How Not to Lay People Off
Paul Hastings is learning this lesson the hard way. A few words to the semi-wise*, so hopefully your company won’t have to:
- If you need to lay people off, lay people off, but admit that you’re doing it to cut costs. Unless something drastic has happened in the last three months, don’t simultaneously insult both the outgoing employee’s work product and his/her intelligence by throwing together a few obviously pretextual, eleventh-hour performance reviews that fly in the face of every regularly scheduled performance review you provided before.
- Hell, even if you did can the employee because you weren’t happy with his/her work, ask yourself if you have a credible, face-saving way to spin this as a non-performance based, “sorry, your position was eliminated” downsizing. If such an opportunity exists, take it.
- If the person you’re thinking of laying off / shitcanning / etc. is pregnant, and hasn’t anything just about anyone would consider a hanging offense, think twice and then a third time before doing anything that will make you look like a total shithead.
- If that same person just miscarried, don’t even THINK about it.
- If, after reviewing rules 1 through 4, you are still convinced that simultaneously terminating and insulting the employee is a smart thing to do, don’t try to bribe that employee into not talking smack about you.
Last and least, if you are a famous national employment law firm, and your particular branch is located in a state that prohibits noncompete and non-solicitation agreements, don’t try to bribe that same employee into signing an agreement that violates that law, as well.[See update.]
*I’ve never really been comfortable with the phrase “a word to the wise.” After all, if the guy you’re talking to is so damned wise, why did you need to tell him this stuff? Then again, I’ll grant that any potentially good advice assumes some wisdom on the part of the hearer; if you thought he was too foolish to listen, you’d probably save your breath.
More here, here, here, here and here.
UPDATE: After re-reading the “non-compete” provision, I think it’s not a non-compete after all, but a promise not to re-apply for work there. Not a likely violation of B&P Code 16600, but a violation of common sense if nothing else. If they don’t want to re-hire her a year from now, two years from now, or whenever, that’s their prerogative, but what’s the point in contractually barring someone from even applying for a job?
May 7th, 2008 at 4:41 am
Out of curiosity, are contracts like that really “against the law” or just not enforceable by the law?
May 7th, 2008 at 4:43 am
Er. Sorry, really should double check accuracy when using quotation marks: Do contracts like that actually “violate the law”?
May 7th, 2008 at 6:31 am
Non-competes are generally unenforceable. However, strongarming someone into signing an agreement you know to be unenforceable can be actionable in other ways.
May 7th, 2008 at 9:26 am
Actually, California law doesn’t forbid non-competes, it just views them very strictly. Like a number of other states, there must be independent consideration for the non-compete (it can’t just be tacked on as a condition of employment)
In this case, PH is providing independent consideration. Stilll, the California courts are remarkably hostile to these agreements for employees, and would tend to construe it against PH at every opportunity. (Surprisingly sensibly, these types of agreements are consistently upheld in sales of businesses, professional practices, etc. as not doing so would impair the market.)
The more important element here for PH is the release of claims, rather than the non-compete. Clearly this woman is primed to sue. Another quirk of California law is that binding arbitration clauses in employment agreements are extremely disfavored and are frequently found to be unconscionable.
Elsewhere people have suggested that the reason for forbidding applying for work is to remove any doubt that there was a promise of re-employment, and to avoid future employment actions based on the status of the person as a protected class with respect to employment discrimination. That is, even though pre-existing claims were waived, the person could theoretically generate a new claim by re-applying and being turned down.
May 7th, 2008 at 12:03 pm
DB, I’m not sure where you get your information from but California does indeed forbid non-competes. Section 16600 of the Business and Professions Code provides that:
The chapter goes on to provide a few discrete exceptions for sale of a business (B&P Sec. 16601), withdrawal or dissolution of a partnership or LLC (B&P Secs. 16602, 16602.5) and customer lists of answering services and employment agencies (B&P Secs. 16606, 16607), but nothing remotely analogous to an associate’s position at a law firm. Independent consideration is irrelevant. [Whether the provision in question should be considered a non-compete is, of course, a wholly separate issue. To the extent it only prohibits her from seeking employment from PH itself, and not from any "Released Parties" who may leave and start firms of their own, it's probably not.]
As to mandatory arbitration clauses, I don’t think Armendariz can be reasonably read to prohibit mandatory arbitration agreement generally. Quite the contrary, it gives a pretty clear blessing to any mandatory arbitration agreement that (1) provides for neutral arbitrators, (2) provides for more than minimal discovery, (3) requires a written award sufficient to ensure that the arbitrators complied with the law, (4) provides for all relief that would otherwise be available in court, (5) does not require employees to pay unreasonable costs or fees peculiar to arbitration and (6) is not otherwise unconscionable (e.g., doesn’t require one party to arbitrate while leaving the other free to litigate). I’d be very surprised if Paul, Hastings has a mandatory arbitration clause for its California employees that does not comply with Armendariz.
May 7th, 2008 at 12:12 pm
I think the “no-reapply” thing is to preclude any notion that this is a layoff. A lot of states (don’t know about CA) require employers to rehire the people they laid off if the position reopens, before they can bring in new people.
May 7th, 2008 at 1:03 pm
I think the “word to the wise” phrase is meant to express the idea that, if your auditors are wise, they will heed your words; and if they aren’t, maybe they won’t. Along the lines of the biblical addresses to those who have “ears to hear.”
May 8th, 2008 at 7:33 pm
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The don’t reapply language is inserted to prevent further discrimination suits. It evolved from famous cases where the company settled with someone claiming racial or sexual discrimination, they clearly did not want that person around, but then did not hire him or her when they applied for there old job, one where they were clearly the most qualified.
jjv