It seems impossible these days to watch TV or even glance at your phone without hearing breaking news about the stock market reaching new lows and America’s bleak economic future in the face of a global pandemic. Unemployment is barreling toward Depression-era levels, while countless businesses are shuttering as they no longer have the customers or revenue to survive.
For managers, there is good reason to panic. A prolonged economic shutdown means that they will be forced to make tough decisions: budget cuts, layoffs and even the existential threat of a bankruptcy filing could all be imminent.
Harking back to the Great Recession, employers and managers may be tempted make some of these decisions hastily and without careful assessment of their legal obligations. They should not. Particularly within the context of large-scale layoffs, deciding which employees to let go—and on what terms—can make the difference between protecting one’s business and exposing it to significant liability and the negative publicity that often comes with it.
What is Recessionary Discrimination?
It is an unfortunate reality that during a downturn, companies sometimes choose which employees to fire and lay off for reasons that are not only illegitimate but may even be unlawful.
During the financial crisis of 2008, the term “recessionary discrimination” was developed to describe situations where employers use poor economic conditions to conceal their discriminatory decision-making while conducting layoffs or reductions in force.
This behavior is especially common when the entire economy is experiencing a severe downturn or recession. In the aftermath of the Great Recession, thousands of claims were filed with the Equal Employment Opportunity Commission alleging that women, people of color and members of other protected groups were wrongfully terminated, citing unlawful discrimination.
In such conditions, employers routinely argued that they were forced to lay off portions of their workforce for purely financial or business reasons, pointing to the other employees who were also laid off as “proof” that the employer was not acting in a discriminatory manner.
Among the most notable cases was a putative class action lawsuit filed by six women against Citigroup. After the banking giant made companywide layoffs on November 21, 2008, the six plaintiffs alleged that women at the firm were disproportionately impacted. Citigroup responded by identifying women who continued to hold C-level positions at CitiFinancial North America.
However, 90% of the most senior positions at Citigroup were held by men, according to the lawsuit; its Senior Leadership Committee was comprised of 39 men and five women, and its Executive Committee included 19 men and no women. Despite this, the lawsuit alleged that nearly half of senior employees who were selected for layoffs at Citigroup were women—a stark disparity that could not reasonably be justified by the numbers.
The lawsuit also alleged that the women at Citigroup were paid less than similarly situated men and were frequently overlooked for promotions and the most desirable assignments. Similar cases were filed against other financial services firms, including Goldman Sachs, Deutsche Bank and Bank of America.
Preparing for the Future
If the past is any indicator, some businesses will use this global pandemic as a cover to target the most vulnerable members of their workforce: women, older workers, people of color, members of the LGBTQ+ community, and other protected employees. They will hide behind the pretext of economic decline in an attempt to avoid liability under anti-discrimination and whistle-blowing laws.
There are, however, various ways to challenge such decisions and reveal them as a pretext for discrimination, including:
- Highlighting past harassment by individual managers who were responsible for selecting employees for layoffs.
- Pointing to patterns of companywide discrimination in the form of unequal opportunities for pay and promotion.
- Showing inconsistencies in how employees were selected for layoff.
- Using statistical modeling.
To be clear, even the emergence of a global pandemic does not trump the anti-discrimination and whistleblower laws. Employers cannot discriminate, either implicitly or explicitly, against their employees on the basis of gender, race, disability, family medical leave, or other legally protected characteristics.
Given that many courts are closed and that we are at the initial stages of layoffs, it is too early to tell whether recessionary discrimination will resurrect itself and become a trending litigation area. Rest assured, employment lawyers are already fielding calls and analyzing potential cases, while lawyers on the management side are trying to counsel their clients on the best ways to insulate themselves from these types of cases. Time will tell where this all takes us in these unprecedented times.