Armenta v. Morris National, Inc., No. B255575 (March 27, 2015): Discrimination claims often ensue after a reduction in force (RIF) because laid off employees second-guess management’s selection process. However, as seen in a recent unpublished California Court of Appeal decision, a systematic approach focusing on business needs and objective criteria can ultimately lead to a successful defense against such claims.

Morris National, Inc. (MNI) manufactures candy. Isidora Armenta, a 63-year-old employee of MNI, worked for 23 years operating a machine that made liqueur filled chocolates. The company suffered financially in 2008 due to the recession, leading to the decision to reduce costs. A production planner/cost controller ascertained that the company could reduce the number of full-time employees from 39 to 20, and save $600,000 in salaries and benefits. Under this plan, the company would need to rotate this core group of 20 employees through various departments and otherwise rely on part-time, temporary, or seasonal workers.

Based on the production planner’s study, MNI laid off 13 employees in 2009. Armenta survived this layoff. In 2010, the company determined it needed to further reduce costs, and decided to lay off three additional full-time employees. The production manager met with other supervisors who had direct knowledge of the production employees’ work performance. He determined the three employees who should be laid off as part of the RIF based upon various factors, including reliability, experience, versatility, and efficiency. He decided Armenta should be laid off because even though she had worked for MNI for many years, her versatility and efficiency were extremely limited, and she was unable to perform tasks that other full-time employees could perform. Armenta was among the three employees selected for layoff. The other two employees were 39 and 40 years old.

Armenta filed a lawsuit against MNI in state court, alleging age discrimination in violation of the California Fair Employment and Housing Act (FEHA), among other claims.

MNI filed a motion for summary judgment, arguing that no facts supported a finding of age discrimination. The trial court granted the motion and Armenta appealed.

Plaintiff Failed to Demonstrate Pretext

In an effort to defeat the summary judgment motion, Armenta argued that her former employer’s stated reasons for her layoff were false and actually a pretext for age discrimination. On appeal, the court acknowledged that a plaintiff may defeat an employer’s motion for summary judgment by “demonstrating such weaknesses, implausibilities, inconsistencies, incoherencies, or contradictions in the employer’s proffered legitimate reasons for its action that a reasonable factfinder could rationally find them ‘unworthy of credence, and hence infer that the employer did not act for the asserted non-discriminatory reasons.” The court examined Armenta’s evidence to determine whether she had demonstrated such inconsistencies.

Armenta asserted that her production manager gave inconsistent reasons for selecting the three employees. At one point in his deposition, he testified that Armenta and a second worker were selected for the same reasons, including that they had difficulty doing all of the production tasks in all of the stations, and both were slow. On the other hand, at another point the manager stated that the second worker also had an absentee problem. Armenta pointed to this inconsistency in reasons for selection as an indicator of pretext. The court rejected this contention, finding the inconsistency too inconsequential to support a finding that the manager’s reasons for choosing Armenta for termination were false.

Armenta asserted that the production manager also falsely claimed that she was chosen for termination because she had only limited experience working in a few stations even though Armenta provided evidence that she had worked in every position on all of the production lines. The court concluded that this evidence did not demonstrate an inconsistency that would justify a conclusion that MNI’s reason for terminating her was false. The manager had testified that he did not know if Armenta had worked on other production lines, but he had consulted with Armenta’s direct supervisors. Although those supervisors admitted that Armenta had worked on other production lines, they testified that she could not do the work required at many of the positions on those lines and therefore she would not work at those positions.

Relying on the manager’s statement that he considered employees’ reliability, experience, versatility, and efficiency when determining who should be laid off, Armenta asserted that MNI’s proffered reason for terminating her was dishonest because there was no evidence that she was unreliable, inexperienced, or inefficient. The court rejected the claim that MNI had been dishonest about the reason. Two direct supervisors provided first-hand observations about Armenta’s inability to work at some positions on the production line, and that she complained about being assigned to certain work.

In Armenta’s favor, overall the evidence demonstrated that she was a reliable and experienced employee. But that evidence was not enough to support a finding of age discrimination. The court rejected Armenta’s implication that the manager’s choice of employees to lay off necessarily would be suspect unless the employees scored poorly on all of the factors the manager considered. The evidence showed that MNI’s ultimate goal was to retain the most versatile employees, who could move from one production line to another, and be proficient at all of the jobs. The manager was informed of this goal, and therefore needed to determine which three employees were least versatile and least proficient at all of the jobs. The court wrote: “It was not inconsistent for the manager to do this by considering each employee’s reliability, experience, versatility, and efficiency. Nor was it inconsistent for him to choose someone who may have been reliable and experienced, because an employee can be found to be reliable and experienced while also being found to be less versatile and less proficient at all of the jobs than other employees.”

Plaintiff Failed to Demonstrate Discriminatory Motive

Merely showing inconsistencies in the stated reason for terminating an employee does not alone demonstrate age discrimination. The appellate court in this case referred to a landmark California Supreme Court case, Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317. As the Supreme Court observed in Guz: “Proof that the employer’s proffered reasons are unworthy of credence may ‘considerably assist’ a circumstantial case of discrimination, because it suggests the employer had cause to hide its true reasons. Still, there must be evidence supporting a rational inference that intentional discrimination, on grounds prohibited by the statute, was the true cause of the employer’s actions.”

In an effort to demonstrate age bias, Armenta presented testimony relating to another employee, Jesse Zamora. Zamora testified that the former plant manager, Raul Canto, had demoted him after he filed a Department of Fair Employment and Housing (DFEH) charge alleging age and disability discrimination. He claimed that Canto had said he wanted a younger crew. Armenta also submitted evidence that Zamora and two other older workers had been laid off multiple times, but that a fourth, younger worker had never been laid off.

The appellate court determined that this evidence was insufficient to establish a discriminatory motive for three reasons. First, Canto was not employed at the time the company decided to lay off Armenta and, accordingly, his actions in the past could not establish that her termination was for age-related reasons. Second, Canto’s actions against Zamora were not shown to be age-related; the DFEH charge had been dismissed without any findings. Third, the fact that Zamora and two other older workers were rehired after layoff did not appear to support a finding that the company wanted to get rid of older workers. Quoting prior appellate decisions, the court observed that “claims that employer animus exists in termination but not in hiring seem irrational.”

Age Diversity

It should be noted, although not relied upon by the court in its decision, that the company presented compelling evidence of age diversity. According to statistics provided by the HR manager, over half of the full-time and seasonal workers hired between 2006 and 2013 were over 40 years old. The ages of the 13 employees laid off in 2009 ranged from 23 to 56 years old, and that five were under 40 years old.

It is also notable that the company offered to retain Armenta, although in a different role. The HR manager also noted that she invited Armenta and the other two employees to apply for part-time seasonal work. Armenta never applied. One of the other workers applied and was rehired by the company.

Practical Tips

Start with business. In this case, the company began with a financial review and a study about how to reduce the headcount while sustaining productivity. Starting with business analysis, rather than jumping immediately to selecting particular “problem” employees for layoff, helps ensure that the RIF decision is made for legitimate business reasons rather than due to a bias against members of protected classes.

Specify criteria. The company in this case needed to retain the most skilled and flexible workers who could successfully move from one production line to another. Defining the selection criteria helps ensure that the RIF can be administered in an objective manner, with the focus on job skills rather than personal characteristics protected by law.

Measure objectively. In this case, company management ranked employees based on the selected criteria. In fact, the company might have done more than institute a formal ranking process, employing objectively measureable criteria such as job performance and productivity. Objective measurements help ensure that improper biases do not play a role in the selection process.