Monday, February 8, 2010

REDUCTIONS IN FORCE: EXCLUSION OF EVIDENCE OF PROFITABILITY

In Bell v Prefix, Inc., F.2nd (2009) WL 3614353 (E.D. Mich 2009), the court reviewed a motion in limine filed by Plaintiff to exclude evidence concerning the defendant’s profitability defense in a reduction in force case. The case involved a claim that plaintiff had been terminated from his employment because his use of FMLA unpaid leave to assist in his father’s healthcare and hospitalization.


The district court granted the motion in limine with respect to the exclusion of evidence concerning profitability on the basis that such evidence is irrelevant to the defense of workforce reduction. The court stated that whether a defendant is profitable or not does not render more or less probable that a reduction in the workforce was because of workflow or profitability. The court stated that regardless of what the profits were at the time of the termination, the company could have wanted to be more profitable. Such evidence is irrelevant to the issue of whether the termination of the plaintiff was part of a legitimate reduction in force.

The case was on remand from the Sixth Circuit’s reversal of the district court’s grant of summary judgment. The Sixth Circuit had found that the plaintiff had presented sufficient evidence of a pretext as to the company’s explanation for his discharge and noted that the company had not given any reason why the plaintiff was chosen as opposed to another employee. The court stated that unlike most reductions in force, the employees in this case were terminated on apparently random occasions over an extended period of time. The court stated that there was no specific evidence about why the plaintiff was fired.

With respect to the issue of profits, the court rejected the plaintiff’s argument that the motive to increase profits was not a legitimate reason. The court stated that this argument failed as a matter of logic and evidence since a profitable company may want to be more profitable Bell v Prefix, Inc., F.3d, 321 Fed.Appx. 423 (6th Cir. 2009).

The original district court decision granting summary judgment was made by a different judge than was involved in the motion in limine. In granting the summary judgment, the district court stated that the reason given by the employer for the termination was a desire to increase profits. The court stated that there was no evidence to counter this stated reason and that increased profitability is a sufficient reason to discharge an at-will employee.

The district court’s exclusion of any evidence concerning profitability presents an interesting issue to the employer. The district court held, in effect, that profitability is a nonissue in a reduction in force case since all employers want to increase profits. The employer finds itself in the position where it cannot use profitability as a defense and apparently has not provided any reason as to why the plaintiff was selected for reduction in force compared to others in what the Sixth Circuit in effect labeled as an unorthodox reduction in force. The employer had not previously argued that termination was part of a reduction in force to cut costs and/or losses. The case certainly alerts employers to the need to document the specific reason why an employee is chosen as well as to emphasize the need to reduce costs independently of any impact on profitability.

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