K. Age Discrimination

Age discrimination complaints have increased markedly with older workers feeling the impact of company restructurings. This is especially true in industries such as advertising, sales and fashion where image sometimes counts as much as skill and experience. In fact, the EEOC recently reported a large increase in the number of age discrimination charges being filed from approximately 23,000 in l990 to more than 34,000 claims in l993.

Federal and state discrimination laws are designed to promote employment of older persons based upon their abilities, irrespective of age. They also seek to prohibit arbitrary discrimination and to help employers and workers find ways of addressing problems arising from the impact of age upon employment. The following thumbnail sketch outlines what employers can do under federal and state discrimination laws pertaining to age:

• Fire older workers for inadequate job performance and good cause (e.g., tardiness or intoxication);
• Entice older workers into early retirement by offering additional benefits (e.g., bigger pensions, extended health insurance, sub- stantial bonuses, etc.), which are voluntarily accepted;
• Lay off older workers, provided younger employees are treated similarly;
• Discriminate against older applicants when successful job performance absolutely requires that a younger person be hired for the job (e.g., in the case of a flight controller).

The following actions, however, are prohibited by law:

• Denying an older applicant a job on the basis of age;
• Imposing compulsory retirement before age 70;
• Coercing older employees into retirement by threatening them with termination, loss of benefits, etc.;
• Firing older persons because of age;
• Denying promotions, transfers, or assignments because of age;
• Penalizing older employees with reduced privileges, employment opportunities or compensation because of age.

Proving Allegations. It is illegal to terminate anyone on the basis of age. Whenever an older employee (over 40) is fired and claims discrimination, the issue is basically whether the company's decision was made because of age or was the result of a reasonable, non-discriminatory, rational business decision. Typically, an older worker must use circumstantial evidence to prove that the employer's motive was improper for example, by demonstrating that he or she was between 40 and 70 years of age, was doing satisfactory work, and vacated a position that was subsequently filled by a substantially younger employee under 40.

But, discrimination is sometimes proved by age-related statements made to the claimant (such as "You are too old, why don't you retire?" "The employee is burned out and forgetful." "You are stupid and old."). Age bias suits have been upheld when brought by senior employees who were subjected to demeaning jokes and adverse remarks about their age. To prevail however, such comments must be shown to constitute direct evidence within the context of an age discrimination case.

Statistics may also be used to prove discrimination (showing, for example, that a company fired five older workers in the past year and replaced them all with employees under 40). In a "pattern or practice" case brought under the ADEA, the plaintiffs must prove that age discrimination is the defendant's standard operating procedure or the systematic result of an employer's intentionally discriminatory practices. Direct evidence may be used to establish such an illegal pattern or practice (e.g., where an older applicant for a job at a spa is told directly by two employees that they have a policy of not hiring older workers because they want to maintain a "macho image"). In addition to direct evidence, a pattern or practice of intentional age discrimination may also be shown by an accumulation of evidence including statistics, patterns, practices, general policies and specific instances of discrimination.

TIP: When employers can support firing decisions with documentation of poor work performance such as written warnings, an older worker's chances of proving age discrimin- ation often diminish. Additionally, if staff avoids making liability-sensitive statements, remarks or threats with respect to age and the employee is unable to obtain statistical proof that the company had a practice of firing older workers and replacing them with younger ones, the chances of proving a claim may be reduced. Thus, use every form of employee communication to caution employees and supervisors against making discriminatory chatter.

A major problem area concerning age discrimination is on-the-job discipline and warnings. Progressive discipline is useful in reducing the risk of wrongful termination lawsuits: by documenting employee disciplinary incidents through precise records of conferences, warnings, probation notices, remedial efforts and other steps, companies sometimes demonstrate that an eventual termination was not motivated by discrimination but stemmed from a good-faith business decision.

TIP: The danger here is that many companies apply their system of discipline and warnings in a haphazard fashion and fail to use the same punishment across the board for similar infractions. You invite an age discrimination lawsuit (or other discrimination charge) if several employees have a chronic problem (such as absenteeism) and the older employee is the first to be fired for that reason, while workers under 40 are only given warnings.

On-the-job discrimination is regularly practiced in many areas. For example, companies must be able to offer strong proof that diplomas or other academic achievements are essential qualifications for a particular job. Otherwise, they may be subject to attack by older workers on the basis that limiting job promotions to recent college graduates at the company is a mere ploy designed to bar older workers from desired jobs or promotions.

Vacation Time. Is it age bias to place a cap on vacation time? The ADEA permits age-based reductions in employee benefit plans where justified by significant cost considerations but places the burden of proof on the employer to demonstrate that its actions are lawful.

Seniority Rights. Do the age bias laws protect an employee's seniority rights? No, unless there was a failure to refuse to hire or discharge any individual or otherwise deny any individual with respect to his compensation, terms, conditions or privileges of employment because of such individual's age.

Retirement Plans. Another related area is forced retirement. This occurs when companies exert pressure on older workers to opt for early retirement or face firing, demotion or a cut in pay. Some also threaten workers with poor references unless they accept an offer of early retirement.

Companies contemplating a large layoff or seeking to reduce payroll through early retirement incentives must do so carefully to avoid charges of age discrimination. Under the ADEA, it is illegal to impose compulsory retirement before age 70 unless the employee is a "bona fide executive" receiving an annual company-paid retirement benefit of at least $27,000 per year after reaching 65, or is in a "high policy-making position" during a two-year period prior to reaching age 65. Some states have passed similar laws which protect older employees from being victimized by forced retirement and mandatory retirement plans. In those states, some public employees cannot be forced to retire no matter how old they get. Private sector employees (with limited exceptions for some executives and tenured college faculty members) are also protected.

Can early retirement plans violate age discrimination laws? That depends on several factors. The employer will have to show that the plan is "bona fide" (e.g., plan benefits are based on an employee's length of service), that the employee's decision to accept early retire- ment is voluntary and that the reasons for the plan are non- discriminatory (i.e., not based on age).

Counsel Comment #121: To avoid charges that a person was not given sufficient time to reflect and weigh the options of an early retirement offer and thus was constructively discharged, always prepare clearly written releases and documents which give retirees time to consider the offer, seek advice from an attorney and even repudiate the decision after signing the document. All early retirement offers should be documented in writing so that your company can specifically include detailed provisions waiving any potential liability to age discrimination charges. Be sure to draft all releases and waivers properly.

TIP: The ADEA does not forbid employers from adopting policies against "underemploying" persons in certain positions rather than forcing retirement so long as those policies are applied evenhandedly. However, there is danger that such policies may serve to mask age discrimination.

Counsel Comment #122: When elimination of a job is imminent, rather than terminating the individual or discussing a forced retirement package, consider an older senior worker's request to be offered a lower paying job, inferior in status to the post you are about to terminate. Automatically refusing such a request may leave your company open to charges of age bias.

Specific Benefits. Due to recent legal developments, companies are required to provide more information on retiree coverage, including its lump sum value to each employee, so retired employees or employees offeredretirement incentives appreciate the value of retiree benefits. Also, while ERISA-governed pension plans must meet narrow vesting, funding and participation requirements, the same rules do not apply to health care programs.

Counsel Comment #123: Employers should explicitly reserve the right to modify the terms of their welfare plans in plan documents and related materials, so that they can change such plans at their discretion. Companies whose plans do not state that they can and may be changed without notice at the company's discretion should amend them as soon as possible to reflect that policy.

TIP: Design all retirement plans to support corporate and human resource objectives. For example, if the company anticipates a shortage of skilled workers within ten years, it should not offer a package which encourages early retirement of experienced, skilled employees.

Litigation Avoidance Measures. To avoid charges of age discrimin- ation, consider the following before terminating an older worker:

• Did the older worker request a transfer to another position before the firing? Was it refused? If so, were similar requests granted to younger workers?
• How was the older worker terminated? Was he/she given false reasons for the termination? Did he/she consent to the decision and has your company received a letter protesting the discharge?
• Was the older worker immediately replaced by a younger worker? Were younger workers merely laid off and not fired?

Positive answers to questions like these may prove age discrim- ination. Thus, all of these concerns must be properly addressed to avoid liability in this area.