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By Steven Mitchell Sack
Warner BooksCopyright © 1998 Steven Mitchell Sack
All right reserved.
Chapter OneAn Overview of Current Law and Trends
Radio and television interviewers frequently ask me why I say that a job is like a romance. My answer is that companies woo applicants with promises of security, fulfillment, and riches. Then, when the honeymoon is over, even highly qualified people often find themselves being treated unfairly. Many don't receive promised benefits, such as year-end bonuses, commissions, and overtime. Others are fired without cause or notice through no fault of their own.
Being fired is never good news, and the fact is that hundreds of large companies throughout the United States continue to announce major layoffs. In a layoff (also called a downsizing or a restructuring), many members of a company, a division, or a department are terminated en masse due to the company's perceived financial constraints, budget considerations, or merger with another company. These layoffs differ from one-on-one firings, where only one or several individuals are let go.
In the past, younger workers with less seniority were generally the first to be laid off in a corporate downsizing to reduce payroll costs. But because younger workers were typically at the low end of the wage scale, companies learned they would have to make substantial cuts to achieve meaningful savings. They realized it was more effective to offer early retirement and severance packages to older workers at the top of the wage scale as the way to reduce costs and stay competitive. This enabled them to fire fewer workers but achieve the same result.
Although this tactic appears to be discriminatory because it targets older workers, some employers found that it was legal when disguised as an offer of an early retirement package. Federal and state discrimination laws often approve early retirement programs because they are perceived as an offer of an employee benefit, which employees have the choice of voluntarily accepting or not.
Companies learned how to survive charges of discrimination provided they based reduction-in-force decisions on legitimate business reasons and used objective criteria, such as demonstrable economic necessity, performance reviews, and productivity evaluations, when selecting the employees to be discharged. This caused the burden to fall on employment lawyers to try to prove that in many major layoffs the choice of individuals to be fired was based on gender, race, national origin, religion, or other categories protected under the Civil Rights Act of 1991, the Age Discrimination in Employment Act, or state human rights laws. This is often difficult to prove. The result is that the majority of terminated individuals cannot make such a claim and prove that illegal discrimination entered into the selection process.
Many individuals who are offered early retirement packages want and need to continue working and don't consider the package a gift. They face a dilemma: If they refuse the offer, they feel that the next step, in six months or a year, will be a notice that their job is being eliminated with no offer of enhanced benefits. Wouldn't it be better to accept the package now?
Companies also recognized that if they needed to hire more workers after business conditions improved, they could do so at less cost by hiring "contingency" workers. These are part-time, temporary, freelance, and contract workers who agree to accept less pay and job security and a lack of health insurance and other benefits because, in today's job market, many are unable to find permanent full-time work. Commentators suggest that this development has significantly altered the landscape of the U.S. working world.
The net result is a business climate that can be very cruel. Anyone can get the ax these days. According to a report by the outplacement firm Challenger Gray & Christmas, layoffs surged 74 percent in the first three months of 1996, compared with the same period the year before, claiming nearly 170,000 jobs.
Furthermore, what is often not considered is the effect that layoffs, firings, and cutbacks have on the people that remain at a company. When workers feel the process was handled tactlessly or cruelly, they are certain to wonder if they will be the next asked to leave. This climate of uncertainty can demoralize entire departments.
People will always be fired for the usual reasons, such as poor performance, habitual lateness, excessive absences, insubordination, or disobeying work rules, regulations, and policies. What has changed the rules of the game, however, is being fired because of corporate greed, to satisfy a manager's desire to cut costs, or merely as a result of general business conditions.
THERE IS AN UPSIDE
While these developments are depressing, you should not despair. Some of my clients, out of frustration and anger, cry when they relate the facts of their firing to me in my office. This is understandable. Since most of us equate self-worth with our work, it's not surprising that losing a job can cause anxiety, self-doubt, depression, and even mental illness. But the experience doesn't have to leave you shattered.
Once you deal with the initial pain, you can use your time wisely to examine your goals, discover what you really want from a career, and find a new job that makes you happy. Being fired can be a benefit both financially and personally in many ways, as I will explain later. For example, after negotiating a large severance package for a client, I sometimes recommend that he or she not begin a job search immediately, but rather travel for three months or take the summer off. Later, after they have spent rewarding time "smelling the roses," many clients have thanked me for this advice.
While large numbers of corporate layoffs continue, the law fortunately has changed for the better in many respects. Up until twenty years ago, employees had few options when they received a pink slip. This was because of a legal principle called the employment-at-will doctrine, which was generally applied throughout the United States. Under this rule of law, employers hired workers at will and were free to fire them at any time with or without cause and with or without notice. From the nineteenth to the late twentieth centuries, employers could discharge individuals with impunity for a good reason, a bad reason, or no reason at all with little fear of legal reprisal.
During the 1960s, however, some state legislatures began scrutinizing the fairness of this doctrine. Courts began handing down rulings to safeguard the rights of nonunionized employees. Congress passed specific laws pertaining to occupational health and safety, civil rights, and the freedom to complain about unsafe working conditions.
The net effect has been a gradual erosion of the employment-at-will doctrine in many areas. Now, in most states, there are probably many exceptions that make it illegal for you to be fired. For example, it was recently reported that a state circuit jury in Miami returned an $850,000 judgment against Sears, Roebuck & Co. after a former store manager alleged that officials fired him for filing a workers' compensation claim. The Florida workers' compensation statute, like statutes in many other states, prohibits this kind of retaliation.
As a result of the passage of the federal Worker Adjustment and Retraining Notification Act (WARN), you must be given at least sixty days' notice before being let go or comparable financial benefits (i.e., at least sixty days' notice pay) if you are part of a large layoff that affects fifty or more workers at a plant site or company office.
Some courts have ruled that statements in company manuals, handbooks, and employment applications constitute implied contracts that employers are bound to follow. In many states, handbooks have been transformed into legally binding contracts of employment. Thus, every word counts when companies draft or revise employee manuals. This is a consideration they sometimes forget, and it can be a costly mistake.
Other states now recognize the obligation of companies to deal in fairness and good faith with longtime workers. This means, for example, that they are prohibited from terminating workers in retaliation when they tattle on abuses of authority (i.e., whistle-blowing) or denying individuals an economic benefit (a pension, commission, bonus, etc.) that has been earned or is about to become due.
A few states are even allowing wrongfully terminated workers to sue in tort (as opposed to asserting claims based on contract) and recover punitive damages and money for pain and suffering arising from a firing. Some employees who have sued under tort theories for wrongful discharge have recovered seven-figure jury awards as a result. Innovative lawyers are asserting federal racketeering (RICO) claims, seeking criminal sanctions and triple damages against companies. This is in addition to asserting fraud and misrepresentation claims against the individuals responsible for making wrongful-termination decisions.
A number of recent court decisions have also favored people whose employer-paid health benefits or monthly pension checks were reduced or taken away after a firing. In 1995, Pittsburgh-based USX Corp. agreed to pay $47 million to seventeen hundred steelworkers after a federal district court judge ruled that the company, in closing its Provo, Utah, plant in 1987 simply to avoid paying pension benefits, was in violation of the federal Employee Retirement Income Security Act of 1974 (ERISA).
After six years of litigation, a federal jury in 1995 took less than an hour to decide that Pfizer Inc. had unfairly persuaded a lifelong employee to take an early retirement package just weeks before it offered subsequently downsized employees a more lucrative buyout. And in another case, the U.S. Supreme Court ruled in 1996 that a large company must restore health benefits to individual employees who, in the eyes of the Court, had been tricked into transferring their benefits to an undercapitalized dummy subsidiary and eventually lost the benefits. The workers were awarded $8.3 million in the case.
Various commentators are now suggesting that in situations where employers manipulate employees unfairly, judges and juries are going to find a way for the wronged to win. Thus, given the changing legal climate, it is understandable that more people are seeking information about their rights and are fighting back after being fired. They are requesting enhanced benefits after a one-on-one firing or major departmental layoff and are receiving greater severance pay than the company's initial offer. As a result of successful negotiations, they are also obtaining accrued bonuses; continued medical, dental, and life insurance coverage; unemployment benefits; office space with use of a telephone, secretarial help, resume preparation, and outplacement guidance while looking for a new job; a mutually acceptable cover story to tell prospective employers; and favorable letters of reference.
Mismanaging the termination process can result in hard feelings, loss of company prestige from bad publicity, a decline in loyalty and morale within the firm, difficulty in attracting new talent, more turnover, and litigation. As a result, employers are now beginning to see a clearer picture of what they are potentially up against when they handle terminations improperly.
Employers are being reminded to carry out terminations in a discreet, consistent, and mature fashion to avoid charges of defamation and/or discrimination. This means, for example, taking all precautions not to embarrass terminated workers in front of coworkers. Companies are also being advised not to fire employees before vacations, during company Christmas parties, or in the presence of a large group of colleagues.
Because a job is closely linked to a person's identity and self-respect and most terminated workers experience feelings of humiliation during a discharge, on-site training is being conducted to help employers understand more clearly how to fire people in a proper and humane manner. In light of the vast number of employment-related lawsuits filed these days, companies are reminded that being fired under humiliating or unfair circumstances is generally devastating to an individual and often brings out vindictive tendencies, which increase the chances that he or she will file a lawsuit to regain a sense of self-respect.
It is not surprising, according to Evan J. Spelfogel, a lawyer and past chair of the New York State Bar Association Section on Labor and Employment, that twenty times more employment discrimination cases were filed in 1990 than in 1970, almost 1,000 percent greater than the increase in all other types of civil litigation combined. The April 1994 issue of Inc. magazine reported that workplace discrimination suits have increased more than 2,200 percent close to the past two decades and now represent an estimated one-fifth of all civil suits filed in the United States. There is currently a backlog of close to 100,000 employment discrimination cases at the EEOC and over 25,000 wrongful-discharge cases pending in state and federal courts nationwide. Nearly all these cases involve jury trials with lengthy delays and unpredictable results.
William K. Slate II, president and chief executive officer of the American Arbitration Association, remarks that defending against a wrongful-discharge claim brought by a former employee can cost an employer hundreds of thousands of dollars. He states that the median time between the date an employment lawsuit is filed and the commencement of a civil trial is two and a half years and that fired workers currently win nearly 70 percent of these cases, with the average jury award for a wrongfully fired employee now being approximately $700,000.
One story in the New York Times reported that "in almost every industry, unfair discharge litigation has proliferated and the amount of money involved in settlements runs into hundreds of millions of dollars annually." Even more than ten years ago, the Wall Street Journal confirmed that more than one third of the New England companies interviewed indicated that they were involved in legal actions with terminated employees.
One reason for this dramatic increase in litigation is that lawyers representing employees have discovered that sympathetic plaintiffs are very appealing to juries in such disputes. Average jurors are lower-level employees themselves. Given the chance, jurors are likely to side with an employee against a deep-pocket employer.
Another reason the number of discrimination cases is soaring is that the stakes have become very high. Due to the enactment of the federal 1991 Civil Rights Act, which made jury trials as well as punitive and compensatory damages up to $300,000 available remedies, more people are now inclined to sue.
Excerpted from Getting Fired by Steven Mitchell Sack Copyright © 1998 by Steven Mitchell Sack. Excerpted by permission.
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