Lay Off Situation

I have a friend of the family who has been told she is being laid off.  Unfortunately she is a single income earner and also has been battling bone cancer in her skull.  Based upon some conversations I have had with her I am starting to wonder if she was selected for the layoff because of her illness.  Her supervisor has told her that he would write a letter of recommendation for her so that she could get another job and has told her that if he has any openings in the future, he would bring her back (so they can't say the lay off is based upon performance).  To date they have not said what the basis is for the people that are being laid off.  There is no one in HR at this company.  Many of the things she has told me in the past have lead me to believe that the managers are flying by the seat of their pants with no regard to laws, regulations or policies.

My question to you is can you think of any court cases recently involving the reason a person was laid off?  She is located in the 4th circuit, although I want to look at as many of the cases as I can find.   I am usually the one telling friends that what is happening is allowed by law, but in this situation I am starting to think otherwise. 


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  • Companies routinely do not specify the exact criteria for their layoff decisions.  Typical problems with layoffs involve inappropriate implementation of WARN, retaliation, and discrimination.  There are plenty of lawsuits out there in which a particular layoff decision was questioned.

    Can you give a more complete picture of the suspicious things she has reported to you that make you suspect that something inappropriate is going on?

    A person can be laid off because their function is no longer needed (replaced by machinery, for example), which often sidesteps all the particular issues related to the person laid off.  What is her role in the Company?  How many others do what she does?

    She should definitely keep an eye on the position she's vacating and find out if they hire someone else into the same exact position.

  • I almost didn't post this yet because I really don't have all the information.  I was just trying to get a jump on looking at some of the cases to see if there could possibly be an issue here.   

    I am meeting with her this weekend to get more of the details about what has happened. One of the things that has concerned me is that she says she is considered a contractor.  I asked her about what paperwork she was given when she took the position and she is supposed to show me all of that.  She is in the mortgage industry, an auditor of loans.  She said that 2 people were hired after her that are considered regular employees.  When she was hired she was told there are no benefits, no sick or vacation leave and no 401k.  Since that time the company changed their mind and has offered her benefits (to which she pays almost 3 times as much as the regular employees).  She is also eligible to participate in the 401k program and receive a company contribution.  She is paid on a W-2 and not a 1099.  The company also determines what hours she works and where the work is done. (She actually asked if she could do work from home while she was taking some of her treatments and was told yes originally and then they pulled that back and said no.)  She has also heard people talking in the office that she is the reason that their health insurance costs went up this year.  She has been told confidentially that some of upper management made the determination as to who would get laid off based on who they liked and didn't like.  (Of course there is nothing to really go on here, other than speculation. Not sure how the person knows this that told her this information.)

    As I mentioned before I really don't have the whole picture yet so hard to make any determinations.  I will be curious to find out from her how many other people were laid off, what positions they were in, etc.  

    Fortunately for me, in the years that I have been in HR, I have never had to deal with a major lay off situation other than a one or two positions being elimated for changes in the business structure, so most of this is all new to me. 

  • Are they asking your friend to sign a severance agreement? If so, she needs to have an attorney review it before she signs anything. She should also get the advice of an attorney if they aren't offering a severance. When you give this scenario the smell test -- something's not right.
  • There are a few problems here, IT.


    Things to look into:

    1. You don't lay off a contractor.  Contracted individuals work on a B2B basis and you simply end the arrangement.
    2. Contractors do not have tax withheld by the contracting entity.  That is, if Company A hires Company B to do some work, then Company A pays Company B who writes pay checks to the people in Company B who did the work or, in turn, sends a check to Company C who was contracted by Company B to do the work on its behalf for Company A.  If she is a contractor, why is she on the contracting entity's payroll?
    3. You don't sever contractors: if she got a release and settlement agreement, it's probably red-handed evidence that she was an employee who was discriminated against due to her illness, which may be a violation of FMLA, ADA, or state protective legislation by preventing her from exercising her rights under the various acts by pretending she wasn't an employee.

    I'll be interested to learn a lot more about the documents involved in the creation and disollution of her relationship with the Company.

  • ETA: I do agree that she is an employee due to the details of the post and therefore would be covered by ADA, FMLA (if there were enough total employees for the employer to be covered), Title VII and other employment laws. 

    It is hard to say without knowing details, but usually unless you can prove a link between her disability and why she was chosen as a person to get laid off, it can be tough to prove illegal discrimination if the company can come up with another reason that is not pretextual.  Some reasons could be length of service, highest salary, lowest producer, etc.  Companies do not always give the criteria for layoff to those that get let go.

    Has there been a decrease in the total amount of loans the mortgage company is auditting?  Is she the only person who does the audits?  Were others also laid off at the same time? Or just her?  If there were others, it will be harder to prove unless they also have a medical condition.  She would have had to have been treated differently than a "similarly situated" employee. 

    I agree with having an attorney look over the details of the situation and any severage/waiver of claims that they might present.  If she happens to be over 40, she should have 45 days in which to do so under ADEA.

  • Thanks for all the help. I will definately keep you posted on new developments.  She had originally called me because she was upset about losing her benefits and wanted to know about how to get other benefits. I explained COBRA to her and gave her some questions to ask about getting the COBRA paperwork.  As I mentioned before, she is a single income earner (over the age of 40) and she has been receiving treatments for cancer.  She has depleted most of her savings with paying bills that the insurance company didn't cover and also for days that she lost when she wasn't able to work (she has no sick or vacation time under this "contractor" role).  She is worried about trying to find another job with benefits.  I have told her to go apply for unemployment. 

    All of this doesn't make sense to me at the moment.  I will get some more details and let you know.  Based upon what I find out this weekend, I will probably be recommending a good attorney for her to speak with. 

  • [quote user="HRforME"]

    ETA: I do agree that she is an employee due to the details of the post and therefore would be covered by ADA, FMLA (if there were enough total employees for the employer to be covered), Title VII and other employment laws. 

    It is hard to say without knowing details, but usually unless you can prove a link between her disability and why she was chosen as a person to get laid off, it can be tough to prove illegal discrimination [...]


    However, it would be difficult to explain why she was under the "contractor" arrangement involving triple insurance costs and no PTO when other people brought on right after she was "contracted" were given regular jobs.  The timing of their awareness of her illness will be critical.  Did they know that before they "contracted" her?  After the "contracted" her but before they "hired" the other two?  Either of those situations is troublesome.

  • Good questions TXHRGuy.  I will have to get her to write down the timeline for everything that has happened.

    Will keep you all posted...

  • It does sound like the company decided to pick and choose when they were going to have her as a contractor and when as an employee.  But I've never seen a 401k plan that allows contractors to participate.  And the whole part of triple medical costs smells too.  There could be an explanation (such as the employer was buying personal medical coverage for each employee rather than a small group plan)....or they were covering her benefits outside of the small group plan so as to not raise the rates -- and making her a "contractor" so she wasn't eligible for the group health plan, but then she wouldn't have been eligible for the 401k either. If the health insurance was not on a pretax basis (i.e. not a qualified benefit), I am not sure that what they were doing is wrong from a benefit standpoint.  But it would be wrong from a discrimination viewpoint unless they charged everyone differently based on the individual cost of their insurance.

     I too would have her document everything and speak with a local employment attorney who is familiar with employment status (employee vs contractor) AND benefit discrimination.




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