Promotions, reductions in force and age discrimination

May 08, 2015

The federal Age Discrimination in Employment Act (or ADEA), protects employees 40 and over from discrimination with respect to any term and condition of employment, including hiring, promotions, and reductions in force. In essence, it prohibits all human resource decisions made because of an employee’s age. An increasing number of employees are now covered under the ADEA because many older workers are also choosing to remain in the workplace for longer periods of time. These factors have contributed to an increasing number of age discrimination lawsuits. 

When companies decide to either promote or lay off employees, problems can occur. In theory, all employment decisions including promotions and layoffs should be based on ability. But, sometimes age is a proxy for many abilities. We often use other factors besides ability at work to judge a person’s potential. For example, we use a person’s participation in sports as an indicator of their ability to work on a team. Some people think the older worker is more valuable because they need less training and have more experience. Yet, others think older workers are less valuable because they have decreased energy and concentration. And, what about reverse age discrimination? At some employers, there are older managers who have been there forever. Are your younger potential managers discouraged because of their lack of experience? All of these perceptions are stereotypes, and should be avoided.

Instead, a company (through management and Human Resources) should perform effective personnel evaluations and plan for management succession. Don’t provide automatic promotions and annual pay increases that are not warranted. Instead, promote based on ability or merit and with your succession plan in mind.

Don’t worry - many companies promote and offer pay increases as a matter of course. From my perspective as an employment attorney, however, you may be inviting litigation. During restructuring and layoffs, it may be difficult to identify who should stay and who should go if everyone is considered “satisfactory” and received pay increases and promotions. So, sometimes, employers just cut the most expensive salaries and benefits. But that type of decision frequently has an undue or “disparate” impact on older workers.

The ADEA prohibits employment practices that have a disparate impact on older workers. It includes an exception, however, for “otherwise prohibited” practices that are “based on reasonable factors other than age.” In a recent United States Supreme Court case involving a reduction in force (or RIF), Meacham v. Knolls Atomic Power Laboratory, the employer needed to cut its workforce and, in doing so, rated its employees on “flexibility” and “criticality” skills. Thirty of the thirty-one employees it identified for termination were older than 40, however. And, these ratings did not always match the performance reviews that had been conducted previously.

The United States Supreme Court held that the employer, not the employee, has the burden of persuading the court that an employment practice with a disparate impact on older workers was “based on reasonable factors other than age.” Although technical in nature, the case should provide additional guidance as employers plan and conduct layoffs.

Now the good news: the Supreme Court reiterated that plaintiffs bringing an ADEA disparate-impact claim “still must carry the burden of identifying the specific employment practices that are allegedly responsible for any observed statistical disparities,” which is not a “trivial” burden.

So, whether you are promoting or laying off employees, here are the steps you should take to curtail age discrimination litigation.

  1. Be honest in performance reviews. Do them right or not at all. Don’t use a RIF to manage performance problems that have not been well documented over the years. Juries won’t buy that you didn’t “mean” the employee was satisfactory when you rated them as such and gave them a raise every year before you laid them off due to performance. 
  2. Base decisions on positions as well as people. Promotion and layoff decisions have to be based on the job titles and on verifiable skills (or lack thereof). 
  3. Train your managers and hold them accountable. Make sure they know the appropriate selection criteria when it comes to promotions, performance improvement plans, succession plans, and layoffs. 
  4. Have a review process in layoffs. You should have written RIF policies to identify positions to be eliminated due to replication or reorganization and employees to be laid off on a performance basis. It is a good idea to have an independent internal review process to evaluate the decisions made. Trust but verify. Anyone involved in developing the reorganization and layoffs should have to defend their selections. Once a list of employees and positions to be eliminated are compiled, it should be reviewed by an objective panel to determine whether it adversely affects any group by age, race or gender, for example. It is also important to consider the impact that the layoff will have on employees who are on workers’ compensation leave, and employees about to vest in benefit plans, because these employees may have claims that the RIF interfered with their protected rights. 
  5. Reduce your risk - negotiate a severance agreement. Consider reducing any ADEA (or other protected class) exposure by offering laid off employees a severance package that releases all claims against the company. One federal law, the Older Worker Benefits Protection Act (OWBPA) requires that certain language be included in the severance agreement, so talk to your corporate attorney. The money spent on a settlement package now will be less than litigation down the road.

If you have questions about age discrimination or other employment law matters, please contact Wilford H. Stone at wstone@lynchdallas.com or 319-365-9101.



Category: Employment Law

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