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RIFs Are Not the Easy Solution for Problem Employees

By Fiona W. Ong - Shawe Rosenthal LLP

January 16, 2019

Some employers view a reduction in force as an apparently easy and clean way to get rid of employees they do not want – like poor performers, who have not been properly performance-managed.  There may even be less appropriate considerations in mind – an older employee viewed as slowing down, an employee with health problems who has missed a lot of work, a pregnant employee who will need leave after her child’s birth. These employers assume that if the employee accepts a severance package and signs a release, the matter is closed.  The case of Hawks v. Ballantine Communications, Inc., however, highlights the peril of such thinking.

In that case, several employees were told that they were being let go because of downsizing.  They accepted a severance package that required them to sign a release of claims.  Almost immediately afterward, however, the company posted the same jobs and eventually hired younger employees for those positions. The terminated employees then sued the company for age discrimination, arguing that the releases they had signed were not valid because the company had given fraudulent reasons for their termination. The court, in refusing to dismiss the claims, recognized that an agreement can be unenforceable if it is fraudulently induced.

What does this mean for employers? Do not go for the quick but legally questionable tactic of culling unwanted employees through a supposed RIF, when you actually just want to replace them.  It is important to take the effort to address performance issues through appropriate performance management techniques.

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