I was disappointed earlier this week to see a consultant quoted in an otherwise good article in the Wall Street Journal -- "Employee Theft Often Leads Small Firms to Make Bad Choices" -- as advising the "bogus RIF" strategy with employees who are suspected of theft.

Talk about bad choices!

What's the "bogus RIF" strategy? That's when you're really firing an employee but don't want to admit it, so you call it a "RIF," or a "layoff," or a "job elimination."

This is a terrible idea, but employers often want to do it -- partly out of a desire to be kind to the employee being terminated, and partly out of an understandable desire to avoid conflict.

If you read this blog regularly, you know that I strongly advocate that employers tell the truth. Sure, you may not want to provide every detail of your decision making process, but whatever you do say should be true "to the best of your knowledge."

Why? Well, first, because it's the right thing to do. Second, there are these pesky things called unemployment claims, and EEOC charges, and lawsuits that you might want to defend someday. And if you give a false reason for a termination, it will come back and bite you.

Here's an example of how a phony RIF can really mess you up:

ENTRAPPED! A Horror Story

You suspect that your 55-year-old administrative assistant, Melanie, is giving herself paid time off that she hasn't earned. (In other words, embezzling PTO.) You haven't proven her guilty beyond a reasonable doubt, but there is enough "smoke" that you know you don't want her working for you any more. You just read that Wall Street Journal article, and you want to be nice, so you tell her that you are "eliminating her position." You fill out her unemployment paperwork and say the same thing. Once she's gone, you advertise for a new administrative assistant and hire 25-year-old Josh, who seems well qualified and very honest.

You probably know what's coming, but I'll continue anyway.

Melanie files an EEOC charge, claiming that you discriminated against her because of her age and her sex. You respond, "No, it was a job elimination." The EEOC investigator asks, "Oh yeah? Well, then why did you replace her?" Darn. "Well, ok, we called it a RIF, but the real reason we fired Melanie was that we thought she was stealing!" Melanie retorts, "Nunh-unh. They told me they were eliminating my position. They even let me collect unemployment." The EEOC investigator asks to see your unemployment filings, and sure enough - in a document that you signed under penalty of perjury, you said that Melanie's job was eliminated.

The worst true "bogus RIF" story I ever heard came from my law partner, Randy Loftis. Many years ago, he was representing a plaintiff in an age discrimination case, and the employer claimed that it was a "job elimination." The plaintiff's job? President of the company. 

So you lose the EEOC charge, and Melanie sues. By this time Josh hasn't worked out either, and thanks to modern technology you've decided that you really don't need an administrative assistant any more. So you figure, "Fine. I got in trouble for saying Melanie stole, so I'll go back to the reason we gave her in the first place, and say we don't need an administrative assistant."

Problem solved?

Melanie's attorney gets a copy of the EEOC investigative file, which shows that you went back and forth between claiming it was a job elimination or a termination for suspected theft. You file a motion for summary judgment, and Melanie's attorney says you should lose because you gave "shifting explanations" for the termination. The shifting explanations are a pretext for discrimination based on age and sex. The judge agrees, and you go to trial, and the jury, like everyone else you've dealt with so far, will consider the fact that you flip-flopped on your explanations. (Melanie wins a zillion dollars, which the judge reduces to back pay and 10 years'  front pay, plus $300,000 in compensatory and punitive damages, plus Melanie's attorney's fees.)

On your first day back at work after the trial, your boss calls you in. The HR manager is there as a witness. The boss looks at you sadly and says, "Your position is being eliminated."

And that, my friends, is why I don't recommend the "bogus RIF."

SWEETNESS AND GOODNESS AND SUGAR AND SPICE: A Happy Story

When you terminate Melanie, you tell her it's because you have reason to believe that she is giving herself PTO time that she hasn't earned. She cries and stomps her feet and argues, but you stay firm. You tell her that you are willing to let her draw unemployment but that you are not going to lie to the unemployment commission. When you fill out the paperwork under oath, you give the true reason for the termination but add, "Employer does not intend to contest claim for unemployment." Then you hire young Josh.

Melanie goes to the unemployment hearing by herself and says you fired her on a trumped-up charge of stealing even though there was no evidence, and she wins her benefits. No big deal to you, because her one-sided testimony cannot be used against you or the company. She files an EEOC charge, and you tell the EEOC exactly what you told her and the unemployment commission. The EEOC dismisses the charge.

Melanie can't find a decent lawyer who is willing to sue you, so she probably doesn't sue at all. But if she does, you file a motion for summary judgment, which is granted because a good-faith belief that an employee is stealing -- even if mistaken -- is a legitimate, non-discriminatory ground for discharge. And you've been consistent all along, so there is no "fact issue" for a jury to resolve. Melanie probably won't bother to appeal, but if she does, you win on appeal.

After the case is over, you get a promotion and big raise for having handled Melanie's termination so well.

(We didn't want you to have nightmares tonight.) Do not fall into the trap of the "bogus RIF"!

. . . AND ALSO OF INTEREST . . . 

By Tony McGrath in our Madison, Wisconsin, office: "DOL's Companionship Rule Gets the One-Two Punch."