Friday, February 13, 2009

We feel your pain....

When the economy started its merciless decline, it first hit those least able to afford the consequences. For months, perhaps even a year, the 'higher echelons' of employees were immune, but now even the legal marketplace is experiencing a marked contraction --- and the pain is everywhere.

A review of today's headlines from show just how dismal things are: "800 Law Firm Jobs Lost in One Day," and there is a list of dozens and dozens of firms where tens of thousands of lawyers and legal assistants have now joined the ranks of the unemployed. A different headline discusses another large firm's approach to the economy, an across-the-board 10% paycut for associates, but an increased bonus pool for those associates as an incentive. While there is no mention of the partners (who typically draw seven figure plus incomes) taking any hit, it is still noteworthy that the firm, which has already laid off associates, has chosen this path. It also serves as a model for all employers.

Money is not the #1 reason employees leave employers. A lack of satisfaction with their workplace is. Toxic bosses. Oppressive work conditions. Lack of recognition for a job well done.

If a distressed but enlightened employer to give its employees the choice of a reduction in force versus a percentage paycut for all employees, I am certain the employees would choose the latter. An enlightened employer looks for ways to maintain esprit de corps, to keep its workforce together and productive through these dark times.

For myself, I find myself in the uncomfortable position of assisting one client with a reduction in workforce on the same day I am negotiating severance packages for other clients who are being laid off. It's hard to find a 'happy client' on a day like that.

So much of what happens in a down economy is knee-jerk. Cut marketing! (so what if we already are losing customers?) Fire employees! (so what if we don't have the staff to do what we need to do as it is?) Reduce equipment maintenance! (so what if the machines are already broken?) So much of those knee-jerk reactions are destructive, and only accelerate the employer's distress.

The survivors of this downturn will have taken a 40,000 foot approach to the situation, made the tough decisions at the right times and in the right manner, and will emerge stronger than before. As Abraham Lincoln said, recalling the ancient folktale about King Solomon, "This too shall pass."

Monday, February 9, 2009

Court may award damages to offset tax effects of back pay award

The Third Circuit Court of appeals has held that the trial court may add an amount to a jury verdict which will adequately compensate the prevailing plaintiff for the tax consequences of the verdict.

Joan Eshelman sued Agere Systems claiming discrimination on the basis of age and disability, and the matter was tried before Magistrate Timothy Rice. The jury awarded $170,000 in back pay and $30,000 in compensatory damages, and following trial the Plaintiff moved the Court for an award of money damages to offset the effects of taxation on the lump sum payment. Judge Rice granted the motion, and the Defendant appealed.

In affirming, Judge Chagares wrote:

We hold that a district court may, pursuant to its broad equitable powers granted by the ADA, award a prevailing employee an additional sum of money to compensate for the increased tax burden a back pay award may create.

This decision follows the 10th Circuit's holding in Sears v. Atchison, Topeka & Stanta Fe Ry. Co., 749 F.2d 1451 (10th Circuit 1984) and rejects a later decision from the D.C. Circuit, creating a clear split in the circuit courts of appeals on the issue. It remains to be seen whether the issue will reach the Supreme Court as it is unlikely the Eshelman case will be appealed further.

The decision is reported at: Eshelman v. Agere Systems, Inc., (No. 05-4895 January 30, 2009).