Monday, October 15, 2007

6th Circuit affirms importance of an objective plan to support a reduction in force

It is always so refreshing when a court provides a nice, neat summary to explain its decision in a case. So, when you read the following introductory paragraph from today's 6th Circuit decision in Blair v. Henry Filters, Inc., you might be inclined to think there is no need to read any further:

When a fifty-seven-year-old's direct supervisor taunts him as "the old man on the sales force," removes him from a profitable account because he is "too old," and tells another employee he "needs to set up a younger sales force" before terminating the employee, can the employee's age-discrimination claim survive summary judgment? We believe it can.

The key facts in Blair are few. Blair, 57 years old at the time of his termination in August 2003, worked for Henry Filters, an industrial manufacturer, in 1986. In 2000, John Tsolis became Henry Filter's VP of Sales and Blair's immediate supervisor. Tsolis called himself as "The Terminator," a self-referential nod to his love of firing employees. Blair claimed that in the years leading up to his termination, Tsolis made ageist remarks about him, such as calling him "the old man."

The company, after suffering some financial hardship, between 2001 and 2003, reduced its workforce by terminating 67 employees, out of which 24 were not replaced. That reduction in force lacked a clear plan for its execution. The Court described it as "chaotic, occurring in fits and starts." In August 2003, without explanation, Tsolis notified Blair that his employment was terminated. At the same time, Henry Filters also terminated the employment of a 37-year-old salesperson and a 39-year-old secretary. A few months prior, Tsolis was overheard saying that he needed to set up a younger sales force, although he had no referred to anyone by name. After Blair's departure, a 42-year-old current employee assume his responsibilities for about four months, after which it hired a man in his twenties for a sales position, although there was no evidence of whether than person took over any of Blair's former sales territories. The Court first concluded that the district court correctly concluded that Blair had not presented any direct evidence of age discrimination. The ageist comments he attributed to Tsolis were either not related to the termination decision, or lacked a connection between Tsolis's desire for a younger workforce and Blair's termination.

Notwithstanding the lack of direct evidence of age discrimination, the Court found that the trial court erred in dismissing the age claim. Even though the alleged ageist comments were attenuated in time from the termination decision and not directly tied to the decision to terminate Blair, the Court found that they nevertheless were sufficient circumstantial evidence the Henry Filter singled out Blair for discharge because of his age. The Court also relied heavily on the lack of an objective plan for the reduction in force, noting that "a lack of evidence regarding a company's objective plan to carry out a reduction in force is a factor that might indicate that an alleged reduction in force is pretextual."

There are two key issues worth some discussion. First, there is no reconciliation by the Court of ageism, on the one hand, versus the inclusion of a 37-year-old comparable in the RIF. Secondly, the Court seems to blur of the required showing for a prima facie case and pretext in a reduction in force context. The Court relies on the same exact evidence to conclude that a genuine issue of material fact exists for the 4th element of Blair's prima facie case (i.e., whether there is additional evidence tending to indicate that the employer singled out the plaintiff for discharge for an impermissible reason) and pretext. It appears that if a genuine issue of material fact exists on the 4th prima facie element, the same will hold true for the issue of pretext. Thus, in RIF cases, the Court seems to have eliminated the pretext analysis, putting it all up front in the prima facie showing. At the end of the day, it may not make a difference, since in a RIF case the employer's legitimate non-discriminatory reason (the RIF itself) is self-justifying, and it is always the employee's burden to overcome that reason and prove that it was a discriminatory reason that motivated the discharge. In other words, the battle front is whether the plaintiff was legitimately included in the RIF, and it doesn't much matter through which hoop one makes the plaintiff jump in meeting that burden.

The Blair decision also importantly highlights the need for written objective criteria in carrying out a bona fide reduction in force. Ideally a RIF should be carried out with severance payments in exchange for signed releases, but that is not always the case. Economic or other realities sometimes make severance payments impractical, and some employees would rather take their chances in court than sign a release. All RIFs should be designed and implemented with the understanding that the selection criteria may have to be defended in court. As Blair illustrates, that defense is more difficult without objective criteria as to who stays and who is RIFed. As always, these programs are best designed, or at a minimum reviewed, by employment counsel.