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Employee Rights and Employment Policy Journal
PREVIEW OF AN ESSAY ON LEGAL CHALLENGES TO DOWNSIZING
[P.173]The next issue of the Employee Rights and Employment Policy Journal will include an analysis entitled Downsizing Employee RightsÎ Immunity for Employer Decisions or Expanded Federal Regu-lation? that we prepared with Thomas Daly and Marco Carmignani, participants in our Rutgers Law School Seminar in 1996. This essay previews our conclusions.
The downsizing process has cost millions of jobs and the resulting dislocation of workers lives. It has been the subject of numerous law-suits under Title VII, 1 the Age Discrimination in Employment Act (ADEA), 2 Employee Retirement Income Security Act (ERISA), 3 Worker Adjustment and Retraining Notification Act (WARN Act), 4 and state contract and tort law. The bulk of this litigation has focused on the individual worker's claim of unfairness, rather than on the le-gality of the employer's decision to downsize and/ or the process by which downsizing was accomplished. There seems to be limited un-derstanding of this process among those who are concerned with the protection of workers' rights.
1. HOW DOWNSIZING WORKS
(A) The Downsizing Plan
Downsizing is conducted pursuant to a "downsizing plan." The plan may be embodied in one formal document, or in several different documents, including memoranda relating to the performance of downsizing operations, and explanations to the managers and employ-ees of how the program will work. Because of its scope and sophisti-cation, the downsizing plan must be considered the most advanced [P.174] labor relations instrument since the development of major collective bargaining agreements of the 1950's. 5
The downsizing plan will (a) provide justification for the downsiz-ing, (b) establish a process for translating the downsizing decisions to particular departments or other units of the employer, (c) create a process to determine which employees will be terminated, (d) provide an internal review procedure for termination decisions and employee complaints, (e) establish a severance pay program for those employ-ees who sign waivers of all legal rights, and (f) provide a waiver which will extinguish all employee claims.
(B) Waivers and severance pay.
The use of severance pay to purchase a waiver of rights requires that major elements of the downsizing plan be in writing. Severance pay is regulated by ERISA, which requires a written instrument. In addition, a waiver must be in writing to be "knowing and voluntary" under the ADEA. 6 Other elements of the plan, including its business justification, are likely to be in writing so as to be available in the event of litigation, although they may be expressed in abstract, ambig-uous and possibly misleading language.
(C) Subjective decisionmaking.
Within the framework of the downsizing plan, the employer selects the employees to discharge. These decisions are supposed to rationally and systematically identify those workers who will best fit in the reduced structure. These judgments necessarily involve a major element of subjectivity and guesswork. Therefore they are subject to influence by conscious or unconscious biases against minorities, wo-men, and long time employees and by the favoritism that usually ac-companies reorganization. The regulation of subjective judgments is one of the most difficult problems for equal employment opportunity (EEO) law and for state contract law. [P.175]
(D) Waivers assured in advance of decisionmaking as prospective waivers.
The managers who make these decisions know that most em-ployees will waive their legal rights in order to collect severance pay. Because they know that their decisions will not be subject to litigation, they may feel free to disregard EEO and other laws in deciding who to discharge. A waiver planned in advance to insulate the employer from litigation creates a situation analogous to a prospective waiver, even though the individual waiver is not signed until after the em-ployer's action. It insulates the employer from obligations imposed by statute, thereby nullifying the effect of the law. Both Congress and the Supreme Court have prohibited prospective waivers in employ-ment discrimination matters. In jurisdictions which require the em-ployee to repay the severance pay before a waiver can be challenged, the protection of the employer's decisions from judicial scrutiny is virtually complete, because employees are not likely to have the money for the repayment. 7 If the employment documents contain an arbitration requirement, the employer has gained further protection against judicial scrutiny. Thus downsizing both reduces the number of employees, and also reduces the extent of their legal rights in the em-ployment relationship.
2. THE ADVANCE NOTICE PRINCIPLE MAY PROTECT WORKERS INTERESTS.
At the same time, several legal developments of the last decade may prevent employers from so readily subordinating employee rights. These developments presage a rule of law requiring that the employer provide sufficient advance information concerning compli-ance with equal employment opportunity, benefit protection and other laws to enable an employee to make a reasoned judgment about possible illegality before deciding whether to waive rights. This infor-mational requirement will compel employers to attend carefully to employee interests before and during the downsizing process, despite [P.176] the virtual immunity that the waiver appears to provide. The princi-ple that employees are entitled to advanced notice of a major adverse personnel action, may, itself, become the foundation of a new indus-trial relations era. 8 This principle, arising out of processes like plant closings and downsizings, is a new development in labor relations law departing from the general principle that management acts first and employees grieve later.
Congressional policies supporting the principle that employees are entitled to advance information are apparent in the ADEA, ER-ISA, and the WARN Act. Congressional policy favoring a full judicial review of employer "business decisions" is expressed in the 1991 Civil Rights Act where the requirement that practices with disparate im-pact be justified as "job related for the position in question and consis-tent with business necessity," 9 was reinstated after it had been diluted by the Supreme Court. 10
3. THE FAILURE OF DOWNSIZING
Judicial review of decisions to downsize should take account of the dismal record of achieving the business objectives of those down-sizings conducted during the last decade. Carl Van Horn's report to the Twentieth Century Fund in 1996 surveyed the literature on the consequences of downsizing:
Empirical research on corporate downsizing strongly suggests that many firms are doing a poor job of implementing cutbacks and are not achieving their goals. Consider the following evidence: [P.177]
Approximately half of the firms surveyed by the Wyatt Corpo-ration were successful in cutting costs after downsizing in 1991; 68 percent claimed success in 1993. . .
Only one-third of the firms responding to AMA surveys from 1989 to 1994 reported increases in productivity following downsiz-ing; only half reported increases in profits. . . Fewer than half of the 1,468 firms surveyed in 1990 by the Soci-ety for Human Resources Management reported productivity gains after downsizing.
Only one-fourth of the firms that downsized in the late 1980s and early 1990s improved productivity, cash flow, or shareholder's return on investment, according to Arthur D. Little Company.
Only half of the 338 executives surveyed in 1993 reported qual-ity improvements in the wake of downsizing.
Fewer than half of the 497 large companies in the United States and another 124 in Europe succeeded in their efforts to gain market share through corporate restructuring, according to a 1994 study by CSC Index, a consulting firm.
The most common approach to downsizing, "across-the-board-grenade-type approaches-is associated with organizational dysfunc-tion," according to a comprehensive study of over 150 firms.
The heads roll and the compensation budget goes down. Stockholders and the investment community applaud. But because the work remains, costs eventually pop up in the form of "special" projects, or temporary help, or new hires.
In fact, many businesses replace laid-off employees with part-time or contract workers. . . Within a year of laying people off, over half the firms refilled at least some of the positions.
Increased productivity is another important goal of corporate downsizing decision. In 1991, nearly three-quarters of the AMA survey respondents sought higher productivity, but only one in five succeeded. By 1995, one in three firms reported productivity in-creases after downsizing. . . .
It is not uncommon for downsizing to hurt productivity, quality, and lead to other negative by-products. Some economists argue that downsizing strategies have gone too far, robbing companies of the needed research, development, and advertising and marketing staffs that generate new products and new market opportunities. "You can't save your way to prosperity," explains Burke Stinson, spokesman for AT& T-a company well versed in the practice of [P.178] large-scale work force reductions. "This continuous downsizing-it's corporate anorexia. You can get thin, but it's not the way to get healthy," argues Gary Hammel, a British management consultant. 11
These depressing results should lead courts to undertake a seri-ous review of both the objectives of the employer in undertaking the downsizing, and the methods it used to achieve these objectives. While a decision to downsize or reorganize requires a major set of "business judgments," those judgements are not immune from review under EEO laws. Given the vastness of the dislocations caused by downsizings and a record of achieving business objectives as poor as this, the courts should examine carefully the justification for such ac-tions and the care with which any downsizing plan has been developed.
4. REVIEW OF THE DECISION TO DOWNSIZE
(A) Disparate impact under Title VII and the ADEA.
The decision to conduct a downsizing is subject to substantive ju-dicial review under federal EEO laws, ERISA, and (perhaps) state law doctrines. The most powerful analytical tool for such a review is the disparate impact doctrine of Title VII which requires employers to justify practices which have such impact on minorities and women on grounds that they are job related and consistent with business neces-sity. This principle, which was initially based on the Supreme Court decision in Griggs v. Duke Power Co. 12 , was given a statutory founda-tion in the Civil Rights Act of 1991. 13
The same doctrine, we conclude, is applicable to downsizings under the ADEA, totally apart from whether the disparate impact doctrine is otherwise available under that statute. The ADEA was amended in 1990 to require that an employer seeking a waiver of em-ployee rights in an "exit incentive or other group termination pro-gram" provide affected employees with information concerning the effects of the downsizing on the age structure of the work force. 14 This information was intended to be adequate to allow employees to make intelligent decisions whether to sign the waiver or litigate. If [P.179] proof of intent is required, these statistics and personal knowledge of the employee will not provide a reasonable basis to assess the probability of age discrimination. A reasonable estimate of the likeli-hood of discrimination can be made on the basis of those facts only if the disparate impact doctrine applies. The legislative history suggests that Congress understood that the statistical information would be sufficient to assess the likelihood of discrimination.
5. STATISTICS AS EVIDENCE OF DISCRIMINATION REQUIRED TO BE MAINTAINED AND PRODUCED IN ADVANCE OF TERMINATION DECISIONS
(A) Subjective judgments of managers as to whom to terminate lie at the heart of the downsizing process.
These judgments are fertile grounds for discrimination, the disre-gard of contract rights, and the ordinarily expected personal favorit-ism which operates in such situations. They necessarily involve predictions of managers concerning the employees retained and re-leased which are not subject to advance verification. The strongest "objective" evidence of the fairness with which these judgments have been made consists of a comparison between the retention/ separation rates of white, male, young managers and those of minorities, women, and older workers.
(B) Information collection and retention requirements under Title VII and ADEA
This information is required to be collected and kept under the record keeping provisions of the Uniform Guidelines on Employee Selection Procedures 15 under Title VII with respect to race, sex and national origin. Somewhat similar information with respect to age must be collected and provided to affected employees if the employer requests a waiver of ADEA rights. The ADEA requires the produc-tion of this information as a minimum condition for a finding that a waiver is "knowing and voluntary." It is a "floor" concerning the in-formation which the employer must supply, not a ceiling or an exclu-sive list.
The principle requiring disclosure of statistics should also apply to requested waivers of Title VII race, sex and national origin claims [P.180] under the "in pari materia" doctrine. The statutory definition of "knowing and voluntary" 16 under the ADEA should be applied when the same standard is used under Title VII. In this way, employees will be provided informal discovery of the statistics which are crucial to findings of discrimination, prior to making the decision to take the money or litigate.
(C) Fiduciary duties in the administration of severance pay plans under ERISA include collection and supply of information
If the employer utilizes severance pay to buy out a terminated worker's pay, it must comply with ERISA standards, including the statutory and fiduciary duties of an ERISA plan administrator, on re-quest, to supply specific information to the plan "participants," to ad-minister the plan fairly, in the interests of all employee participants, without favoritism, and to answer employee questions honestly. 17 To meet these disclosure obligations, relevant information must be col-lected and available.
6. THE DOWNSIZING PLAN MUST PROVIDE PROTECTIONS AGAINST DISCRIMINATION.
The risks of disparate impact are so great as to require the down-sizing plan itself to contain specific safeguards against possible dis-crimination. This risk is well understood and there exist practical methods to address it. 18 A plan to reduce these risks should include, at a minimum, these concrete steps:
1. Specific directions to all personnel involved in making deci-sions as to who to discharge, that the decisions are to be made without discrimination, and in accordance with existing affirmative action policies.
2. Assurance that job descriptions are sufficiently specific to fit candidates to the prospective jobs, permit meaningful differentiations between candidates, and reduce opportunities for favoritism and discrimination.
3. Assurance that relevant statistics concerning disparate impact are collected and maintained. [P.181]
4. Assurance that the downsizing process, including standards for personnel selection are in fact implemented in conformity with the plan.
5. Review proposed dismissals before the employees are actu-ally dismissed, to identify disparate impact, review the supportability of judgments which compare competing candidates, and secure recon-sideration of suspect decisions.
6. Assurance that any waiver excludes ERISA claims which cannot be subject to waiver.
If the plan does not contain the above provisions, or their equivalent, it may not meet the statutory requirement of being "con-sistent with business necessity," and also leaves the employer open to the charge that there existed alternatives with lesser disparate impact, i. e. the steps mentioned above. 19 These steps are not burdensome, and are consistent with existing personnel practice. Employees may seek injunctive relief against the operation of plans which do not con-tain such safeguards. Of course, if these safeguards are included in the plan, they may be binding on the employer under ERISA or under state contract law.
7. EFFECT OF DISCLOSURE REQUIREMENTS
(A) Creating a negotiation context
These disclosure requirements under ADEA/ Title VII/ ERISA will provide employees with facts germane to the questions of discrim-ination and contract breach before they must choose between signing a waiver or litigating. When that information is provided employees, advised by counsel, will be able to make intelligent judgments and, pursuing them, to negotiate with their employers on the basis of rea-sonable knowledge. If they are unionized, the union will have the in-formation for purposes of negotiation or, if they are not unionized, the information may provide employees with a basis for seeking organiza-tion or representation. This environment will require employers to be sensitive to employee interests despite the prospect of a waiver. This prospect of unionization or litigation is not only an antidote to the risk that anticipated waivers may lead managers to disregard their legal obligations, but it is a positive advance in the relations between em-ployers [P.182] and employees by providing information to employees before they are faced with serious employment related choices.
(B) Fiduciary and other duties in connection with downsizing under ERISA
The managers of a downsizing program which utilizes severance pay are subject to the fiduciary duties of ERISA in connection with decisions concerning who to discharge. These duties require the man-ager not only to act prudently and in the interests of participants and beneficiaries, but to provide truthful information concerning the plan on request of those parties. 20 In addition, these employees are enti-tled to certain information by the terms of ERISA itself.
Therefore, when an employee learns that he or she is a "partici-pant" in a downsizing program -- meaning only that the unit or job in which the employee works is subject to downsizing -- the employee is entitled to information about the plan, a copy of the summary plan description, and access to a copy of the plan. The employee is also entitled to truthful answers to questions concerning how the fiduciary intends to carry out the plan, including matters discussed earlier in this paper relating to the avoidance of discrimination.
When an employee is told that he or she has been fired, that em-ployee is entitled to truthful information from the fiduciary to deter-mine if the administrator acted prudently and in accordance with the plan document and applicable law in connection with both the process of downsizing and the decision to terminate the plaintiff. Plaintiff is entitled to that information in a timely manner. If the forty-five or twenty-one days provided under the ADEA to review a proposal for severance pay with a waiver is insufficient to obtain the information or consider its significance, the parties can agree to extend the time for providing that information. A refusal by an employer to provide such information or an extension may mean that the waiver is not "know-ing and voluntary" under ADEA, and may itself constitute the basis for an ERISA Section 510 action. A refusal to provide the informa-tion at all or providing false or misleading information would consti-tute a breach of the fiduciary obligation subject to injunctive and equitable relief and damages under ERISA. [P.183]
(C) Nature of information which must be supplied
What sort of information, beyond that statutorily required under the ADEA must the fiduciary supply? First, information concerning whether the plan was adopted or amended in contravention of ERISA Section 510 must be presented. If the plan was adopted to deprive employees of rights under ERISA or an ERISA covered plan, the fi-duciary may not implement it because it is not "in the interests of the participants and beneficiaries."
Second, information as to whether the employer acted prudently and in accordance with law in carrying out the downsizing must be provided. This would include information concerning the impact of the downsizing on groups subject to Title VII, as well as the ADEA.
Third, information must be provided explaining why a concerned worker was dismissed, who will perform his or her duties, why one worker had been discharged and other similarly qualified identified employees were retained.
When the employee and counsel have this information, they can truly make an informed judgment as to whether to litigate or accept the severance payment with the waiver. Until then, they do not have sufficient information to make the kind of judgment that is "knowing and voluntary." The ADEA, Title VII and ERISA are properly con-sidered together in downsizing situations. The result of the joint con-sideration of these three statutes is a form of informal prelitigation discovery which will provide employees with relevant information on which to make a decision about whether they have been wronged.
8. STATE EMPLOYMENT CONTRACT LAW AND DOWNSIZING
The application of state employment contract law in downsizing situations is uncertain for two reasons. First, the checkered state of the state law, and second, the clouded issues of the constitutionality and interpretation of ERISA preemption.
(A) Critical issue in state contract law-- is "downsizing" a reason to avoid state law contract liability?
A reduction in force, downsizing or restructuring takes place against a history of relations between employer and employees. In the course of these relations, employees may have acquired state law based contractual rights to continue in employment while their per-formance is satisfactory. The law of implied employment contracts that developed in the 1970's and '80's was particularly addressed to [P.184] larger employers who operated with employee handbooks and per-sonnel manuals. This "new" law essentially held employers to the promises they had made or implied in those documents or in other aspects of their relations with employees. The core promise in these relationships was of continued employment while performance was satisfactory. Almost by definition, employees terminated in a down-sizing will have been performing at or above standard level, and most will have performance appraisals to prove it. Their state contract rights must be addressed in connection with a downsizing program. The employer effort thus far has been directed to securing an interpre-tation of the implied contract which permits the downsizing.
(1) Interpretation to permit downsizing
Employers argue that any contractual rights to continued em-ployment while performance is satisfactory does not prevent a reduc-tion of the workforce for business reasons. This interpretation of the implied contract appears sensible where (1) a downsizing is necessary to preserve the operation of the business from impending bankruptcy or other financial disaster, (2) the employer has taken other actions appropriate to that end, and (3) the dismissal of the employee is a necessary step. 21 Both the probable expectations of the parties and the balance of social values suggests this result. Preserving a going concern which employs many at the expense of a few appears to be a valid weighting of interests. The burden of proving these facts is on the employer seeking to justify a breach.
Some courts appear to broaden this justification to include any economic advantage that the employer may seek. 22 But to discharge [P.185] an employee who has worked under a promise of continued employ-ment while performance is satisfactory in the name of improving the profitability of a going concern, renders the promise of continued em-ployment illusory. The employer who has made a promise to pay for goods to be delivered cannot avoid the obligation on the grounds that it could make more money by refusing delivery and not paying. No different rule should be applied to promises concerning services.
2. Unilateral abrogation without mutual assent or consideration
Another approach taken by some employers to their promises of continued employment while performance is satisfactory is to attempt to abrogate the promise unilaterally, without mutual assent or consid-eration. This is accomplished by issuing a statement that existing promises are no longer binding, and then arguing that the employee agreed to this "disclaimer" by continuing to work after the statement was issued. This argument has been accepted in a few jurisdictions. 23 The difficulty lies in the requirement of mutual assent and considera-tion for an effective modification of an existing contract. Continuing to work under the unilaterally altered terms does not constitute an acceptance of those terms, because the employee is entitled to con-tinue to work under the original contract until it has been lawfully modified. As the Seventh Circuit put it:
To conclude that the employee has agreed to become an "at will" employee by continuing to work after such a unilateral announcement has been made, is to afford the initial contract less weight than ordi-nary contract law would require. The employer who is already under a contractual obligation to provide employment, has not provided any consideration for the alteration of the agreement. Mutual assent can-not be assumed from the fact that the employee continued to work under the original contract. The initial offer of employment so long as performance was satisfactory, or to be discharged only for just cause, is understood to be accepted by working because its terms are advan-tageous to the employee. The same assumption cannot be made when the employer seeks to impose disadvantageous terms without negoti-ation, mutual assent or consideration. 25
(B) Disparate impact statistics as evidence of breach of contract
Statistics showing a disparate impact on minorities, women or older workers, which provide a basis for Title VII or ADEA liability, are also relevant in state law breach of contract actions. In those ac-tions, employers either deny there was a contract or assert a "good reason" for terminating employees. Statistics showing disparate im-pact cast doubt on whether the reason given was the basis of the ter-mination, whether legitimate business needs were in fact involved, or whether the employer was ridding itself of members of groups pro-tected by national, and usually also, state policies. The evidence also would be germane under state anti-discrimination law, public policy doctrines, and doctrines requiring good faith and fair dealings with employees.
(C) Preemption of laws that 'relate to' ERISA covered plans.
ERISA preemption is very broad and was intended to protect employer pension plans, which were to be subject to a uniform federal law, from state regulation. The statute preempts state laws that "re-late to" ERISA regulated plans. The comprehensive nature of regula-tion of pension funds and plans fully justifies foreclosing state [P.187] regulation. But so called "welfare benefit plans," which include sever-ance pay and health insurance plans, are not comprehensively regu-lated and do not require formal funding. Such plans are usually paid from current earnings. Therefore, the regulatory scheme is much less specific and the fiduciary duties are narrower. Thus, there exists the possibility that some employer activities in connection with severance payment and health insurance plans, for example, arguably will not be subject to ERISA, but will nevertheless "relate to" ERISA plans suffi-ciently to foreclose state regulation. Some courts have recognized a "gap" in ERISA law where neither federal nor state law apply. They do this by assuming that conduct that is neither expressly permitted nor prohibited by ERISA cannot be regulated under state law. This presumption perhaps unwittingly reinstates "Wood's Rule," that em-ployment is presumptively at the will of the employer. This extraordi-nary result flies in the face of congressional policy in ERISA to prevent employers from cheating their employees, not to give employ-ers an immunity to do so.
ERISA preemption will legitmately preempt state regulation of downsizing process only where it actually regulates the actions of em-ployers and fiduciaries. But where Congress has neither permitted nor prohibited conduct -- where it has left a "gap" -- there is no federal justification for usurping state regulatory power. There is no basis for interpreting ERISA to permit employers unregulated freedom of ac-tion. Thus the courts have a choice; they can either narrow the scope of preemption so that it only reaches matters on which there is, or can be developed substantive federal law, thus leaving state law applicable to all other issues; or they can expansively interpret ERISA to de-velop a comprehensive code of federal law substantively regulating all aspects of a relationship which involves ERISA. The adaptation of federal common law to achieve this result -- as happened under Sec. 301 of the Labor Management Relations Act 26 -- was foreshadowed in the legislative history of ERISA and has been adopted by some courts. In developing this body of law, the courts should be mindful that in enacting ERISA, Congress did not intend to restore "Wood's Rule" of employer discretion but to protect workers against employer abuses. Thus the expansive preemption language in ERISA should be confined to situations where the congressional intent to regulate is clear. Otherwise, the preemption of state laws that "relate to" the downsizing process is probably unconstitutional. [P.188]
CONCLUSION-- THE INSTABILITY OF THE EMPLOYMENT RELATION AS A POLITICAL AND ECONOMIC PROBLEM
The main thrust of this essay has been that the seeming sacro-sanct "business judgment" of the employer concerning downsizing is in fact subject to a searching judicial review; that statistics of the impact of the downsizing are a key to surviving summary judgment because they are the best "hard" evidence on which a court can rely under federal EEO law doctrines; and that workers are entitled to substan-tial information concerning the fairness of programs that adversely af-fect them before they must make major life choices concerning their employment. We think these are important points, not only for the parties involved in the process; but for the larger picture of labor rela-tions in a future when constant change, rather than job stability, ap-pears to be the emerging standard employment relation. 27
At stake in the downsizing cases is a struggle over the price that employers must pay for the transition into a world of change that may create permanent anxiety among employees. Accepting that change is inevitableÎ and perhaps desirableÎ is not the same as concluding that workers must bear all of the costs. The desirability of retraining pro-grams, and other forms of assistance to enable displaced workers to find another niche in society may be acknowledged as a political mat-ter, but to make those programs real will cost real money -- the Twen-tieth Century Fund suggests that four percent of payroll, rather than the current one percent, would be an appropriate figure for the nation to spend on such programs. 28 This means that there is currently a $120 billion annual "training gap." 29
The extent to which the business community will support such programs is directly related to the issues raised in this essay. If the employer community understands that it cannot shift substantially all of the human and economic costs of downsizing to the workers, it may support other programs, in the hope that government will bear or share these costs. Otherwise, we risk a nation of permanently inse-cure and discontented workers.
* Thomas A. Cowan Professor of Law, Rutgers, the State University of New Jersey, BA, JD University of Michigan.
** Adjunct Professor of Law, Rutgers, the State University of New Jersey, former Associate Professor, Rutgers Graduate School of Management.
1. Title VII of the Civil Rights Act of 1964, 42 U. S. C. ¦ 2000e-2000e( 17)( 1994).
2. Age Discrimination in Employment Act of 1967, 29 U. S. C. ¦ 621-634( 17)( 1994).
3. Employee Reitrement Income Security Act of 1974, 29 U. S. C. ¦ 1001-1374 (1994).
4. Workers Adjustment and Retraining Notification Act of 1988, 29 U. S. C. ¦ 2101-2109 (1994).
5. ETHAN LIPSIG, DOWNSIZING: LAW AND PRACTICE (1996) systematically explores the legal and practical issues involved in planning and executing a reductions in force from the per-spective of counsel to employers. This book should be required reading for government regula-tors, plaintiffs' lawyers, as well as the employers' bar for whom it is oriented. Chapter 3, entitled Exit Incentives, pp. 71-91 provides a good overview of the elements of the plan. This Chapter is reprinted in, ABA, CENTER FOR CONTINUING LEGAL EDUCATION AND SECTION OF LABOR AND EMPLOYMENT LAW, DESIGNING, ATTACKING, AND DEFENDING WORKFORCE RESTRUCTURINGS (hereinafter Restructuring) C-1Î C-24 (1996), a helpful collection of essays by practitioners.
6. 29 U. S. C. ¦ 626( f)( 1994).
7. The Supreme Court may resolve this issue in Oubre v. Entergy, 112 F. 3d 787 (5th Cir. 1996) cert. granted, 117 S. Ct. 1466 (1997). Both public policy and the plain meaning of the Older Workers Benefits Protection Act (OWBPA), 29 U. S. C. ¦ 623 (1994), should lead to a conclusion that the tender back issue is nothing more than a claimed breach of contract, which may be adjudicated as a counter claim, but should not preclude litigation claiming a violation of the statutory standards for establishing a valid waiver. The premise of the OWBPA was that work-ers did not have an equality of bargaining power with those employers who would pay severance pay only to employees who signed a waiver. And the premise of ERISA was that employees needed protection of their retirement funds from greedy or dishonest employers.
8. The notice will allow the employee to seek counsel, and or the advice of a union. Em-ployees may seek union assistance in a particular instance without seeking general union repre-sentation. The union, as agent for those employees who have appointed it, can demand information, and can advise in the filing of litigation. The employer may negotiate with the union serving as counsel, agent or party regardless of whether it represents a majority of the employees. See, Alan Hyde, et al., After Smyrna: Rights and Powers of Unions that Represent Less Than a Majority, 45 RUTGERS L. REV. 637 (1993).
9. Pub. L. No. 102-166, 105 Stat. 1071, 1071 (codified at 2000e-2( k)( 1994)).
10. See Wards Cove-Packing Co. v. Atonio, 490 U. S. 642 (1989).
11. CARL E. VAN HORN, TWENTIETH CENTURY FUND, NO ONE LEFT BEHIND: THE RE-PORT OF THE TWENTIETH CENTURY FUND TASK FORCE ON RETRAINING AMERICA'S WORKFORCE 102-06 (1996)( internal citations omitted).
12. 401 U. S. 424 (1971).
13. Pub. L. No. 102-166 ¦ 3( 2), 105 Stat. 1071, at 29 U. S. C. 2000e-2( k)( C)( 2)( 1994).
14. Older Workers Benefit Protection Act of 1990, Pub. L. No. 101-433; 104 Stat. 978 (codi-fied at 29 U. S. C. ¦ 626 (1994)).
15. 29 C. F. R. ¦¦ 1607.1-1607.7 (1996).
16. 29 U. S. C. ¦ 626( f)( 1)( H) (1994).
17. 29 U. S. C. ¦ 1022 (1994).
18. Lipsig, supra note 5, at 64-67.
19. Liability may exist even where business necessity has been shown under the "alterna-tives with less adverse impact" provision of the 1991 Civil Rights Act, ¦ 703( k)( 1)( A)( ii), codi-fied at 29 U. S. C. 2000e-2( k)( 1)( A)( ii) (1994).
20. David M. Cook, Exit Incentive Fraud Claims, in RESTRUCTURING, E-1, at 7-13.
21. Gianaculas v. Transworld Airlines, Inc., 761 F. 2d 1391, 1395 (9th Cir. 1985); Valles v. Arizona Bd. of Regents, 743 P. 2d 959 (Ariz. 1987); Lofvendahl v. Barclays Amer. Corp., 5 Indi-vidual Employment Rts. Cas. (BNA) 821 (C. D. Cal. 1990); Malmstrom v. Kaiser Aluminum and Chem. Corp., 187 Cal. App. 3d 299 (1986); Stull v. Combustion Engineering, Inc., 595 N. E. 2d 504 (Oh. App. 1991).
22. In Joanou v. Coca-Cola Co., 26 F. 3d 96, 100 (9th Cir. 1994), the employer amended its seven year old severance pay plan one month before selling part of its business, to exclude benefits to employees who were offered employment with the new employer if the new em-ployer offered "comparable" employment. The employees sued under California law to enforce the older plan. The court first held that the employer could amend a welfare benefit plan with-out regard to employees' interests. [This holding was clearly wrong in light of the later Supreme Court decision in Inter-Modal Rail Employees Ass'n v. Atchison, Topeka and Santa Fe Ry. Co., 117 S. Ct. 1513 (1997).] Then the court found state law preemped. It nevertheless proceeded, in dicta, to hold that the sale of the business was "good cause" and that the employees had presented no evidence that it had been done in bad faith, that plaintiffs had been treated differ-ently than others, or that it was "pretextual." 26 F. 3d at 99-100. The court stated: "The proper inquiry to determine good cause will consider whether the discharge was within the bounds of the employer's discretion or instead was trivial, capricious, unrelated to business needs or goals, or pretextual." Because of its erroneous view of ERISA, the court did not consider whether the amendment of the plan a month before a sale, was inconsistent with the reliance interest of the employees built up during seven years under a plan which appeared to protect them in the event of a sale, particularly when no notice was given to the employees to enable them to protect themselves from the economic consequence of a sale to an arguably financially weaker employer.
23. Sadler v. Basin Elec. Power Coop., 431 N. W. 2d 296 (N. D. 1988); Ferrera v. A. C. Niel-sen, 799 P. 2d 458 (Colo. Ct. App. 1990); Chambers v. Valley Nat'l Bank of Ariz., 721 F. Supp. 1128 (D. Ariz. 1988); Conkwright v. Westinghouse Elec. Corp., 993 F. 2d 231 (4th Cir. 1991) (Maryland Law, but, see contra, Dahl v. Brunswick Corp, 356 A. 2d 221 (Md. 1976). These courts assume that a unilateral contract arises where an employee accepts the employers offer of em-ployment while performance is satisfactory by working, and therefore can be changed in the same way, by a change in the employer's offer, accepted by working. This analysis overlooks the difference between the first offer, where there was no prior relationship between the parties, and the later offer, where the parties are already committed by the first contract.
24. Robinson v. Ada S. McKinley Community Serv., Inc., 19 F. 3d 359, 364) (7th Cir. 1994), refusing to follow Condon v. A. T.& T., 569 N. E. 2d 518 (Ill. App. 1991). Accord, Small v. Springs Indus., Inc., 357 S. E. 2d 452, appeal after remand, 388 S. E. 2d 808 (S. C. 1987); Hanley v. River-side Methodist Hosp., 603 N. E. 2d 1126 (Oh. App. 1991).
25. Torosyan v. Boehringer Ingelheim Pharm., Inc., 662 A. 2d 89, 98-99 (Conn. 1995).
26. See Textile Workers Union v. Lincoln Mills, 353 U. S. 448 (1957).
27. ROBERT B. REICH, THE WORK OF NATIONS: PREPARING OURSELVES FOR 21ST CEN-TURY CAPITALISM (1991).
28. Van Horn, supra note 11, at 17-21, 28-29. 29. Id. at 4.
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