Greater Cheyenne Chamber of Commerce Business Journal Q2 2014 | Page 50
Business Journal
Issue Sponsor:
Capitol Properties
how to limit litigation
risks during layoffs
Orginally published on Entrepreneur.com
Guidelines to reduce your exposure to ‘disparate impact’ claims
Economic conditions remained bleak last month, with
the U.S. Bureau of Labor Statistics reporting that “the
unemployment rate [for July] was unchanged at 9.5 percent.”
In these difficult economic times, companies across the
country have been forced to consider layoffs and other
cost-saving measures. As many business leaders already
know, layoffs can increase your exposure to employment
discrimination lawsuits brought by disgruntled former
employees. While there is no way to completely eliminate
this risk, there are steps employers can take to reduce the
likelihood that they will fall prey to disruptive litigation.
One obvious risk resulting from terminations is individual
employment actions asserted by employees who claim
they were victims of unlawful discrimination. Business
conducting layoffs may be particularly vulnerable to age
discrimination lawsuits. There has also been an increase
in same-sex sexual harassment lawsuits, with statistics
indicating that some of the largest jumps in the number of
sexual harassment lawsuits filed by men occurred in states
with the highest unemployment rates.
Companies conducting large-scale layoffs must also
consider the risk of disparate impact claims. Under a
disparate impact theory of discrimination, terminated
employees may argue that a company policy or practice-which appears neutral on its face--disproportionately
affects a particular group. For example, if the company
terminates a disproportionate number of employees
over the age of 40, those employees may allege that the
company’s selection process had a disparate impact on
older workers.
Though some courts use additional methods of statistical
analysis, the general rule is that a disparate impact exists
where members of a non-protected class (e.g., employees
under 40) are selected for termination at a rate that is
less than 80 percent of the rate at which members of the
protected class (e.g., employees over 40) are selected.
Companies can reduce their exposure to disparate impact
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litigation by using quantifiable and objective job-related factors
such as seniority when selecting employees for layoff. If the
company cannot base its termination decisions solely on
quantifiable and objective factors, the managers res ۜ