Fastserve Inc - Legal Issues in Reduction of Workforce

RUNNING HEAD: LEGAL ISSUES IN REDUCTION OF WORKFORCE

Legal Issues in Reduction of Workforce

University of Phoenix

Introduction

FastServe Inc is a 25 million dollar 350 person-strong organization that focuses on the direct marketing of branded sports apparel. The company decided to shift focus towards the Generation Y sports-crazy segment and opened two online marketing distribution channels, one for boys and one for girls. At that time the company moved ten percent of employees to manage this division. The main attraction for these online channels was the 3-D Drape-N-See mannequins that attracted the Gen-Y segment however because they were difficult to download potential buyers were not making enough transactions to justify the investment of the technology necessary to make this a viable opportunity for the company. The company decided it was necessary to move out of the online distribution and therefore has to downsize.

There are five employees that are currently being reviewed as potential candidates for dismissal. The company must consider all legal ramifications and make the best decision that brings maximum benefits to FastServe Inc. Please see attached table for the summary of each employee and the concepts of employment law that affect their status.

Additional Extenuating Regulatory Circumstances

Some of the employees are under contract employment which means that an agreement was entered into between the employer and the employee at the commencement period of employment that states the exact nature of the business relationship, with regards to what compensation will be given in exchange for work performed (wikipedia.org). Often these agreements provide for termination of employment, by either party, and include items associated with termination including a notice period and compensation arrangements. Before determining which employees to terminate it would be necessary to be aware of the contract that was agreed to for those employees who are under contract employment.

Those employees who are under contract employment are exempt from the concept of employment-at-will, which states that employers can discharge an employee at any time without cause (Reed, Shedd, Morehead, Corely, 2005). There are now several statutes, some of which were identified in the attached table, that limit the absolute right of an employer to terminate at-will. In addition, courts have ruled that there is an inherent promise of good-faith and fair dealing behind at-will employment and that this promise can be broken with the unjustified dismissal of employees. FastServe will do well to make sure that the release of employees is done in good faith and fair dealing to avoid litigious involvement.

Another regulatory issue could be that of collective bargaining, which is “the process by which labor and management negotiate and reach agreements on matters of importance to both,” (2005). These matter include wages, hours worked and other terms of employment. This may become important for those employees who are under contract.

Best Interest of the Organization

The agency theory states that people have a tendency to pursue their own best interests and therefore conflicts of interest arise over some issues when they engage in corporate endeavors (Chew, Gillan, 2005). It is further stated that these conflicts of interest tend to create losses for the parties involved and therefore all parties have incentive to minimize those losses. The fundamental notion of agency theory is that “rational self-interested people involved in cooperative endeavors always have incentives to reduce the losses resulting from them,” (2005). When determining which employees to release the individuals determining who to release are the “rational self-interested people” and have a vested interest in reducing any losses. Potential losses in this particular situation are those of a litigious and legal nature as those candidates who are being considered for release each have various “human resource” issues that could lead to litigation if not carefully considered.

With regards to the simulation it appears that the three candidates to select for release are Brian Carter, Sarah Boyd and Jenny Mills. The choice to release these candidates is directly in the best interests of the company for several reasons. The company needs to release those individuals with non-critical skills that are unable to bring value to the company. Brian Carter has skills and education that are no longer of viable interest to the company as his VC++ skills will