The threat of litigation is making companies skittish aboutaxing problem workers.
Would you have dared fire Hemant K. Mody? In February, thelongtime engineer had returned to work at a GE facility inPlainville, Connecticut, after a two-month medical leave. He was avery unhappy man. For much of the prior year, he and his superiorshad been sparring over his performance and promotion prospects.According to court documents, Mody’s bosses claimed he spokedisparagingly of his co-workers, refused an assignment as beingbeneath him, and was abruptly taking days off and coming to worklate. But Mody was also 49, Indian born, and even after returningfrom leave, he continued to suffer a major disability: chronickidney failure that required him to receive daily dialysis.
The run-ins resumed with his managers, whom he had accused flatout of discriminating against him because of his race and age. Itdoesn’t take an advanced degree in human resources to recognizethat the situation was a ticking time bomb. But Mody’s bosses werefed up. They fired him in April. The bomb exploded in July 2006.Following a six-day trial, a federal court jury in Bridgeport,Connecticut, found GE’s termination of Modyto be improper andawarded him $11.1 million, including $10 million in punitivedamages. But the award wasn’t for discrimination. The
judge found those claims so weak that Mody wasn’t allowed topresent them. Instead, jurors concluded that Mody had been fired inretaliation for complaining about bias. GE sued to have the awardoverturned but was only able to get the award reduced by $5 millionin 2007. Unfortunately, Mody never saw any of the 2006 jury award;he died in April 2007 of a heart attack.
If this can happen to GE, a company famed for its rigorousperformance reviews, with an HR operation that is studiedworldwide, it can happen anywhere. The result: Many companies todayare gripped by a fear of firing.
Terrified of lawsuits, they let unproductive employees linger, layoff coveted workers while retaining less valuable ones, and payseverance to nonperformers and even crooks in exchange for promisesthat they won’t sue. The fear of firing is particularly acute inthe HR and legal departments. They don’t directly suffer when anunderperformer lingers in the corporate hierarchy, but they mayendure unpleasant indirect consequences if that person files alawsuit.
When Mody signed GE’s job application in 1998, the form said hisemployment was “at will” and “the Company may terminate myemployment at any time for any reason.” Well, not exactly. Thenotion that American workers are employed “at will”—meaning, as onelawyer put it, you can be fired if your manager doesn’t like thecolor of your socks—took root in the laissez-faire atmosphere ofthe late 19th century and, as an official matter, is still the lawof the land in every state, save Montana. For most American workersnow, their status as at-will employees has been transformed by asuccession of laws growing out of the civil rights movement in the1960s that bar employers from making decisions based on such thingsas race, religion, sex, age, and national origin. This is hardlycontroversial. Even the legal system’s harshest critics find littlefault with rules aimed at ensuring that personnel decisions arebased on merit. Most freely acknowledge that it is much easier tofire people in the United States than it is in, say, most ofWestern Europe. Mass layoffs, in fact, are a recurring event on theAmerican corporate scene. Yet even in these situations, RIFs, or“reductions in force,” are carefully vetted by attorneys to assessthe impact on employees who are in a legally protected category.These days the majority of American workers fall into one or moresuch groups. Mody, for example, belonged to three because of who hewas (age, race, and national origin) and two more because of thingshe had done (complained of discrimination and taken medical leave).That doesn’t mean such people are immune from firing. But it doesmean a company will have to show a legitimate, nondiscriminatorybusiness reason for the termination, should the matter ever land incourt.
1. Why are many companies afraid of terminating unproductiveemployees?
2. Why do supervisors bear much of the blame when HR sayssomeone can’t be shown the door?
3. Can managers really fire employees “at will”?
4. GE was successful in getting the amount of the award reduced,but was the size of the award really its first concern?
5. Relate your personal experience, and apply what you learned.Indicate how you would have handled the situation if you were theprimary subject in the case study, the subordinate in the casestudy, a supervisor or an outsider witnessing the situation.
