Tech Employers At Risk Of Suits From Laid-Off Workers

While it may be a new economy, many technology-sector companies are finding out the hard way that some old laws still apply. As job losses and workforce reductions mount throughout the industry, increasing numbers of downsized dot-com employees are resorting to a time-honored, American-as-apple-pie strategy for redressing grievances against their former employers ó litigation.

For many employers, the concept is far from novel. Any seasoned veteran of human resource wars can tell you that any employee termination ó even in times of relative economic difficulty ó presents some risk of a suit. But, among technology companies, those risks are proving somewhat greater. Many are relatively new ventures, formed amidst the sanguinity of a bull market that would put the streets of Pamplona to shame. Owing largely to a belief that the sky was, in fact, the limit, many of these companies grew quickly. Employees remained steadfastly loyal, in anticipation of continued growth, an eventual IPO and a huge payday.

As fortunes shifted, the situation changed. Throughout all segments of the technology industry, companies are eliminating jobs and reducing head counts. In many cases, these workforce reductions are planned and executed by younger managers who have never soldiered through an economic downturn and, thus, have never had to play the role of "corporate grim reaper."

This relative inexperience in dealing with layoffs ó coupled, in some cases, with a lack of familiarity with applicable employment laws ó has led many employers to decisions that have come back to haunt them. Growing numbers of laid-off tech-sector employees are hitting their former bosses with suits and administrative claims. Discussion of possible claims can be found in Internet chat rooms and on Web sites frequented by technology company employees.

The nature of the claims asserted is as rich and varied as the range of targeted employers. Those companies that have merely trimmed their head counts by choosing smaller numbers of individual employees for layoff or reduction see garden-variety employment discrimination claims under state or federal civil rights laws (e.g., Title VII, the Americans With Disabilities Act or the Texas Commission on Human Rights Act).

Companies that have met with total or near-total financial meltdowns and slashed entire groups of employees see claims for fraudulent misrepresentation (e.g., as to financial performance or value of stock options) or failure to...