when notice would have
been required
• Circumstances are caused by a sudden, dramatic, unexpected
action or condition beyond employer’s control
• Client’s sudden and unexpected termination of a major contract,
strike at a major supplier, unanticipated or dramatic economic
downturn, government‐ordered closing without notice
37
Worker Adjustment and Retraining Notification Act
Sale of a Business
o Business Sales: Generally speaking, when employees are shifted from one employer to another as
the result of a wholesale acquisition by a buyer, WARN's notice requirement is not triggered merely
because employees are technically "terminated" by the seller. For the purposes of an asset sale,
courts look to the entirety of the circumstances to determine if the employees experience an
employment loss under WARN. Courts will review the asset purchase agreement to see if: (1)
employees are included in the terms of the deal; (2) whether the buyer is “assuming” the employees
(instead of “hiring” them) as part of the deal; and (3) the manner in which the employees are on‐
boarded by the buyer. To the extent the employees must apply, interview and be subject to
background checks following the sale, it could be difficult to demonstrate they have not suffered an
employment loss under WARN.
o Caution: A change in the terms and conditions of an individual’s employment could constitute a
“constructive discharge” under WARN. Indeed, WARN’s regulations specifically provide “[a]n offer of
reassignment to a different site of employment should not be deemed to be a transfer if the new job
constitutes a constructive discharge.” 20 C.F.R. § 639.5(b)(2). A constructive discharge occurs “if an
employer deliberately makes the working conditions intolerable in an effort to induce the employee
to quit.” Long v. Dunlop Sports Group Americas, Inc., 506 F.3d 299 (4th Cir. 2007), quoting, Martin v.
Cavalier Hotel Corp., 48 F.3d 1343 (4th Cir. 1995). Where an employee is rehired into an inferior
position under unfavorable terms and conditions, such re‐hiring may also constitute an
“employment loss.” Adames‐Milan v. Centennial Communs Corp., 500 F. Supp. 2d 14 (D. P.R. 2007).
38
191/30/2018
Worker Adjustment and Retraining Notification Act
Sale of a Business
• If a plant closing or a mass layoff results from the sale of a business, the
timing of the layoffs will determine whether the seller or the buyer is
required to issue WARN notices to the affected employees.
• The seller is responsible for providing any required WARN notice of a plant
closing or a mass layoff that will occur up to and including the effective
date of the sale.
• The buyer is responsible for providing any required WARN notice of a plant
closing or a mass layoff that occurs after the effective date of the sale.
39
Mini-WARN Laws
An employer must satisfy state
WARN-type notice requirements…
CA
IL
HI
KS
ME (sev pay)
MD
MA
MI
NH
NJ
NY
OH
TN
VA
WA
WI
PR
USVI
40
201/30/2018
Older Workers
Benefit Protection
Act
41
Consider Alternatives to Workforce Reductions
1. Hiring Freezes 6. Curtailing Overtime
2. Wage and Bonus Freezes 7. Job Sharing
3. Bonus Reductions
8. Work Furloughs of Limited
4. Postponement of Wage Duration
Increases
5. Reducing Fringe Benefits 9. Reducing Work Hours with
Employee cost Proportionate Pay Cuts
sharing of insurance
premiums 10. Discontinuing Use of
Increased insurance Temporary, Part‐Time and
deductibles Contract Employees and
Redistributing Their Work
Limited benefit
eligibility for newer
employees 11. Employee Transfers
42
211/30/2018
Consider Alternatives to Workforce Reductions
Voluntary Attrition Programs
• Voluntary programs mitigate risk by avoiding adverse employment
actions and obviating WARN notices
• Afford employees control over their employment options
• Early Retirement Incentive Programs (“ERIP”)
• Voluntary Resignation Incentive Programs (“VRIP”)
• Employers can retain discretion to decline applications for voluntary
programs as long as program participants are not offered tax‐
qualified retirement plan benefits
• Voluntary programs must be implemented on a non‐coercive basis
• Program participation should be conditioned on signing a separation
agreement containing a general release of all claims, including ADEA
claims
43
Conducting Involuntary Reductions in Force (“RIFs”)
Use Objective, Job‐Related Criteria and Procedures to Select Employees
for Layoff
• Identify desired organizational changes
• Retain employees who are most qualified to perform necessary post‐RIF
business functions
• Eliminate unnecessary positions
• Combine and restructure essential positions, as necessary
• Use skill assessments and performance criteria to compare employees within
remaining positions
- Select employees with significant performance/disciplinary problems
- Rank remaining employees based on their ability to perform essential
post‐reduction job functions and competencies (e.g., productivity,
versatility, customer satisfaction, business competency, technical
proficiency)
44
221/30/2018
Conducting Involuntary Reductions in Force (“RIFs”)
Use Objective, Job‐Related Criteria and Procedures to Select Employees
for Layoff
- Whenever possible, derive employee performance ratings from
existing performance evaluations
- If necessary, prepare current performance evaluations or
rankings
- Base initial selection decisions on employee rankings
- Use seniority as a tie breaker
• Review status of employees on approved leaves of absence
• Determine whether employees have made internal or external
complaints of alleged discrimination, harassment or unfair working
conditions
• Document selection procedures and criteria
45
Conducting Involuntary Reductions in Force (“RIFs”)
Evaluate Potential Disparate Impact
• Conduct disparate impact analysis to evaluate initial
selection decisions
• If disparate impact exists and cannot be justified by
“reasonable factors other than age” or “business
necessity,” consider alternative selections
46
231/30/2018
Conducting Involuntary Reductions in Force (“RIFs”)
Determining Disparate Impact
• 80% (or 4/5) Rule
• Adverse Impact = selection rate of non‐protected group (males,
non‐minorities, younger employees) is less than 80% of selection
rate of protected group (females, minorities, older employees)
• 39 of 110 men selected (35%), 58 of 101 females selected (57%)
• Male selection rate (35%) ÷ female selection rate (57%) = 61%
• 61% ˂ 80% (Male selec on rate is less than 80% of female
selection rate = Disparate Impact)
47 47
Conducting Involuntary Reductions in Force (“RIFs”)
Determining Disparate Impact
Standard Deviation Analysis
• Measures the probability that the difference in selection rates
occurred by chance
• Two or more standard deviations = “statistically significant” adverse
impact
• The difference in selection rates deviates so far from the expected
norm that the result could not have happened by chance
• Utility may be limited when employee population size is too small to
be statistically significant
• Jackson Lewis proprietary software
48
241/30/2018
Conducting Involuntary Reductions in Force (“RIFs”)
Addressing Disparate Impact
If Adverse Impact Exists, Review Initial Selection Decisions
• Under ADEA, employee must prove disparate impact
resulted from the application of a specific, facially
neutral employment practice
• Disparate impact against employees age 40 and older is
not unlawful under the ADEA if employer can prove
impact resulted from a policy or practice based on
reasonable factors other than age
49
Conducting Involuntary Reductions in Force (“RIFs”)
Addressing Disparate Impact
Under Title VII, to disprove unlawful discrimination employer
must demonstrate policy that gave rise to disparate impact was
justified by “business necessity”
• Employer had legitimate business purpose(s) for conducting RIF
• Selection criteria effectively carried out the business purpose
• No acceptable alternative selection methods or criteria existed that
would have better accomplished the business purpose, or accomplished
the purpose as well but with less adverse impact
50
251/30/2018
Securing Valid Releases
Employers implementing RIFs can limit liability for
employment claims by obtaining signed releases from
departing employees in return for valuable consideration
To be enforceable, release of rights must be “knowing and
voluntary”
To obtain a knowing and voluntary waiver of federal ADEA
(age discrimination) claims, procedural requirements under
the Older Workers Benefit Protection Act (“OWBPA”) must
be satisfied
51
Securing Valid Releases
Under OWBPA, waiver
• Must be written in easily understandable terms
• Must specifically refer to rights and claims existing
under the ADEA
• Cannot extend to prospective rights or claims
• Must be supported by valuable consideration
• Must inform employee of right to consult with legal
counsel before signing waiver
52
261/30/2018
Securing Valid Releases
Under OWBPA, waiver in group termination
program
• Must allow individuals 45 days to consider
waiver
• Must allow individuals 7 days after signing
waiver to revoke their acceptance
• Must notify individuals of the eligibility
requirements and time periods for participating
in the group termination program program
53
Securing Valid Releases
Under OWBPA, waiver in group termination
program
• Must include comparative data
• Job titles and ages of all individuals eligible/selected
for termination program
• Job titles and ages of all individuals in the same job
classification or organizational unit (“decisional unit”)
ineligible/not selected for termination program
• Data cannot mislead employees by (1) understating
the impact of layoffs on older employees, or (2)
overstating the impact of layoffs on younger
employees
54
271/30/2018
Securing Valid Releases
Identification of employees retained within a decisional unit
depends on how selection decisions are made
Examples of decisional units include:
• Facility‐wide
• Division‐wide
• Department‐wide
• Reporting lines
• Job category or categories
55
Securing Valid Releases
Under OWBPA, waiver
• Cannot require individual to waive his or her
right to file a discrimination charge with the
EEOC, or to participate in any EEOC investigation
• Can require individual to forgo individual relief
from EEOC proceeding
56
281/30/2018
Securing Valid Releases
Continuing RIFs may require employers to give employees
cumulative OWBPA data
Affected employees with pending claims may request carve‐outs
from releases
Use affirmations to confirm the absence of a factual basis for
claims that cannot be released without judicial or administrative
approval (e.g., FLSA)
Review severance requirements under applicable employment
agreements and collective bargaining agreements to ensure
employees receive additional consideration for signing release
57
Securing Valid Releases
Avoid providing employees with any severance
benefits until the time periods for considering and
revoking the release have expired
Avoid tender back problems
• Avoid release provisions that require employees to
- Return severance benefits before filing a lawsuit
or an administrative charge challenging the
validity of an ADEA waiver
- Pay damages, attorneys’ fees or penalties for
initiating a legal challenge to an ADEA waiver
Review state release laws for additional requirements
58
291/30/2018
Thank You With 800 attorneys practicing
in major locations throughout
the U.S. and Puerto Rico,
Jackson Lewis provides the
resources to address every
aspect of the
employer/employee
relationship.
jacksonlewis.com
30You can also read
