Layoffs On the Rise, Litigation Too

When Grady Memorial Hospital CEO Michael Young announced in March the layoffs of 140 employees at the Atlanta safety net hospital, he told the Atlanta Journal Constitution that some of the ousted workers were let go because they didn't mesh with his efforts to remake the "Grady culture".

The existing culture, he suggested, had been too tolerant of inefficiencies and was adversely affecting patient care. "It's an old and unsuccessful way to run a hospital," Grady's sixth CEO in three years told the AJC. "We need to bring new ways of doing things and new ways of thinking."

That may be true, but those words could come back to haunt Young if one of those employees feels they were unjustly let go for ill-defined "cultural" reasons. The fact is, layoffs are on the rise. So is litigation for wrongful discharge. Sacramento, CA-based emTRAiN, an HR compliance consulting firm, cites EEOC data showing that discrimination filings in 2008 were at the highest levels in the 44-year history of the commission, with age discrimination suits up by 29%, retaliation claims up by 23%, sex discrimination up by 14%, and racial discrimination up by 11%.

Janine Yancey, president of emTRAiN, says executives like Young have to be very careful about how they justify layoffs, or they may find themselves in court. "Certainly that doesn't sound like a very prudent thing to say and in these times you need to be very careful with all your communications," Yancey says of Young's remarks.

Yancey says Google used the "culture" argument in 2004 when it fired a 54-year-old operations director because he didn't fit with the company's emphasis on "youth and energy." His job was filled by a 30-something. Reid sued.

"They told him he didn't mesh with the culture, and he turned around and said 'Yeah, your culture is a bunch of 20-something-year-olds. I'm over 40 and unprotected,' " Yancey says. "It depends on how you define the culture. If the culture is a bunch of white males, sorry but you're not allowed to do that anymore."

Yancey says there are a lot of similarities between today's recession with its layoffs and litigation and the recession that dogged the early 1990s. "We have more implementation laws now than we did then and we have more severe conditions now than we did then," she says. "We can extrapolate back and look in the early 1990s where we had four to five years solid of impacted courts because of the high levels of HR litigation that was going on. We are all expecting the same or more this time around."

One tactic that ex-employees and their lawyers are using involves suing for back pay for meals and rest breaks.

"The trial lawyer will look at the possible discrimination claim and ask 'have you been paid for meals and rest breaks, or overtime?' We are seeing an increase in wage-and-hours class-actions as a result of all these layoffs," Yancey says.

There has also been a huge uptick—more than 50%—in the number of WARN Act lawsuits, Yancey says. Under that 1988 law, businesses with 100 employees or more have to provide a 60-day notice if they are going to layoff 50 or more employees.

If your hospital is planning layoffs, Yancey has a few suggestions that will position you to defend your actions.

First, develop a business criterion to use to select folks for layoffs. "Obviously salary can be one criterion but that can't be the only criterion because that is going to disproportionately weigh it toward older workers," she says.

Yancey also recommends evaluating your hospital's "core competencies" that make the organization run. "Do we need marketing? Do we need PR? There are some of those softer divisions that maybe aren't core competencies," she says.

Make sure that line managers are using that criterion when they are preparing a list of employees targeted for layoffs. Let the line managers provide the list, but check their work. "You have to check for any disproportional impact to the workforce," Yancey says. "Look for irregularities. Are you disproportionately impacting older workers, minorities, or females? If you are, take a second look and see if you can justify it from a business sense. If you can't, or if the numbers are too skewed, you might want to take a second pass."

Yancey, who is a consultant and an attorney, also recommends hiring a consultant and/or an attorney to look at the layoffs list before you make a final call. "This is not something you want to wing, especially in these times," she says.