Mba 560 Legal Issues in Reduction of Workforce

Legal Issues in Reduction of Workforce

University of Phoenix

Legal Issues in Reduction of Workforce

“Increased competition and rapidly developing technologies are leading companies to make innovations in how they operate, organize work, and manage people. As employers increasingly take advantage of new technology they are finding the need to restructure staff” (Lieberman, Moss, 2001). These changes present legal challenges and risks for human resources; however, with proper planning the potential for incurring charges of discrimination or other employment law issues can be anticipated and avoided. This paper identifies these issues, the alignment of self-interest and the interests of the organization, the balance of risk, and a recommended solution to the current situation.

Situation Analysis

FastServe Inc. is a strong company involved in the direct marketing of branded sports apparel. The company has decided to move out of online distribution because the amount of transactions no longer justify the online division. A few will be retained based on past performance and skill level, while others must be released. Cutting costs is the primary reason for FastServe’s recent reduction of workforce decisions, and legal issues have come into play. “One way to make sure that former employees don’t become plaintiffs is for managers to fully understand federal statutes that create implications for these decisions because what decision makers in this area don’t know can hurt them” (Kuhn, Stout, 2004).

After two days of discussion, FastServe’s COO made a list of five individuals being considered for layoffs. According to Paul Oyer and Scott Schafer in their article Layoffs and Litigation, “Although the costs of continuing to employ too many unproductive workers are potentially crippling, costs associated with displacing workers can be significant…and many observers argue that these costs of displacing workers, which can include legal expenses, severance payments, unemployment insurance taxes, and outplacement assistance, have escalated in recent years due to substantial increases in employment discrimination litigation” (p. 345, 2000). All five of the candidates present potential legal challenges that would affect the company’s decision. The following is a discussion of extenuating regulatory circumstances, legal risk, and business risk associated with the layoff of each individual.

Carl Haimes

Carl is an above average exemplary employee; however, the skills he possesses will now be redundant considering