RIF Criteria Should Be Clear and Consistent
When conducting a reduction in force, it is important to ensure that the criteria by which employees are either retained or selected for termination are clearly identified and applied consistently, as the U.S. Court of Appeals for the Fifth Circuit recently reminded employers.
In Gosby v. Apache Industrial Services, Inc., an employee was terminated as part of a RIF only days after suffering a diabetic attack at work. She sued, alleging discrimination under the Americans with Disabilities Act. The Fifth Circuit found the employer’s reasons for her selection for the RIF to be questionable. The company’s managers gave different rationales for inclusion in the RIF at different times. One set of criteria was “performance, the skillset of the individuals, and time on the worksite.” But another explanation focused on job level, customer requirements, and attendance, along with seniority, skills, and discipline. Moreover, the Fifth Circuit noted that there was no evidence that both the terminated and retained employees were evaluated against any fixed criteria; while there was documentation of the assessments of the terminated employees, there was no similar documentation for the retained employees. The Fifth Circuit found “[t]he inconsistent explanations and the absence of clear criteria” could demonstrate that the company’s stated reasons for the RIF were actually pretext for disability discrimination.
This case highlights some of the many legal landmines that can be triggered in a RIF. In addition to establishing clear and consistent criteria, and documenting the application of the same, there are also potential issues with the possible discriminatory impact of those criteria on a particular protected group (e.g. age, minority, gender, use of protected leave, etc.). In addition, if the employer is seeking a release of claims in exchange for a severance package, there are technical requirements that must be met under certain federal and some states’ laws. Wise employers should work closely with employment counsel in conducting a RIF.