In a period of time where 40 million Americans filed for unemployment insurance in the space of just ten weeks, organizations’ dismissal strategies will inevitably find themselves under the microscope. In this article, we look at some key considerations in the process that will apply to any further action, while helping you retroactively reinforce business cases and risk assessments for actions already taken.
The decision to take Reduction in Force (RIF) or furlough measures is never a light one. However, the COVID-19 response strategy of temporarily closing businesses and enforcing strict distancing policies for those that stay open has created financial headwinds that many organizations have had to respond to. The economic effects of COVID-19 continue to be felt at every level and in every locality of the United States:
- Big national brands have had to take action. Macy’s had to furlough 125,000 employees nationwide in late March
- There’s no shortage of regional action being taken. 1,200 employees were laid off at Texas medical provider Baylor Scott & White Health in late May.
- Organizations have to deal with positive processes at unusual scale too. The US added 2.5 million jobs in May, partially due to the process of post-COVID rehiring and recall.
Deciding who gets to stay and who regrettably has to depart the business is a complex decision and one that comes with an appropriate level of risk. Few employees will be happy to be swept up and out by these changes. If the appropriate checks and balances haven’t been carried out to ensure that these decisions haven’t disproportionately and unjustifiably affected certain groups, those employees may have ample grounds for a discrimination case against their former employer.
What You Need to Know About Disparate Impact Claims
When considering the legality of decision-making for salary reduction, furloughs, layoffs, terminations and recalls, the theory applied in law will be that of ‘disparate impact.’ An important distinction to understand upfront is that disparate impact claims specifically require no proof of intent. This differs from individual employment discrimination cases, where a ‘disparate treatment’ theory is applied, and the plaintiff must provide evidence that the employer set out to discriminate against them.
This renders this type of decision-making somewhat challenging, because why a potentially discriminatory pattern exists (be that unintentional or premeditated) doesn’t especially matter. All that matters is that the pattern does exist, and an organization could find itself in trouble if it cannot point to a legitimate business-led motivation coincident with that pattern.
This challenge effectively requires organizations to be proactive in identifying where proposed cuts will have, or have had, a disproportionate effect on certain classes.
Also on the blog: ‘Leveraging Your AAP for Better Workforce Insights’
A Proactive Model for Making Workforce Decisions
The analysis is thankfully, relatively straightforward, although it requires a high degree of thoroughness. In summary, organizations should conduct a two-step analysis:
- Firstly, employers should perform a statistical analysis to determine whether any ‘facially neutral’ policy or practice has the effect of disproportionately excluding people on the basis of race, color, religion, national origin, or age.
- Secondly (and if the statistical analysis determines that a discriminatory pattern exists), the employer must explore the business case for the policy or practice. If they can show that the selection procedure is job-related and consistent with business necessity, there is a safe case despite the pattern.
If you’re approaching a decision about salary reductions, furloughs, terminations, or recalls, you will need to assemble a team to perform this two-step analysis. This team should include:
- Business leaders: Encompassing individuals such as the VP of HR, but also general counsel and others. The group will analyze the workforce needs to determine exit or return decisions
- Statistical expert: Whether internal or external the organization, a skilled statistician will be needed to look for potential disparate impact in the business leadership’s proposals.
- Outside legal counsel: An impartial, outside observer is required to offer advice on the risks of any proposal.
Related reading: ‘Avoiding Bias and Discrimination in Downsizing Decisions’
The Role of Statistical Analysis
Statistics are a particularly powerful tool at this time. They will help you make fairer and more intelligent decisions that protect you from, and prepare you for, potential claims. An expert’s perspective is needed, however, due to the complexity of the area.
For example, different models are needed at different levels of the organization. Some models are better if you’re looking at a high level (e.g. whole organization, business units) picture. Other models (for example, Fisher’s exact statistical significance test) will be required at a granular level (for example, specific job titles, roles, or job families).
Furthermore, a granular-level analysis may be required when an adverse impact is discovered in a larger selection, in order to determine the source of that impact. That process requires reiteration and over time, recycling, and repetition in order to determine the best course of action or anticipate risks.
Conclusion: There’s No Time Like the Present
In the context of COVID-19, you may well have already made tough employment decisions. The analysis and team requirements remain the same regardless of this, and they can be applied retroactively to identify risk. Furthermore, the economic issues facing employers will continue to evolve, and will require smart decisions under time pressure. Therefore, if you haven’t already assembled a team capable of responding to this aspect of the crisis, it is imperative that you do so at the nearest opportunity.