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A Risky Reduction in Force

A manufacturing company is headed to a jury trial after including race as a factor on a workforce-review spreadsheet; a document that experts say left the organization vulnerable to claims of racial bias.

Monday, October 28, 2013
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The spreadsheet a company ostensibly created to avoid bias during a reduction in force could potentially be its undoing in a former employee's racial bias lawsuit.

A Florida jury will now make that determination, after a district court denied manufacturing company Edward B. Stimpson Co. Inc. summary judgment in a case where a terminated tool-and-die maker claims his race was a factor in the organization's decision to relieve him of his duties.

Elzie Fuller III was employed with the Pompano Beach, Fla.-based manufacturer of metal eyelets, grommets, snap fasteners and hole plugs for approximately 39 years, according to court records. As part of a mass reduction in force, Fuller was let go in February 2009, along with 85 other Stimpson employees. All 86 workers were selected based on productivity, flexibility, cross training, reliability, attendance and seniority, according to the company.

Here's what led to those terminations, according to court records:

In the midst of what court documents describe as a "steep drop in orders" in 2008, Stimpson concluded it needed to lay off close to 30 percent of its 300-member workforce. Stimpson began determining the employees to be laid off by evaluating the activity levels of the employees for the months of November and December 2008, according to court documents.

The list of individuals that foremen and management decided would be laid off was provided to Jim Cuenin, the organization's vice president, who then prepared a workforce-review spreadsheet. The spreadsheet listed all employees by categories including department, job classification, race, gender, age and years of service, and also grouped together "all employees of a certain type who are of the same race."

Stimpson reviewed the spreadsheet, presumably to see that no particular group of employees would be adversely affected. In fact, three termination decisions were changed as a result of the organization's review of the spreadsheet.

Fuller was selected for termination due to attendance issues, as Stimpson records indicate he was either late to work or left early on 57 occasions in 2008. Fuller maintains all the time he took off in 2008 was authorized and approved by the company, which claims "no other employee's attendance record compared with his in this regard."

In the lawsuit, Fuller challenges this contention -- pointing to his foreman and co-workers as examples of employees with worse attendance records – and alleges Stimpson intentionally discriminated against him on the basis of his race by including him in the reduction in force.

In denying Stimpson summary judgment on Fuller's racial discrimination claim, the United States District Court for the Southern District of Florida determined a jury could find that the company had acted with discriminatory intent.

While Stimpson's intentions may have been above board, the company may have avoided costly litigation by documenting Fuller's attendance issues through the years -- and taking corrective action long before the reduction in force, says Jennifer Sandberg, an Atlanta-based partner with employment law firm Fisher & Phillips.

"I think employers frequently trip up by ignoring bad behavior, poor attendance, low performance, or whatever the case may be," says Sandberg. "This happens either because they're scared to do something, or they don't know what to do, or they're just very averse to litigation."

Say, for example, a male employee is terminated from his job at an assisted-living facility where the staff is predominantly female, she says. The male worker's performance may very well have earned him a pink slip, but a company's failure to document as much only shores up the terminated employee's legal case.

"If at that point you haven't dealt with the problem, then it may seem like you're just looking for a reason to get rid of someone."

In Stimpson's case, the organization's lapse may have been in how it used the workforce-review spreadsheet, adds Eric Stevens, a Nashville, Tenn.-based attorney with labor and employment law firm Littler Mendelson.

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"It appears here that this statistical analysis was used as a decision-making tool rather than simply an analytical tool," says Stevens. "If an employer wants to learn a lesson from this case, [then] that may be it."

Still, he notes that "denying summary judgment is not the same as finding an employer did something wrong," he says. "All the court can do is determine if genuine issues of fact exist. If the court finds that issue exists, it has no choice [but to deny summary judgment]."

Fundamentally, "it looks like the Edward Stimpson Co. fell victim to trying to be too careful," says Todd Wulffson, an Orange County, Calif.-based partner with Carothers DiSante & Freudenberger.

"In trying to analyze and balance all the issues -- including race -- they created the perception, if not the reality, that race was a factor in the RIF decision," says Wulffson.

In fact, he says, the company could theoretically be sued by other terminated employees of different races, who could argue "they were let go to balance the ledger."

Stimpson appears to have "created a document that used race as a criterion for deciding who would be in the RIF group before the final decision was made," he continues. "And that was a mistake, both procedurally and because they made an ambiguous and potentially damaging memorialization of their activities."

To avoid similar missteps, Wulffson says he advises clients to develop an objective, non-discriminatory metric for reduction-in-force selection, and reviewing the chosen group of terminated employees after the decision is made, to ensure the group does not include whistleblowers or workers who have recently filed worker's compensation claims, and doesn't have a disparate impact based on age, gender, race or disability, for example.

And "if there is a problem, the selection process is usually scrapped and [the company] starts over," he says. "I think it is legally dangerous, and pragmatically difficult, to try to 'balance race.' "

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