HRMN 408 Assignment 2: Discrimination and Harassment Case Study

Age Discrimination

• Covered Employers

• Exceptions

• Benefit Plans

• Proving Age Discrimination

• Release of ADEA Claims

• Remedies under the ADEA

CHAPTER 16

C o p y r i g h t 2 0 1 7 . S o c i e t y F o r H u m a n R e s o u r c e M a n a g e m e n t .

A l l r i g h t s r e s e r v e d . M a y n o t b e r e p r o d u c e d i n a n y f o r m w i t h o u t p e r m i s s i o n f r o m t h e p u b l i s h e r , e x c e p t f a i r u s e s p e r m i t t e d u n d e r U . S . o r a p p l i c a b l e c o p y r i g h t l a w .

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Book: The SHRM Essential Guide to Employment Law : A Handbook for HR Professionals, Managers, Businesses, and Organizations Author: Charles Fleischer Date: 2017

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The SHRM Essential Guide to Employment Law306

The purpose of the federal Age Discrimination in Employment Act (ADEA) is to promote employment of older persons based on their ability rather than age by prohibiting age-based discrimination against employees and job applicants. Consistent with that purpose, the ADEA applies only to persons 40 years of age or older, so that an age-based decision affecting only persons under 40 does not violate the ADEA.

ALERT! Many states and local jurisdictions have their own age discrimination laws that apply to

all employees, not just those 40 years of age or older.

Hiring or promoting a 35-year-old employee instead of a 45-year- old for reasons other than age is perfectly legal. However, the employer should identify the objective, job-related, nondiscrimi- natory criteria used in making the decision. In making personnel decisions, employers should avoid using terms such as dead wood, fresh faces, new blood, or more energy. These terms are often viewed as evidence of discriminatory intent and will hurt the employer in defending an age discrimination claim.

Harassment with respect to age can constitute age discrimination, just as harassment with respect to race or sex can violate Title VII. Employers should not tolerate workplace jokes or teasing aimed at older employees, their medical conditions, or other factors common to age.

There has been some doubt just how the ADEA works in certain circumstances. For example, is favoring a 45-year-old over a 60-year- old illegal, even though both workers are within the protected, over- 40 class? Alternatively, may an employer favor a 60-year-old over a worker age 45?

In 1996 the Supreme Court answered the first question, ruling that when an older worker is replaced by someone younger because of age, it does not matter that the younger worker is also in the 40-and-older protected class. A case of age discrimination can be

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Age Discrimination 307

based just on a significant age difference even though both workers are over 40, said the court.

The Supreme Court later answered the second question as well. The court ruled that an employer practice that favors older workers is permitted under the ADEA, even though it discriminates against younger workers who are in the 40-and-over protected class. In the court’s words, the ADEA does not look both ways.

COVERED EMPLOYERS The ADEA covers most employers with 20 or more employees. Specifically, it covers employers engaged in an industry affecting commerce that have 20 or more employees for each working day in each of 20 or more calendar weeks in the current or preceding calendar year. The coverage provisions track Title VII, except that the employee threshold for Title VII is 15 employees instead of the 20-employee threshold of the ADEA. (See Chapter 14 for the meaning of industry affecting commerce and the methodology for counting employees.)

EXCEPTIONS As with Title VII, there is an exception in the ADEA for a bona fide occupational qualification (BFOQ); however, the exception has been narrowly applied by the courts. For example, an airline had a rule that its flight engineers must retire at age 60 on the theory that many persons over that age have limitations that preclude safe operation of aircraft. The airline argued that it would be impractical, if not impos- sible, to examine all flight engineers and identify those with limita- tions. A jury found the rule illegal under the ADEA and awarded damages. The Supreme Court let the jury verdict stand, saying that it was not enough for the airline to have a rational basis for its policy. Instead, the airline had to prove that its policy was reasonably nec- essary to the normal operation or essence of the particular business. (Ironically, the Federal Aviation Administration long had a rule that pilots must retire at age 60; Congress has raised that age to 65.)

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The SHRM Essential Guide to Employment Law308

The ADEA also permits an employer to have a bona fide senior- ity system provided it is not intended to evade the purposes of the ADEA. A seniority system cannot be used to justify involuntary retirements.

The ADEA has other exceptions that make the act unique among federal nondiscrimination laws. For one, the ADEA does not apply to persons under age 40, so age discrimination against persons younger than 40 is not illegal under the ADEA. (As pointed out above, it may be illegal under state or local laws.)

Although the act generally prohibits compulsory retirements based on age, bona fide executives or high policymakers may be forced to retire. A bona fide executive is a person who exercis- es substantial managerial authority over a significant number of employees and a large volume of business. A high policymaker is an employee other than a bona fide executive who plays a sig- nificant role in developing and implementing corporate policy. The act allows forced retirement of a bona fide executive or high policymaker if the person held the position for two years preced- ing retirement, is at least 65 years old, and is entitled to annual retirement benefits of at least $44,000 based solely on employer contributions.

QUICK TIP The definition of a bona fide executive for ADEA purposes is different from the Fair Labor

Standards Act’s definition in connection with exemption from overtime requirements.

(Chapter 5 addresses overtime requirements.)

State and local governments are also permitted to establish man- datory retirement ages for firefighters and law enforcement officers.

BENEFIT PLANS Almost all retirement plans make age-based distinctions. Plans stat- ing that employees who have attained a specified age (such as 65) may retire and begin receiving benefits are lawful. However, employ-

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Age Discrimination 309

ers must take caution when changing the terms of plans to ensure that benefits are not being taken from a class of persons protected by the ADEA.

For example, when an employer converts from a defined bene- fit plan to a cash balance plan (discussed in Chapter 9), employees lose the back-loaded boost they had anticipated from their defined benefit plan. Since this loss is borne most heavily by older workers who are near retirement, some have argued that such conversions amount to age discrimination.

PROVING AGE DISCRIMINATION Although an older worker may be the victim of age discrimination, the worker still has to prove that the adverse employment decision was age-based. It is often difficult to find such direct evidence of discriminatory motive. In the more usual case, the boss’s motive is unclear (or at least unexpressed), and circumstantial evidence is all that is available.

One type of circumstantial evidence is a significant age differen- tial between the fired person and his or her replacement. Courts have come up with a variety of answers as to what is significant, ranging from 3 years to 10 years. Five to seven years seems to be emerging as a standard, so that an age differential of less than that should not provide circumstantial evidence of age discrimination. But even when the age difference is less than five years, an employ- ee could still prevail in court if he or she has other evidence of age discrimination.

Employers should be alert to code words that often stand for age, such as describing an employee as tired or inflexible, or seeking to hire new blood or a digital native.

Salary may also be seen as a proxy for age, since older, more senior workers are generally paid more than younger, more junior workers. Is it alright to discriminate on the basis of salary, such as by choosing more highly paid employees for termination during a reduction in force? The courts have generally said yes.

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The SHRM Essential Guide to Employment Law310

RELEASE OF ADEA CLAIMS A release is a type of contract by which one party gives up a legal right or claim in exchange for valuable consideration—usually money. In general, no special form of contract is required to release most types of claims, including discrimination claims.

ADEA cases are different. Unlike other employment-related dis- putes, the release of an ADEA claim will be ineffective unless the employer follows very specific procedures spelled out in the law. For example, the employee must be advised in writing to consult with an attorney before signing the release. Then, the employee must be given at least 21 days to consider the release before signing it. Also, the employer must give the employee an additional seven-day rescis- sion period after the signing date to change his or her mind.

The law does not require the employee to actually wait 21 days before signing the release. The employee can sign earlier, so long as his or her right to take a full 21 days is not restricted. However, the seven-day rescission period after signing cannot be shortened.

The Supreme Court has ruled that when a release did not comply with ADEA requirements, an employee who received severance pay in exchange for a release of her ADEA claim was entitled to keep the severance pay and still sue her employer for age discrimination. Therefore, an employer that has required a release of all claims in exchange for a severance package should not begin making sever- ance payments to its age 40-plus former employee until the sev- en-day rescission period has expired.

If a release of ADEA claims is requested in connection with an exit incentive or other employment termination program offered to a group or class of employees, the 21-day period increases to 45 days. In addition, the employer must provide all persons in the class or group with a description of the class or group. The employer must also inform them of the job titles and ages of all employees eligible or selected for the program. The ages of all employees in the same job classification or organizational unit who are not eligible or selected for the program must also be disclosed.

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REMEDIES UNDER THE ADEA The remedies available to an individual who has suffered age dis- crimination in employment are similar to those under the Fair Labor Standards Act (discussed in Chapter 5) and unlike those available under Title VII (discussed in Chapter 14).

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