Pre-RIF Statistical Audits

Employers contemplating reductions in force (RIFs) can avoid or minimize exposure to discrimination claims by conducting pre-RIF statistical audits. A comprehensive audit identifies potential vulnerability prior to a suit being filed and will help ensure that data and documentation exist showing that any disparities are the result of nondiscriminatory factors.

These audits help deter discrimination claims in several ways. For example:

  1. The fact that the company has such data in hand has the effect of raising risks to plaintiffs seeking to proceed as a class, since it is unlikely plaintiffs will prevail beyond making out a prima facie case.
  2.  An audit of employment practices also demonstrates to a jury that company management attempted to eliminate potential discrimination prior to the lawsuit.
  3. Data from such audits is compiled prior to litigation, rather than as a result of litigation, so it is less likely to be deemed by fact finders to be biased.
  4.  Many disparate-impact claims allege that employers engage in a pattern of discrimination by allowing individual managers to make employment decisions without overall control or review. This, plaintiffs argue, allows discriminatory practices to flourish throughout the company. Statistical audits counter this type of argument, since they are evidence of central-management involvement in the decision-making process.

Audits begin with the same type of statistical review plaintiffs would perform in seeking to make out a prima facie case of discrimination. Using files commonly kept by employers, the RIF plan is tested for possible disparate impact on protected classes.

If the tests show that disparities might occur, analysts then conduct the same type of tests performed by defendants seeking to determine if disparities can be explained by valid, nondiscriminatory factors.

To the extent that disparities cannot be ascribed to nondiscriminatory factors, a problem area has been identified that must be addressed by management before the RIF is carried out.

How Center Economists Can Help

Economists at the Center for Forensic Economic Studies have developed a series of easily administered pre-RIF Chi-square and T tests. These tests, analyzing data typically kept by employers and generally not requiring extensive data-gathering, can quickly reveal any statistically significant disparities.

If such disparities exist, regression analyses can be conducted to identify mitigating variables explaining the disparity. If the tests are performed under the direction of outside counsel, they should be privileged under attorney-client and attorney work-product protections.

Contact the Center to discuss how the Center can help you or your client with pre-RIF planning.


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