External Staffing

The retained work force. On the other hand, if retirement incentives provide
increased opportunities for the organization to promote talented younger employees,
the productivity effects could be quite positive.

MANAGING EMPLOYEE DISMISSALS

Unlike resignations, employee dismissals are initiated by the employer. They

reflect the employer's choices, rather than the employee's. Because dismissals
ar the est extreme employme1'l.t action that can be taken, a great deal of
human resource activity attempts to avoid them. However, they are a fact of
organizational life that must be managed effectively, not just ignored or avoided .

Discharges

"You're fired." Few of us ever hope to hear those words, because they signify
the organization's most extreme action-capital punishment in terms of the employment
relationship. Discharges occur when the employer terminates the employment
relationship because the employee's behaviors are seriously harmful. A Bureau of
National Affairs (BNA) survey showed that, among human resource managers reporting
their most serious discipline problems, 60 percent cited attendance, 17 percent cited
performance, 9 percent cited alcohol or drugs, and 14 percent cited a variety of other
factors.

The Decision Process for Discharges

Because discharges represent the most extreme disciplinary action, they are not
undertaken lightly. In the vast majority of organizations, they represent the culmination
of repeated unsuccessful efforts to resolve the behavior problem or conflict. We discuss
conflict resolution systems in detail in Chapter Fourteen; here, we focus on their
implications for discharging employees. Virtually all organizations responding to the
BNA survey adopted some form of progressive discipline involving oral and written
warnings for initial conflicts. If the conflict is not corrected, more stringent disciplinary
actions are taken, such as reprimands and suspension without pay, finally culminating
in discharge. Discharges’ of rarely the only disciplinary step; however, a majority of
the organizations in the BNA: reported a one-step discharge decision for extreme
infractions. These include computer fraud/security violations, falsifying work records,
divulging trade secrets or proprietary information, willful damage to company property,
falsifying an employment application, stealing company property, physical assault,
possession of alcoholic beverages, possession of a weapon, and possession of illegal
drugs. Fifty-four percent of companies with nonunion work forces included counseling in
the process, and 71 percent included a formal appeals procedure. Those with unionized
work forces were slightly more likely to include counseling (57 percent) and much more
likely to have appeals procedures (98 percent). Discharges are more likely than any
other disciplinary action to require approval by one or more managers at a higher level
than the supervisor. Thus, discharge is reserved for only the most serious conflicts. A
recent research review suggested that discharge rates are higher during prosperity,
perhaps because increased hiring demands lead to selection errors; also found that
unionized employees had similar discharge rates to nonunionized firms paying equal
wage levels; that discharged Employees have longer, more difficult job searches; and
that discharge likelihood decreases with seniority and age. The Employment-at-Will
Issued perhaps the most controversial issue regarding employee discharges involves
the limits. Of an employer's right to dismiss employees at will. The concept when an
employee is fired for cause, what constitutes sufficient or just cause? Indeed, is any
"cause" required?

In early industrial revolution, both master and servant had obligations spelled out in law.
A master cored not discharge a servant unless that individual's conduct had been less
than satisfactory. The servant could not quit without giving sufficient notice.

The U.S. industrial revolution modified this view, however' Rather than stressing the
mutual duties of employment, the courts began to stress the right to freely choose an
employer or employee. In 1910, The California Supreme Court described the
employment-at-will rule. Precisely as may the employee cease labor at his whim or
pleasure, and, whatever be his reason, good, too, of indifferent, leave no one a legal
right to complain; so, upon the other hand, may the employer discha.rge.. and, whatever
be his reason, good, bad, or indifferent, no one has suffered a legal wrong.

Changed attitude toward employment-at-will the employer's right to terminate

at will has been steadily "tiding. The 1935 Wagner Act made it illegal for employment at
will to be fired because of union activity. Collective bargaining agreements "pouring
approximately 20 percent of the nonagricultural United states labor force" for rehiring
unionized employees, except for cause. Approximately 19 percent of the U.S. work
force ark- federal, state, or local government employees, of whom the majority are
protected from arbitrary dismissal by civil service Rules. Title VII of the Civil Rights Act
protects employees from being fired on the basis of race, color, sex, .religion, or
national origin. In addition, some legislation, such as OSHA and the clean Air Act,
includes protection against retaliatory discharge for employees who report employers'
violations' However' unjust dismissal remains a potential problem for the 70 million
employees in the United States who are neither civil servants, union members, nor
members of protected classes.
In the 1980s, the courts began to limit the application of the at-will doctrine.
Still, the treatment of wrongful or abusive discharge has been uneven. 441e
court actions have examined the at-wi doctrine in two ways: as a violation of
public policy}': and as a violation of implie contracts between the employer and
Employee.

In special circumstances the firing 0 an employee violates public policy.41

However, the "interest that the enll~lo}'ee seeks to Yindicate musL be public,
and not personal." For examj2le, j2ublic policy j2rotects:
1. An employee wllo r.efuses to commi an unlawfuLact; the court held that
an employee was protected from discharge when she refused to submit
false testimony at a trial and thereby commit perjury.
2. An employee who exercises the right to perform an important publicity
obligation; an employee was protected from discharge when he blew
the whistle on his employer's illegal conduct.
3. An employee who exercises a statutory right or privilege; an employee
may sue his employer on the grounds that his filing of a workers' compensation
claim resulted in retaliatory discharge in violation of the employee's
statutory right.

However, a Florida court held that an employee could not sue when he was
discharged for filing a workers' compensation claim, and an Alabama employer
was permitted to fire an employee who refused to falsify medical records. 42
Withou a.nationa aw, cons_e-"sus' Ihe state courts eludes us thus far.

Employee discharges can violate employment contracts. Personnel policies

and rnanuals have been construed as implied, enforceable contracts. In Toussaint
v. Blue Cross/Blue Shield of Michigan, the court held that an employee's
Discharge was improper, because the employer had discussed permanent employment
during the interview and it was reinforced in the employee handbook.
43 So, simmy referring to "permanent" employment may imply a contract,
Especially if the reference can be combined with statements on the application
Blank or oral statements during an employment interview.

Some courts have also indicated that any action must be in the context of
the total employment relationship. Thus, such factors as length of service or an
employee's moving the family to work for an employer may imply a contract.
For example, in Clearly v. American Airlines, the court ruled that termination
without legal cause after 18 years of apparently satisfactory service amounted
to "bad faith" because it would deprive the employee of pension and benefit
rights.

When discharges are subject to arbitration due to an employment contract,

employers' decisions can be overturned by an outside arbitrator. Gould, Inc.,
fired a Minnesota man who harassed his former supervisor by dumping a load
of dirt in his driveway, putting his house on the market with a real estate agent,
and summoning paramedics to his home with a false report that the supervisor
was having a heart attack. Seven months later an··arbitrator reinstated the
CHAPTER NINE Employee Separations, Work Force Reduction, and Retention 337
worker, concluding that the evidence that his actions caused the supervisor's
work to deteriorate was insufficient.46
The EEOC is likely to take an expanded and quasi-judicial role in wrongful
discharge cases in the future. More than 25,000 wrongful discharge cases were
pending in state and federal courts in late 1989, according to the BNA.47 A
U.S. Federal Courts Study Committee noted that employment discrimination
cases filed in federal courts increased from 336 in 1970 to 7,613 in 1989-an
increase of 2,166 percent. The panel noted that the bulk of this increase is due
primarily to an "enormous jump" in wrongful discharge cases, and it recommends
that EEOC become a first-line adjudicator in such cases.48
Damages paid to wrongful discharge victims can be costly. One study examined
120 wrongful discharge cases in California between 1980 and 1986, involving
employees whose average salary was $36,254. Plaintiffs won 67.5 percent of
the cases and were awarded an average of $646,855, including an average backpay
award of $388,500 and punitive damages of $523,170.49 Often, punitive damages
involve claims of mental distress. 50 Another more recent report estimates
average jury awards of $602,000. 51 However, the California Supreme Court decision
in Foley v. Interactive Data Corporation may serve to limit such damages
in the future by limiting the types of discharges for which punitive damages
may be claimed.52
Implications for human resource management As the state courts judicially redefine
traditional employment-at-will, employers must become increasingly concerned
about liability for wrongful discharge. Several lawyers specializing in the
area have recommended the following guidelines to reduce potential liability.53
1. Wrongful discharge liability begins at the reemployment interview. Avoid
any ora representation of permanent employment.
2. Revise employee handbooks to remove any implications that employment
is other. than at-will. Words such as "permanent" employee should be
dropped. Include such statements as "this handbook is not a binding
contract."
3. Job applications should list employer's rights and state that employment
is at-will. For example, Sears Roebuck & Company has had a clause on
its employment blanks for years which reads, ". . . my employment and
compensation can be terminated, with or without cause, and with or
without notice, at any time, at the option of either the Company or myself."
All applicants sign this clause, which has consistently been upheld
in termination and demotion lawsuits.
4. Document performance evaluations. Supervisors must be entirely truthful
when they evaluate subordinates. They must document each instance of
unacceptable behavior and the supervisor's response to it. Dissatisfaction
must be communicated to the employees. :they must be properly notified
that their gerfounance 's jeogardizing theit Job.

PART THREE External Staffing

Layoffs
The employer is in control of a discharge and, therefore, has the time and
tools tohandle it carefully and properly. In planning a discharge, an emotou".
should list all potential isiuei raised by the decision, any prior disiipiir"
iv-""ti"r, itt'" investigation 9.f th" employee's conduct, and
"u?f"ffy
document the chargei. The discharge should be discussed with
itr" ".if.V"e to hear the employee's_interpretation of events. Discrepan-
"i"r
.f,i,"fO be investigated-ihe employee may be right'
Establish a conflict resolution procedure'
These guidelines are also important to avoid legal suits by employees who were
dischafued in legally appropriate ways. When the reasons for discharge are not
well doiumented, "tnpioy"i.
can sue their former employers for libel based on
the former employer;s statements to the employee's prospective employers
about past job Performance.s4
Attempts to achieve legal safety may often lead employers to constantly
stress that employees understand the company's right to terminate at will' Repeatedl'
tellin! applicants and employees o'we may fire you at any time" is a
iot like having a divorce lawyer as the best man or as matron of honor at your
wedding. will employ"", r"ully feel they should commit to a job or organization
thit emphasizes dismissals? Just instituting such practices can be risky'
consider Small Business Technologies (sBT), a Sauselito, california, software
company that asked its 50 employees to sign an agreement saying they could
be dismissed at any time for any reason. When Lee Pullins, an assistant manager
with two years of tenure, refused to sign, he was fired. Now he's suing
S"g1' for *rorrgiot discharge.55 Yet employers may face considerable liability if
they do not take some precautions. Certainly' an effective and defensible performance
evaluation and communication system is needed'
Implications for the Quality of the Retained Employees
Employees are selddm discharged without documented evidence, and often
onty aiter an exhaustive series of reviews and appeals. If past behavior predicts
future behavior, such discharges are likely to rid the organization of employees
who would have been poor performers or harmful influences in the future' The
retained work force is likely to be better as a result of such discharges' Thus,
it is in the employer's and the employees' interest to have a discharge procedure
that refleits job-related behaviors and that makes decisions based on evidence.
The performance assessment process (discussed in Chapter Four)
becomes a critical activity for identifying and documenting this evidence'
5.When employees are discharged, it is usually because of something they did.
when they are laid off, it is usually not because of something they did but,
rather, beiause of "economic reasons," such as poor business decisions, poorly
Designed products, poor marketing, or unanticipated declines in markets that
are out of the organizations or the employees’ control. Thus, as difficult as discharges
may be layoffs are even more difficult, because of the affected employees are often not
at fault. Layoffs result from a verv different decision process than discharge. Layoffs
can be either permanent or temporary. Permanent layoff obviously have more serious
consequences so, much of the following discussions apply to the following permanent
discussion layoffs. The general principles howeverapply to all layoffs.

The Decision process for Lavoffs

As with discharges, employers
example, Control Data Corporation " CDC )attempts to avoid layoffs.
Rings of Defense Strategies through its rings of defense strategies, shown in the
exhibits. The idea of these is that the company protects the inner rings by first using the
strategies in the outer rings. The first defense is to cut overtime, ,.:
J40 PART THREE External Staffing
EXHIBIT 9.7 Inner Rings of Defense Strategies at Control Data Corporation
Source: Control Data Corporation, Bloomington, Minnesota.
then call back work that was subcontracted to outside vendors. Next, the company
dismisses supplemental employees and part-time employees. Finally, if the
surplus still remains, CDC must consider programs affecting its full-time work
force-the Inner Rings of Defense, shown in Exhibit 9.7. Such programs as hiring
freezes, voluntary layoffs, and dismissing poor performers are considered.
Finally, CDC considers attempts to share work and reduce normal work hours.
All of these options are considered before resorting to layoffs of full-time
employees.
Man-y organizations include redeployment, or moving of employees between
jgbs within the organization, as an alternative to layoffs in surplus areas and
hiring in areas of short~ages. 8 Redeployment can be a potent addition to efforts
to provide continuous employment for employees in organizations that believe
employment security creates important corporate advantages. 59 We will discuss
such internal movement in Chapter Ten. Employment stabilization and job security
policies often seem to be adopted with little concern for their costs, but
evidence suggests that avoiding layoffs can be cost-effective.60 One study of
U.S. government agencies found that the costs of layoffs, or "reductions in
force (RIFs)," cost more than reduction through normal attrition, with excess
costs amounting to over $1 million for some of the agencies.61 Human resource
managers would do well to consider other alternatives than "throw the crew
overboard" when the organizational ship is sinking.62
It does not appear that work force reduction, or "downsizing," has become
less frequent over recent years, though the number of employees affected by each downsizing effort has
fallen. Less than half of organizations cite a business
downturn (actual or planned) as the reason for downsizing, with "improved
staff utilization" and "mergers and acquisitions" also motivating such
efforts.63 Increasing competition ani industry maturity seem.to bring inevitable
shake-outs leading to layoffs, with recent headlines describing layoffs in high technology
and financiai institutions, such as Hewlett-Packard, Bank of America, chase Manhattan Bank, Ashton-
Tate, and AT&T.& Meanwhile, layoffs in the auto industry continue. Even tight labor markets can't
prevent layoffs to rebalance the work force by eliminating workers with obsolete skills to hire those
with more necessary skils.. So, layoffs are likely to remain a fact of corporate life.

Human Resource Activities for Managing Layoffs

when organizations decide to reduce their work force, they must consider several
activities, including: (1) giving notice of the layoff or plant closing; (2) order
layoff and bumping it:(3) in""on'" maintenance and extension of employee benefits;
(4) job search assistance, or outplacement'

Notice of layoff or plant closing The worker Adjustment and Retraining Notification
Act (wARN) requires employers with 100 or more workers to provide
at least 60 days' notice of a plant ilosing or of mass layoffs to the affected
workers or their representatives, to state dislocated worker units, and to the
appropriatelocalgovernment.ThislegislationbecamelawonAugust4,1988,
afterpassingbothr'ou'".ofCongressbymorethanatwo-thirdsmajority.
while this legislation ** resisted by tresident Ronald Reagan and several busi-
,.r"., g.orp.,lvidence suggests thai it has not drastically affected business op-
'"|ji;.;-;profits.6
Adv.ance notice appears to reduce unemployment among
displaced workers and to moderate temporary increases in area unemployment
rates