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Ex-Employee Challenges Yahoo’s Performance Review System

A former employee filed a complaint against Yahoo!, Inc. in federal court last week, alleging, among other claims, that its system of employee performance reviews and related firings violated the Worker Adjustment and Retraining Notification (WARN) Act. Gregory Anderson, the plaintiff, contends that Yahoo terminated his employment at around the same time as 600 other workers whose performance on the company’s Quarterly Performance Review (or QPR) System fell within the bottom five percent of all employees.

According to the complaint, Yahoo President and CEO Marissa Mayer implemented the QPR System when she joined the company in July 2012. Managers were required to rank their employees into different “Buckets,” ranging from “Greatly Exceeds” to “Misses,” based on how each employee performed in relation to his or her immediate peers. Anderson contends Yahoo managers were required to give a predetermined percentage of employees low marks, regardless of overall performance.

The complaint asserts violation of the WARN Act based on Yahoo’s alleged failure to comply with the law’s advance notice requirement. Subject to some exceptions, companies with 100 or more employees must provide at least 60 days’ notice of “mass layoffs,” defined by statute as a reduction in workforce not resulting from a plant closing, and consisting of losses at a single site of employment in any 30-day period for: (a) at least 33 percent of full-time employees, so long as the number of employees terminated is greater than 50; or (b) at least 500 full-time employees. See 29 U.S.C. § 2101(a)(3); 29 U.S.C. § 2102. Anderson contends Yahoo used the QPR System to circumvent the WARN Act’s notice requirement and is seeking back pay for each day of violation.

According to The New York Times, Yahoo never provided advance notice, but did fire around 1,100 employees in late 2014 and early 2015. Mayer apparently refused to characterize these losses as “layoffs,” and instructed her managers to use the decidedly more pleasant term “remix” instead.

We will keep an eye on this case as it progresses. In the meantime, it serves as a good reminder to employers to read up on the WARN Act and seek out legal advice should they anticipate any substantial cuts in their workforce.

About the author: Jonathan Crook practices on the firm’s litigation team. He focuses on employment law, insurance coverage analysis, and business litigation. Please contact him if you have questions or would like to discuss further.