• Drew Dotson

Brace for [Adverse] Impact: EEOC Rules IBM Layoffs were Discriminatory

Updated: Apr 28

Reductions in force (RIFs). Layoffs. Downsizing. No matter what you call it, workforce reduction is no HR professional’s dream. However, when layoffs are unavoidable, it’s important that they’re handled as thoughtfully and carefully as possible. RIFs alone can easily cause your thoughts to spiral into the courtroom before a single notice is issued, but statistical analysis can help identify areas of concern before they become, well, concerning.

IBM’s layoff process was recently scrutinized, and the company will be paying for it for quite some time. When the U.S. Equal Employment Opportunity Commission (EEOC) took a closer look at IBM’s layoff practices from 2013 to 2018, the numbers simply did not compute. Upon analyzing IBM’s process, the EEOC found that employees aged 40 and older comprised more than 85 percent of the total potential pool of employees considered for layoff. Not only did IBM’s practices raise questions under the Uniform Guidelines on Employee Selection Procedures (UGESP), but the company violated the Age Discrimination in Employment Act (ADEA), since employees 40 years and older fall into a protected class.

After crunching the numbers, the EEOC was convinced that IBM’s employment practices had adverse impact, meaning there was “a substantially different rate of selection in hiring, promotion, or other employment decision which works to the disadvantage of members of a race, sex, or ethnic group” (UGESP). Because the layoffs disproportionately affected older employees, IBM’s process was deemed discriminatory.

Before any workforce reduction, employers must consider whether the layoffs will adversely impact any protected groups. If pre-RIF analysis shows disproportionate layoff rates based on any prohibited factors (e.g., age, race, or gender), it’s important to dig deeper to try to understand why. Though numbers alone don’t necessarily mean a company was discriminatory, you can complete an adverse impact analysis up front to draw attention to areas of consideration – and possibly eventual scrutiny. And, since you asked, yes, ePerkz can analyze your severance events for compliance with ADEA (and WARN, ADA, and Title VII, but who's counting?).

Employees in protected groups should be eliminated at a rate equal to or below the average rate for all employees being laid off. If one group has a surprisingly high percentage of layoffs, you know you’ve found an area that might raise eyebrows. The UGESP has made it clear that “any procedure having adverse impact constitutes discrimination unless justified.” Chances are that your RIF was driven by financial reasons, and the last thing you want is to open yourself up to the economic burden of litigation.

When it comes to workforce reduction, compliance is key. By automating the offboarding process, employers can benefit from compliance assessment tools, a priceless perk if it means steering clear of discrimination and wrongful termination lawsuits. Layoffs aren’t fun for anyone, so it’s imperative they’re done correctly – with adverse impact top of mind. Otherwise, your workforce reduction could quickly transform from a chaotic quarter to a multiyear legal battle. Just ask IBM.

About Onwards HR Onwards HR helps organizations manage human capital risk. We empower businesses to conduct consistent and compliant separations using our analytics-driven management platform. Our five-step process leverages integrated workflows, decision support tools, and advanced analytics to improve efficiency, increase effectiveness, and minimize risk. The result is a streamlined separation process that creates a positive experience for employers and employees alike as they move onwards.

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