Employment Law Daily Hilton manager can’t show factors targeting him for layoff in RIF were pretext
Friday, August 18, 2017

Hilton manager can’t show factors targeting him for layoff in RIF were pretext

By Lisa Milam-Perez, J.D.

Affirming summary judgment in favor of Hilton Worldwide on a California state-law age discrimination suit brought by a 60-year-old manager who fell victim to a company reduction in force, the Ninth Circuit concluded that the employer had legitimate reasons for selecting the employee for layoff and, when looking at the broader context in which the layoff occurred, the employee failed to rebut them. The appeals court declined to revive the employee’s Fair Employment and Housing Act (FEHA) claim (Merrick v. Hilton Worldwide, Inc., August 16, 2017, Zouhary, J.).

RIF. The employee was laid off after 20 years with Hilton. He had worked his way up from maintenance mechanic to director of property operations at one of Hilton’s California hotels. He oversaw 50 major building renovations over the course of his tenure, in addition to supervising routine HVAC, plumbing, and equipment repairs. In 2009, Hilton directed a subsidiary entity to assume responsibility for capital improvement projects at the facility. This was a contentious development—the employee had complained about the performance of those who took over that role—and the parties disputed the extent of his ongoing involvement in renovations. With a $110,325 salary and $20,000 annual bonus, the employee was the hotel’s second-highest paid employee behind the general manager. And he was the second oldest—following closely on the heels of the 61-year-old GM here, too.

He had escaped three prior workforce reductions, the first of which was in 2008, due to falling revenues in the economic downturn. But in 2012 Hilton ordered several hotels, including the employee’s, to reduce payroll by 7 to 10 percent. Decisionmakers were instructed to identify candidates for RIF based first on overall performance, followed by any disciplinary actions received and, failing that, to decide based on length of service. The corporate office also specified that job eliminations “should be heavily weighted at the senior level.”

Factors. With this, the general manager, HR director, and director of finance looked to the hotel’s 29 managerial-level employees for RIF consideration. They decided to focus on managers who had little direct interaction with guests, who did not generate additional revenue for the hotel (which ruled out the sous chef, for example), and who did not supervise large numbers of workers (they sought to minimize the impact on the workforce). Further narrowing the field, they looked to avoid departments that had been hit operationally from previous layoffs. Finally, they hoped to achieve the desired payroll savings, if possible, by cutting just one position, and the only job (beside the general manager) that could generate the 7 percent savings was the employee’s. Therefore, the employee was chosen for layoff, and his responsibilities were assumed by the assistant director of property operations—15 years his junior. (The hotel also hired an hourly mechanic to assume some of the assistant manager’s duties.) The employee had asked to be transferred into the assistant manager position after his own job was eliminated, but Hilton refused.

Prima facie case. The district court found the employee could not establish a prima facie case of age discrimination because he was not “replaced” by a younger individual, since the assistant director was not given the “director” title. This was erroneous reasoning, the Ninth Circuit said. In RIF circumstances, almost by definition, employees typically are not replaced. Therefore, laid-off employees don’t have to make a showing that they were replaced by a younger worker; they need only establish that they were laid off under circumstances that create an “inference” of age discrimination. One way to do that is to show that the employer had an ongoing need to have someone perform the RIF’d employee’s duties. The employee made that showing here, as Hilton had to outsource or otherwise distribute his responsibilities. However, based on the criteria noted above, Hilton asserted legitimate, nondiscriminatory reasons for the layoff decision.

No pretext shown. The employee offered three circumstantial bases to infer that the asserted reasons were pretext. First, he claimed that Hilton refused to consider transferring him to another open position. But the assistant director job was not open—someone was in the position. Moreover, Hilton gave him a list of current job openings at the time of his layoff.

Next, he contended that Hilton “deliberately mischaracterized” his job responsibilities and performance, and the impact of his position on hotel guests—which proved critical to the RIF decision. According to the employee, Hilton understated his continued involvement in capital projects and unfairly criticized his “negative” attitude, but did not subject other employees to this scrutiny. He also said the company downplayed customer surveys reflecting the importance of property operations to the guest experience. But Hilton could reasonably assume that the assistant director would be able to take on whatever role the employee did play in capital projects. Also, the record evidence indicated that the decisionmakers did take into account other candidates’ attitude and job performance. Moreover, the decisionmakers permissibly chose to eschew customer survey data for their own business judgment about the impact of his role on the guest experience—a decision that was not subject to judicial review, nor indicative of pretext.

In addition, the employee argued that the decisionmakers deviated from Hilton’s own guidelines in conducting the RIF. He noted that the finance director was included in the decisionmaking process even though corporate guidelines instructed that the general manager and HR director were responsible for making RIF recommendations. But the guidelines did not expressly exclude other individuals from playing a role. And while the employee argued that the finance director’s inclusion in the process effectively removed him from layoff consideration (along with the HR director), the evidence indicated that both positions were potentially subject to the chopping block, as evidenced by their inclusion on the spreadsheet of managers under RIF consideration.

He also claimed the decisionmakers deviated from guidelines by failing to consider length of service as a primary factor in their deliberations—a factor that would have worked in his favor. However, even if length of service had been given its due, it wouldn’t have been enough to counter the other stated reasons for the RIF decision.

Finally, the employee claimed that the layoff deviated from RIF guidelines in that it missed the targeted 7 to 10 percent reduction in payroll. It was true that, in the end, the employee’s layoff amounted to a net payroll savings of just 5 percent. But this deviation was not enough to suggest pretext, particularly given the larger context: “the lost profits during the economic downturn, a series of layoffs over several years, the overall age of the workforce, the fact that [the employee] survived previous RIFs despite having then also been a member of a protected class, and the business reasons for selecting his position for elimination.” Therefore, the appeals court affirmed summary judgment in Hilton’s favor.

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