Encounters @ Southern Bank Allegations of both adverse impact and adverse treatment in the involuntary layoffs of bank employees

Case Background Southern Bank >$300 billion in Total Assets Rapid expansion through mergers and acquisitions Merged/acquired 12 institutions in Florida from 91-94 In 2014, total assets ~ $1.5 trillion and world’s largest bank according to market capitalization (~250 billion) Over 3000 affected by involuntary layoff Defendant in age discrimination case ADEA protects workers of 40 years of age and older Approximately 350 plaintiffs filed suit Focus was on entire system for which we had data Discovery was problematic College recruitment, compensation, promotion, layoffs

Southern Bank 25,721 employees in dataset PM System data file spanning 1991-1994 PM System 1-5 point graphic rating scale Annual, top-down, single-source system Many missing appraisal observations Depositions of HRM staff asserted that PM ratings and length of service were the only criteria for reduction in force decisions Naturally we focused on the tenability of this assertion We began with establishing prima facie evidence

Prima Facie Evidence of Disparate Impact (Exhibit 1) Table 4. Employment Status by Employee Age Group Employment Status Total Retained Involuntary Layoff Voluntary Termination and Other Terminated - Reason unknown Age Group Under 40 years of age Count 1553 951 1676 836 5016 31.0% 19.0% 33.4% 16.7% 100.0% 40-49 years of age 779 547 511 298 2135 36.5% 25.6% 23.9% 14.0% 50-59 years of age 476 383 283 207 1349 35.3% 28.4% 21.0% 15.3% 60+ years of age 127 228 176 118 649 19.6% 35.1% 27.1% 18.2% 2935 2109 2646 1459 9149 32.1% 23.1% 28.9% 15.9% Age of employees in 1994 was one month older than employees in 1991 It could not have been due to a higher voluntary termination rate among older employees because their rate of voluntary and other terminations was lower than that of employees in the youngest age group (23.9%, 21%, and 27.1% versus 33.4%).

Prima Facie Evidence of Disparate Impact (Exhibit 2) Table 6. Proportional Involuntary Lay-off Rates of Each Employee Age Group From 1991-1994. Age Group 1991 Lay-off Ratio 1992 1993 1994 Under 40 years of age Count 77/1630 710/2263 118/1671 46/1599 % Within Age Group .047 .313 .070 .028 40-49 years of age 63/842 366/1145 82/861 36/815 .074* .319 .095* .044* 50-59 35/511 265/741 58/534 25/501 .068* .357* .108* .049* 60+ 17/144 176/303 23/150 12/139 .118* .580* .153* .086* Total 192/3127 1517/4452 281/3216 119/3054 % .061 .340 .087 .038 11 of 12 differences in lay-off ratios are statistically significant 10 of 12 differences in lay-off ratios demonstrate adverse impact on ADEA employees Aggressive lay-offs in 1992 produced a rate among 60+ employees that was almost twice that of those under 40 years of age

Do data conform to the deposition provided by HR staff executives? Figure 17. Southern Bank Decision Model of Employment Termination Years of Service ADEA Status Employment Status Job Performance Model 2 Coefficient is statistically significant. Model 1 Coefficient was not statistically significant.

Do appraisal data relate to compensation? Table 5. Correlations Between Age Group Variables and Percentage Change in Hourly Compensation Among Management Employees of Acquired Institutions. Percentage Change in Pay: Pre-Acquisition - 1992 Percentage Change in Pay: 1992 - 1993 Percentage Change in Pay: 1993 - 1994 ADEA Status at Acquisition Correlation Coefficient .118 -.101 -.232 Sig. (2-tailed) .003 .026 .000 N 624 481 374 Age Group at Acquisition .170 -.164 -.300 Note. 0=Non-ADEA 1=ADEA. Trend reversal so that age becomes negatively related to performance ratings.

Conclusions Among those for whom PM data were available, no rational logic could explain the pattern of empirical relations observed Identifiable, legitimate factors could not explain ratings Relations with employee LOS went from positive to negative from 1990-1994 Relations of pay and performance ratings went from positive to zero among ADEA employees but not among non-ADEA employees 44.8% of employees designated as PNE (position not evaluated) were subject to involuntary termination r = -.75 between positions converted to PNE and presence of payroll record in 1994 Ongoing college recruitment programs hired several thousand new employees over the 1991-1994 period while hundreds of laid-off employees had reapplied for their old positions and were denied employment Both adverse impact and adverse treatment were viable allegations that could be substantiated by evidence

Final Report Conclusion The series of analyses we reported in this document repeatedly support the allegation of age-related bias being manifest in a wide variety of employment decisions at XXXXXXX during the 2-year period immediately subsequent to the acquisition of large institutional competitors. The demonstration of age related bias was pervasive in most decisions involving employee retention including the designation of job as “position not evaluated” which was correlated with involuntary layoffs; the reversal in appraisal ratings relationship with age subsequent to acquisition; the higher promotion rate among employees younger than 40 years of age; the reversal in the relationship between age variables and percentage increase in hourly pay and the consistent demonstration of a negative age-pay raise relationship subsequent to acquisition; the fast-tracking of new management talent through the college recruitment program; and the often improbably high over-representation of older employees among those experiencing involuntary layoffs. This last effect was robust across most acquired institutions, job groupings, and years subsequent to acquisition. Finally, these last series of tests conducted with the largest population of XXXXXXX employees available to us for analysis suggested a pattern of force reduction that systematically reduced the proportion of employees above the age of 40. Whereas younger employees tended to engage in higher rates of voluntary termination, older employees were designated at a disproportionate rate by XXXXXXX for involuntary termination through layoffs. A definitive test of two decision process models clearly indicated that the best explanation for employee status as a “layoff” versus “retention” was membership in the more senior age group (i.e., ADEA class membership) at the time of the decision.