Base layoffs on legitimate business needs

The Hilton La Jolla Torrey Pines.

General managers, I feel your pain. A recent case takes readers deep inside the decision-making process of a franchisor-mandated reduction in force. The case also illustrates the foreseeability of a discrimination case by the worker who gets the bad news.

In May 2012, Hilton Worldwide ordered a number of properties to reduce payroll expenses by 7 percent to 10 percent within three months. Included on the list was the Hilton La Jolla (Calif.) Torrey Pines Hotel. Following the announcement, Hilton instructed the GM and human resources director to recommend one or more positions to eliminate. Franchisor guidelines identified as the “primary consideration a team member’s overall performance followed by any disciplinary action a team member has received.” If further whittling was needed, Hilton required that consideration be given to employees’ length of service with the company.

The La Jolla Hilton GM and human resources director prepared a spreadsheet listing all 29 hotel managers. They sought to retain positions with direct guest contact, with significant team member impact and jobs that directly generate additional revenue. Further, they hoped to eliminate only a single position if possible because the hotel had laid off 17 workers between 2008 and 2011 and so staffing was already low.

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All of the managers were meeting their performance standards and none had been subject to disciplinary action. The GM and human resources director then considered the business case for retaining or eliminating each of the 29 management-level positions. Unfortunately for plaintiff, he well satisfied the selection criteria. He was a 60-year-old director of property operations who had been with the company for almost 20 years. He directly supervised seven to 12 people. His salary was $110,325 plus an annual bonus of $20,000, making him the highest-paid hotel employee after the GM. He was the only one besides the GM whose salary equaled the necessary 7-percent to 10-percent decrease. He sued, claiming age discrimination.  

To successfully defend, Hilton needed to show that it terminated plaintiff for a legitimate, nondiscriminatory reason unrelated to his age. Downsizing alone is not sufficient. An employer must give an individualized reason for laying off the employee. Since plaintiff met the hotel’s selection criteria, and since they were based on sound business justifications, the hotel avoided liability; case dismissed. 

Karen Morris is a lawyer, municipal judge and distinguished professor at Monroe Community College in Rochester, N.Y., where she teaches hospitality law. Contact her at [email protected].