Check post-Layoff rehire policies for disparate-Age impact

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in Compensation and Benefits,Discrimination and Harassment,Hiring,Human Resources

In tough economic times, organizations sometimes have to make hard choices—such as whether to temporarily lay off employees. Of course, you’ll hope to ramp up staffing when the economy rebounds.

That’s when you’ll need to be extra careful. If you bar workers you laid off from being rehired—perhaps because you prefer to hire new employees whom you won’t have to pay extra for years of relevant experience—you may be courting trouble.

Here’s why: A recent 8th Circuit Court of Appeals case found that a policy that blocks laid-off workers from reapplying for their jobs is an employment policy, not a hiring policy.

In this case, the appeals court ruled that older employees who were disparately impacted by the policy could sue under the Age Discrimination in Employment Act.

The burden then shifted to the employer, which now has to show that a factor other than age motivated the policy. That’s hard to do.

Recent case: The EEOC sued Allstate Insurance on behalf of former Allstate insurance agents. The employees had left the company during a major reorganization aimed at reducing the number of employees and turning insurance agents from employees into independent contractors. Presumably, that would save the insurer money for benefits, salaries and other costs typically associated with having employees on the payroll.

Shortly after the employee-agents picked a termination package (there were several, including one that allowed them to continue on as independent contractors), Allstate announced a new rehire policy that prohibited rehiring the former employees in any capacity for at least one year.

The EEOC sued on behalf of older former employees, who constituted most of the employee-agents who had lost their jobs. The commission relied on a statistical analysis showing that the new rule disparately affected those older than 40. More than 90% of the former employees banned from reapplying were older than 40. The EEOC then argued that Allstate had to prove that a factor other than age was behind the rule.

The court explained that hiring policies can’t be challenged based on their disparate impact on older applicants—but an employment practice that deprives older employees of employment opportunities can. It then said the rehire rule was an employment practice and not a hiring rule. The case was sent back for trial. (EEOC v. Allstate Insurance Company, No. 07-1559, 8th Cir., 2008)

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