From Layoffs to Lawsuits

Economists are still arguing over whether the United States slipped into a recession in 2001. But one thing is for sure: Fewer people have jobs.

Nationwide, about 1.5 million jobs have been eliminated since the alleged recession began in March 2001. In Arkansas, the number of unemployed workers increased by 11,800 (or 23 percent) from 51,400 to 63,200 while the state’s unemployment rate increased from 4.1 to 5 percent.

In the Fayetteville-Springdale-Rogers metropolitan statistical area, 900 more people were officially listed as unemployed this past December, compared with December 2000.

That may not sound like a lot compared to the national statistics, but it’s an increase of 35 percent from 2,575 to 3,475. That’s out of a civilian labor force of 158,475. The MSA’s unemployment rate increased during that time from 1.7 to 2.2 percent, still considerably below the national average of 5.8 percent.

The sputtering economy of 2001 saw the Dow dive by 29 percent from a May high of 11,350 to 8,062 after September 11, but it has since recovered to be trading around 10,463.

Last year also saw corporate profits sink by 13 percent, CEO compensation drop by 10.2 percent and job discrimination complaints increase by 1.2 percent — the highest level since 1995.

Cutting Back

As corporations look for ways to tighten their belts, middle management seems to be getting squeezed the hardest.

“Middle management is a place where companies tend to get fat,” said John Delery, an associate professor of management at the University of Arkansas, “so it’s not unusual to see that that’s where some of the layoffs are.”

Delery said companies don’t lay off workers simply because their salaries are high but that it is one factor to take into consideration.

“When people do get laid off, there are people who are average employees and do well enough to stay with the firm [in good economic times],” he said. “But when you have to cut back, you may have [a lot] those employees.

“It doesn’t make a whole lot of sense to do it by the salary. What makes sense is to lay off people who are not part of the strategic core of the company. Some people make high salaries because they’re exceptional.”

Delery defined “strategic core” as “employees who are directly responsible with the core competencies of the organization.”

Delery said companies are usually good about documenting performance, so they can cite a reason for laying someone off.

“The problem with laying off older workers is anyone age 40 and over is protected under the Age Discrimination in Employment Act,” Delery said. The act, passed in 1967, was later amended to remove an upper age limit.

Delery said some layoffs of workers over age 40 wouldn’t be a problem, but during a massive “right sizing,” if the majority of dismissed workers were in that age group, they might have grounds for a lawsuit.

“That would show a diverse impact to people in that age group,” he said. “But they would have to be laid off disproportionately.”

If a company has a reputation for laying off older workers, Delery said, other employees who are laid off will be more likely to file a discrimination suit.

“People look at the way management behaves,” he said.

80,840 Complaints

According to the U.S. Equal Employment Opportunity Commission, 80,840 job discrimination complaints were filed in the last fiscal year (ended Sept. 30) against private employers. That was the most since 1995, when 87,529 claims were filed. Those numbers tend to increase during tough economic times.

The rate of age discrimination complaints increased by the greatest amount — 1.5 percent last year to 21.5 percent of all allegations. The percentage of disability discrimination complaints rose one-half to 20.4 percent of all cases in 2001. All other types of claims filings either declined slightly (less than one-half percentage point) or remained the same as the previous year.

“The incidence rate of age and disability discrimination appears to be on the rise with the graying of America,” EEOC Chairwoman Cari M. Dominguez said in a press release. “Employers must be vigilant in preventing such characteristics from being factored into their employment decisions.”

Race discrimination allegations accounted for the most complaints at 35.8 percent. Sex discrimination claims followed at 31.1 percent. Other job discrimination complaints pertained to retaliation, national origin, religion and equal pay.

A total of 431 job discrimination-related lawsuits were filed last year in the United States, according to the EEOC.

The commission resolved 90,106 complaints last year, the fewest since 1994, when only 71,563 were closed. Almost two-thirds of the closed cases last year were found to lack evidence that discrimination had occurred.

More non-litigation monetary benefits were paid out in 2001 than in previous years at $247.8 million. Monetary benefits obtained through litigation totaled $50.6 million.

One of the largest discrimination suits of 2001 was the one against American Express Financial Advisors Inc., which agreed to pay $31 million to settle a sex and age discrimination lawsuit filed on behalf of more than 4,000 women who say they were denied equal pay and promotions.

The proposed settlement, which is awaiting approval from a federal judge in Washington, D.C., would also require the money-management division of American Express Co. to appoint a diversity officer, institute mandatory diversity training for financial advisers and managers and, by 2005, increase its hiring of women to 32 percent of all new financial advisers.

Currently, about 25 percent of the unit’s financial advisers are women, the company said.

Two other large business entities — Merrill Lynch & Co. and the Salomon Smith Barney unit of Citigroup Inc. — settled high-profile sex-discrimination cases in the late 1990s.

Economically Insulated?

Stephen L. Woods, a Rogers lawyer who handles job discrimination suits, said he hasn’t seen an increase in those cases in recent years.

One reason for that, he said, is Northwest Arkansas’ healthy economy and low unemployment rate even though unemployment is up compared to 2000.

“Our employment rate here is so high you just don’t see much of it,” he said.

Woods said he filed about 15 job discrimination suits last year, with sex discrimination and disability discrimination accounting for the majority of them.

“People haven’t been lining up at my door to talk about age discrimination,” Woods said. “Maybe [more cases are being filed] in some parts of the world, but I haven’t seen it in my little corner of Arkansas.

“Yes, [age discrimination] is occurring. There’s no doubt about that. But the other side of the coin is if you’re over 40 and you lose your job, it’s not necessarily because of age.”

Also, Woods said, laying off workers to save money is perfectly legal, so firing an executive because he or she has a high salary is as good a reason as any.

The layoffs that have affected other parts of the country are just now trickling down to Northwest Arkansas, Woods said, so that could cause an increase in age discrimination lawsuits.

Only three age discrimination suits were filed in U.S. District Court in Fayetteville over the past three years. Three age discrimination suits were filed there in 1998, and two were filed in 1997.

In one of those suits, the plaintiff said he stood no chance because Arkansas is a “right to work state.” But Woods said that phrase means you don’t have to belong to a union to work.

“I think what they’re talking about is at-will employment,” Wood said. That means an employee can be fired basically for no reason, as long as the termination is not discriminatory.

Federal Laws Prohibiting Job Discrimination

• Title VII of the Civil Rights Act of 1964, which prohibits employment discrimination based on race, color, religion, sex or national origin;

• The Equal Pay Act of 1963, which protects men and women who perform substantially equal work in the same establishment from sex-based wage discrimination;

• The Age Discrimination in Employment Act of 1967, which protects individuals who are 40 years of age or older;

• Title I and Title V of the Americans with Disabilities Act of 1990, which prohibit employment discrimination against qualified individuals with disabilities in the private sector and in state and local governments;

• Sections 501 and 505 of the Rehabilitation Act of 1973, which prohibit discrimination against qualified individuals with disabilities who work in the federal government; and

• The Civil Rights Act of 1991, which, among other things, provides monetary damages in cases of intentional employment discrimination.