Jury Awards $50 Million in Punitive Damages for RIF Decision

Reduction-in-force decisions can be very costly. In late January, 2017, a jury awarded Robert Braden over $51,500,000 in damages against Lockheed Martin Corporation. Of the total award, $50 million was for punitive damages. Mr. Braden had been terminated from employment at Lockheed as the result of a company-wide reduction-in-force (“RIF”). He sued for age discrimination, under the Age Discrimination in Employment Act (“ADEA”) and the New Jersey Law Against Discrimination (“LAD”), asserting that older workers were targeted in the RIF. At trial, Mr. Braden, who was 66 at the time of the RIF, presented evidence that he was the oldest worker on his team and the only one subject to the RIF; substantially younger employees with the same job title were not terminated; in determining to include him in the RIF, the company did not follow its policies for ranking employees at risk of termination; performance reviews were historically influenced by age bias and inaccuracies; he had witnessed managers at the company make ageist remarks and use age to justify decision-making; and after the RIF the company continued to hire younger workers, including one for his position. Lockheed asserted its decision concerning Mr. Braden was based on legitimate business reasons and presented evidence that employees older than Mr. Braden were not terminated as part of the RIF; performance documentation supported its decision to include Mr. Braden; the retained younger employees had different responsibilities and skills despite holding the same title as Mr. Braden; and the RIF was motivated by a lack of work. The court instructed the jury that the issue of causation should be determined using the “but-for” standard set forth in Gross v. FBL Financial Services, 557 U.S. 167 (2009), which requires a finding that age played a role in the decision-making and had a determinative influence on the outcome. Not only did the jury find the “but-for” standard satisfied, but it also concluded that Lockheed Martin’s conduct was willful, resulting in an award of liquidated damages under the ADEA (doubling of the lost wages award), and “especially egregious or outrageous” justifying an award of punitive damages of $50 million under the LAD.

This case should not only give employers pause in implementing “routine” RIFs, but also serve as a reminder that the basic housekeeping elements of human resources should not be ignored. As a preliminary measure, and one that will be helpful in many other areas of employee management, job descriptions and titles cannot be formulaic documents; the job description, requirements, and title should match what the employee is actually doing, and should be reviewed annually, every time there is a transition in the position, and before a RIF. Human Resources professionals and supervisors should be involved in and challenge performance assessments, requiring both objective data and examples and subjective support, particularly when a review is substantially different from prior assessments. All employees should be trained on company policies and the law concerning harassment, discrimination, and retaliation in the workplace, and managerial and supervisory employees should understand the ramifications of decision-making that could implicate protected characteristics. When a RIF is on the horizon, companies should review their policies and criteria and then ensure that they are implemented consistently. A “clearinghouse” department or individual should exist, so that every decision is considered objectively and with an analysis of consistency and risk, including a review of all potentially relevant information concerning the employees proposed for the RIF, such as their demographic status, leaves and accommodations granted, and internal and external complaints. Once the RIF process has culminated in a list of employees who will be eligible for the RIF, Human Resources and counsel should review the decisions, searching for potential flaws in the process, problematical decisions, and vulnerability to a legal challenge. In short, the employee “life cycle” should be meticulously and actively managed from beginning to end.