Pandemic predicament: Laying off a key witness?

As a result of the ongoing COVID-19 pandemic and resulting economic downturn, many employers find themselves in a tough position, having to decide whether to lay off employees, and if so, which ones. The issue is obviously widespread: just over 16.7 million Americans lost their jobs over the three weeks ending April 3, and economists predict job losses could total 20 million positions by the end of April.

For employers engaged in or anticipating litigation, the difficult decision of whether to lay off an employee — a decision already fraught with risks and considerations — is further complicated when the employee might be a witness or player in those disputes. Former employees unhappy with having been terminated may no longer be “friendly” witnesses. Even a former employee who remains friendly may become unavailable if he moves to a distant location. Opposing counsel may be encouraged upon learning of the termination of a key witness, and may believe it is more ethically permissible to communicate directly with that witness.

So what is an employer to do when it cannot sustain its payroll or must otherwise lay off an employee as an economic matter, but the employer is or may soon be in need of the employee’s cooperation in a legal action?

In fact, there are a number of things such an employer can do both on its own and in coordination with its attorneys to protect its financial and legal interests.

Of course, the first step is to determine before layoffs occur which employees have knowledge of material information or may have had a role in the circumstances giving rise to the litigation. With most court proceedings effectively on hold as they are here in Orange County (and elsewhere) until nearly the end of May, the employer might be tempted to put pending litigation on the back burner. However, the employer should consider working with counsel to gather and review relevant documents and communications to identify employees who may have pertinent information. From there, the employer and its attorneys can work together to narrow the list to those key employees whom the employer might wish to have counsel interview (and from whom to gather any documents that may have been missed the first time around) to preserve information the employer might need after the employees have been laid off and the litigation resumes.

Attorneys can also work with the key employees before any layoffs to obtain declarations or signed statements of facts from the employees for future use. Most people will want to be consistent with prior testimony despite their personal feelings, but if a former employee does try to change his or her tune following a layoff, a statement under oath from before he or she had a reason to be adverse to the former employer can be a powerful tool for impeachment.

Of course, a bit of sympathy and kindness also goes a long way to maintaining good relationships with former employees whose cooperation might be needed down the line. In communicating the lay-off, employers should not feel (as many do) that expressions of regret or empathy are an indication of weakness. Rather, an employer hoping to stay in the good graces of a laid off employee will likely have more success if the employer communicates the layoff with a tone of compassion.

It might also be worth considering whether an employee who could become a witness in litigation after having been laid off should be offered a separation agreement releasing any and all claims in exchange for a severance package. Such an agreement should be admissible in any future proceedings in which the former employee might be a witness.

In addition, the agreement could include a cooperation clause, obligating the former employee to make herself available to provide complete and truthful testimony in witness interviews, depositions, and trial, without a subpoena, with the company to compensate the former employee for her time and any reasonable out-of-pocket expenses. While opposing counsel may argue the severance payment influences the employee’s testimony, the severance agreement is still a useful tool to make peace with a terminated employee and better ensure future cooperation.

It might also be worthwhile to have the employee represent in writing that she returned all company property prior to her departure, including any company documents (electronic or hard copy). Here, the best practice is trust, but verify. When laying off an employee — particularly one identified as having information relevant to on-going or expected litigation — the employer should conduct a forensic examination of the employee’s computers and any other company-issued devices to look for suspicious emails, uploads, or use of thumb drives or other storage devices. In recent litigation, a client conducted just such an examination through a computer forensics expert, and discovered a former employee used a thumb drive multiple times to download company manuals and other documents which later turned out to be at issue in the lawsuit.

Dire economic circumstances mean that some businesses are laying off or furloughing all of their employees, such that they do not have the luxury of engaging in a selection process. For other companies which are struggling but able to keep at least some portion of their employees on payroll, they must decide which employees to keep, and which employees to lay off or furlough. In the best of economic times, it is never a good idea to lay off and anger an employee who might be called upon to testify in litigation; an adverse attorney loves nothing more than to come across an opponent’s knowledgeable former employee with an axe to grind. The same is true in the present circumstances.

If feasible, it may be best to simply keep a “key witness” employee off the lay-off or furlough list; indeed, that is the advice many lawyers would give, particularly in the midst of litigation. If that is not possible, however, employers should strongly consider the steps suggested above, to keep an already difficult situation from becoming potentially much worse. 