Workplace Restructuring Presents Discrimination Risk

Written exclusively for ChubbWorks

The Equal Employment Opportunity Commission (EEOC) announced they uncovered evidence of a pattern of age discrimination between 2013 and 2018 in their investigation of IBM. The EEOC found that the employer's top executives directed management staff to engage in a strategy to remove older employees and replace them with younger workers.

In its findings, the EEOC found that older workers (those age 40 or over) made up more than 85 percent of the total number of employees considered for layoff. They also found that many older workers laid off by the employer were later rehired as contract workers, with decreased salary and benefits. The EEOC compiled testimony from dozens of witnesses in support of the charge of age discrimination.

The employer denies any systemic discrimination, stating its employment decisions are not "centralized," but are made individually within business groups and by front-line managers. They argue that they based termination decisions only on "the needs of its business units," not the age of the employee.

EEOC representatives have told some former employee that its decision could affect more than 6,000 former employees and could cost the employer millions of dollars in settlement costs. Peter Gosselin "The U.S. Equal Employment Opportunity Commission Confirms a Pattern of Age Discrimination at IBM" (Sep. 11, 2020).


Commentary and Checklist

Employers who face large-scale lay-offs must be alert to the possibility of disparate impact. Even if there is a legitimate business reason, how the implementation of that reason affects those in protected classes must be considered. Make sure you document your business reasons for downsizing, along with the criteria applied in your decision about each employee.

Here are further suggestions that can help employers avoid discrimination risk when needing to terminate multiple employees:

  • If affordable, provide methods other than involuntary reduction-in-force to reduce your workforce.
  • Carefully analyze all factors used for involuntary reductions-in-force.
  • Make a determination as to whether your reduction-in-force criteria can withstand legal and public scrutiny, seeking advice from legal counsel.
  • Provide fair severance packages alongside severance agreements for those involuntarily laid off. Have an attorney draft and approve all severance agreements to make sure they comply with the federal Older Workers Benefit Protection Act.
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