Rise in Termination Suits Follows Wave of Layoffs

By Dhyana Levey | Daily Journal Staff Writer

The news about the economy just went from bad to worse - that is, if you are on the losing end of a wrongful termination suit.

As companies buckle under financial stress and give way to massive layoffs, attorneys, government agencies and an online legal matching service are reporting a spike this year in discrimination and wrongful termination complaints.

And lawyers who aren't noticing a recent boost in employment-related claims say they are bracing for a rush in 2009, especially if the economy doesn't pick up.

"If I was going to use my practice as a radar to how the economy is doing, it would be indicative that the economy is doing bad," said Therese Lawless, an employment plaintiff's attorney with San Francisco's Lawless & Lawless. "My business is booming, but I'm not gleeful about it. ... It's tough times."

LegalMatch, an online service that matches clients to lawyers, logged a 32 percent increase in wrongful termination cases and a 34 percent rise in employment discrimination cases in California from 2007 to 2008.

Employment discrimination cases filed dually nationwide with the U.S. Department of Fair Employment and Housing and the U.S. Equal Employment Opportunity Commission grew from 3,319 in the 2007 fiscal year to 4,072 in 2008 - an increase of 753 cases, according to Phyllis W. Cheng, director of the fair employment department, who posted comments about the trend on a recent Daily Journal article.

Lawless listed older employees, people who take time off for medical reasons and women on leave for pregnancies as those who tend to face the brunt of layoffs.

"Age discrimination is a huge problem in our culture," she said. "That increases when it comes to company-wide layoffs. It's an opportune time for employers to take the older workers and lump them in with other individuals."

Unless an employer has objective criteria in place for downsizing, older or disabled workers and minorities find themselves more often getting the boot, agreed Todd Schneider, a plaintiff's attorney with Schneider Wallace Cottrell Brayton Konecky.

He said his office has taken in about a 150 percent increase this year in wrongful termination claims. However, that doesn't necessarily mean a hike in viable lawsuits, he added.

"It could mean new cases, or it could just mean that people are being terminated and are angry about it," he said. "But I do believe that in an economic downturn, the potential for increased litigation is there."

Mark Ross, who defends employers as a partner in the San Francisco office of Seyfarth Shaw, said he hasn't experienced a notable rise in employment complaints. But he said he has been receiving upward of four calls a day from employers planning to downsize, who are concerned about potential legal liabilities.

"I wouldn't be surprised if we are at the foothills of the mountains," he said. "What you are likely to see in the coming months is an attack on the methodology to pick people [for layoffs]."

Companies run into trouble when, anxious to reduce costs, they lay people off without the proper explanations behind their decisions, Ross said. If a mass layoff includes a disproportionate number of employees of a certain age, gender or race, the employer could face a lawsuit - regardless of the intent behind the decision.

"I have yet to meet an employer who wakes up one morning and says - how am I going to get rid of all my old people, how am I going to get rid of all my women?" Ross said.

Natalie Pierce, a San Francisco shareholder at Littler Mendelson, which defends employers, said she's been concerned by calls from companies planning to use outdated 2001 paperwork while downsizing.

Older documents might not comply with more recent anti-age discrimination policies that must disclose to employees older than 40 the reasons behind their dismissals, she said.

Pierce agrees that a boom in employment-related lawsuits is on the horizon. Companies that plan ahead and terminate employees with meaty severance packages while they can still afford to do so will be in better shape, she said. But those taken off guard by tough economic times won't have the resources to handle downsizing as efficiently.

As companies lose money, their severance packages will become less generous - giving way to disgruntled ex-employees, she said. And a company downsizing quickly and unexpectedly could make procedural missteps.

If an employer doesn't have the proper language in its releases, a laid-off employee could sign the release, take the severance package, and then still sue, she said.

However, attorneys should take care with all the hype surrounding the bad economy, warned Cliff Palefsky, an employment discrimination plaintiff's lawyer with McGuinn, Hillsman & Palefsky.

While companies certainly are downsizing, there's nothing inherently wrongful about an economically related layoff, he said. And bringing unnecessary lawsuits can hurt a worker's future.

"If I was giving advise to someone in a difficult economy, I'd tell them to weigh the benefits of a lawsuit on their next job," Palefsky said. "If you walk into a job interview and say 'I was an employee in good standing who got laid off,' there's a lot better chance to get that job if there isn't a lawsuit."