With the economy in flux, and layoffs at a high not seen since the pandemic, how can employers protect themselves from lawsuits by disgruntled ex-employees? In a recent case, Raymond v. Spirit AeroSystems Holdings, No. 23-3126 (U.S. 10th Circuit Court of Appeals, 1/7/25), the court reviewed a claim that a group of former employees were selected for termination in a reduction in force (RIF) based on their age, in violation of the federal Age Discrimination in Employment Act (ADEA). After careful consideration, the court affirmed dismissal of the lawsuit.
Spirit AeroSystems (Spirit) was experiencing financial difficulties in its Wichita, Kansas plant and eventually laid off 271 employees in 2013. Before the company implemented the layoffs, Spirit reviewed a number of options. This review included an analysis of overhead, termination of low performing employees, restructuring of benefits and the hiring process, optimizing workforce shifts, and offering a voluntary severance package to long-term employees. Spirit also restructured the system for evaluating employee performance. Eventually, Spirit recognized that it needed a reduction in force (RIF) to achieve financial stability, but it was the last option. The RIF effected 10% of the workforce. The employees alleged that age was the primary motivation for the RIF selection.
It should be noted that union employees were included in the RIF. Spirit had to comply with a collective bargaining agreement (CBA). Under the CBA, Spirit could include unionized employees in a reduction-in-force only after conducting a “retention exercise.” In this exercise, Spirit considered an employee’s 2012 performance rating, 2013 performance, versatility, and criticality. Based on these factors, managers would put 70% of the employees in the top category (A), 20% in the second category (B), and 10% in the bottom category (C). With few exceptions, the first employees to go in a reduction-in-force would come from the bottom category (C).
As for seniority of the employees, Spirit’s agreement with the union generally allowed 20-year employees to advance one category in a retention exercise. So an employee with a C rating and 20 years’ experience would automatically advance to a B rating. But the union agreement authorized Spirit to exempt employees, removing this advantage. Spirit exercised this authority, exempting every tenured employee from this advantage in the retention exercise. Spirit also softened the role of tenure by exempting new employees in the retention exercise.
The Court found that Spirit carefully reviewed various options and impacts on the organization. It was well documented. The court found the evidence persuasive when considering whether Spirit had a legitimate, nondiscriminatory basis for the RIF. When considering layoffs, employers need to follow the same approach. Document the reasons for the layoffs and the process that got you to that decision.
Second, when considering the selection criteria, HR should include an employee’s qualifications or skill sets, salary level, past performance, productivity, and feasibility of other employees absorbing the duties of a laid-off employee. Further, the selection process should be documented and conducted under attorney review, to maintain privilege, and to not run afoul of Title VII or other similar laws. An adverse impact analysis of race, gender, and age at minimum should be conducted to determine if there are any specific discriminations that come to play and to analyze if these indicators are real or not given the selection criteria.
Moreover, an analysis of the planned RIF under the federal Worker Adjustment and Retraining Notification (WARN) Act and applicable state laws is important to undertake at this stage to better understand the financial risks associated with the RIF. And obviously on the day of, treat the laid off employees with dignity and respect. How they are treated will be watched and will have a long-term impact. If these employees have the possibility of being recalled, make sure that policy is in place with objective criteria as to the selection process.
Next, communication is key, not just for the employees impacted but the employees not impacted by the RIF. Communication should be drafted carefully, and managers should have scripts to follow so not to have any miscommunication and misconceptions arise. Communications must be carefully drafted to prevent loss of business and trust by customers who rely on the employer for supply. On the day of the RIF, employers should have a plan for the remaining employees, possibly giving them some space (be it a few hours or even the remainder of the day) to process the news and recharge from what can be an emotional day.
RIFs are not easy and should be used as a last resort. If HR follows simple steps, working with legal counsel, they should be able to navigate the pitfalls and possible lawsuits that could arise.
ASE Connect
If your organization is facing a reduction in force, ASE has curated layoff resources on its website: https://www.aseonline.org/Survey-HR-Resources/Layoff-Resources.
Source: Cooley LLP 3/12/25