According to the BusinessWeek story:
THESE WORKERS WIELD A POTENT WEAPON: They can force companies to
prove in court that there was a legitimate business reason for their
termination. And once a case is in court, it's expensive. A company can
easily spend $100,000 to get a meritless lawsuit tossed out before
trial. And if a case goes to a jury, the fees skyrocket to $300,000,
and often much higher. The result: Many companies today are gripped by
a fear of firing. Terrified of lawsuits, they let unproductive
employees linger, lay off coveted workers while retaining less valuable
ones, and pay severance to screwups and even crooks in exchange for
promises that they won't sue. "I've seen us make decisions [about
terminations] that in the absence of this litigious risk environment,
you'd have a different result," acknowledges Johnny C. Taylor, Jr.,
head of HR at IAC/InterActiveCorp (IACI ), the conglomerate that runs
businesses such as Match.com and Ticketmaster.
The story says keeping lackluster employees can be a wet blanket for workers who perform well:
This set of divergent incentives puts line managers in a tough
position. When they finally decide to get rid of the underperforming
slob who plays PC solitaire all day in her cubicle, it can be
surprisingly tough to do. And that, in turn, affects productive
workers. "Few things demotivate an organization faster than tolerating
and retaining low performers," says Grant Freeland, a regional leader
in Boston Consulting Group's organization practice. ...
The cost and distraction of lawsuits lead many employers to engage
in contortional, and at times perverse, litigation avoidance. Defense
attorney [Lisa] Cassilly offers the story of one of her clients, a
hospital in the Southeast forced to reduce its ranks because of budget
cuts. The head of one department elected to let go a female employee in
favor of keeping a more junior male, whom he had spent a great deal of
effort to recruit and whom he felt was more valuable. But the hospital
overrode that choice and laid off the man out of concern that it would
be more exposed in a lawsuit by the woman.
Getting Beyond a 'Fear of Firing'
This article raised several questions for me. As an employee, I
value laws to protect me--but why does America need so many categories
of protection? Shouldn't there be a limit to what employers will
tolerate, without fear of dropping thousands of dollars?
Some of the scenarios in the article reminded me of workplace
situations friends have described to me, or which I've experienced
first-hand. It's demoralizing, as the story suggests, when you work
hard and see others getting by with much less effort. Nevermind that
managers often expect you to pick up slack for lackluster employees.
There's got to be a better way for handling problem employees.
Employers dancing around lawsuits and running scared--that just doesn't