Banks are more exposed than ever to employment discrimination suits as the industry consolidates and thousands of employees are laid off.
The latest target was First Union Corp., which agreed Tuesday to spend $58.5 million to settle age and race bias charges by 239 former employees.
"Any industry that is going through reductions where long-term employees are being laid off is vulnerable," warned Jeffrey G. Huvelle, a partner in the Washington office of the Covington & Burling law firm. "The likelihood of being hit by a lawsuit-meritorious or not-is higher."
Other financial institutions facing employment bias suits include NationsBank Corp. and Federal Home Loan Mortgage Co.
Employment law experts said banks can avoid liability if they develop detailed termination plans, train managers on the bias laws, and fire blocks of employees, rather than individuals.
"As long as you follow your plan you have good ... protection against losing the litigation," said Lawrence Coe Lanpher, a partner at the Washington office of the Kirkpatrick & Lockhart law firm. "If you do it after the fact and gin up some criteria, you are going to get into a lot of trouble."
Banks should list the essential functions of every job and what skills are best suited to the position. It then could eliminate employees whose skills do not match the requirements of the job, lawyers said.
"You need to develop an objective reduction-in-force plan which is consistently applied," said Andrew L. Sandler, a partner at the Washington office of the Skadden, Arps, Slate, Meagher & Flom law firm.
Banks also should train managers to refrain from discussing the reasons for a termination, Mr. Lanpher said. In the First Union case, plaintiffs charged that a senior bank manager said he wanted more young employees.
Banks that are shuttering scores of branches as part of a merger also should consider laying off everyone in the closed office, rather than trying to pick-and-choose among employees. It is very difficult to challenge the right of a bank to terminate employees who work at a facility that has been closed, Mr. Huvelle said.
The First Union case stemmed from the 1992 acquisition of First American Metro Corp. and the 1993 purchase of Meritor Savings, both of which operated in the Washington area.
The employees claimed First Union singled out workers who were more than 40 years old or of foreign origin for firing when it consolidated offices. These employees were replaced by younger, white workers, they said.
The Charlotte, N.C.-based bank has consistently denied any wrongdoing and said in a prepared statement that it settled to avoid an expensive and distracting trial. A bank spokesman declined to comment further.
The Age Discrimination in Employment Act prevents companies from discriminating against workers who are more than 40 years old. Title VII of the Civil Rights Act of 1964 outlaws bias against anyone on the basis or race, sex, or gender.