One of today’s most significant employment trends is older workers who are staying employed and planning to remain employed. People have been extending their work years since the early 1990’s. Workers 55 and older made up 12.9% of the workforce in 2000. According to the Department of Labor, that group will be 20% of our workforce by 2015.
A 2010 survey conducted by the Employee Benefit Research Institute showed workers 50 and older who planned to retire at or before 62 declined to 7.4%. Health care expense is the single cost factor that keeps people from retiring.
The economic downturn is reinforcing the trend. Even those who have a pension and retiree health care are hesitant to retire until the economy improves. People are more informed about retirement and do not want to put their families in a financially vulnerable position.
The Age Discrimination in Employment Act of 1967 (ADEA) originally protected those from age 40 to 65. In 1978, the age ceiling was raised to 70, and in 1986, the age ceiling was eliminated. Indiana state law protects employees ages 40 to 70.
The ADEA clearly states a private employer cannot mandate retirement. There are very few exceptions to the Federal law. One exception is: “An employee who has attained 65 years of age and who, for the two-year period immediately before retirement, is employed in a bona fide executive or a high policymaking position…and is entitled to an immediate, non-forfeitable, annual aggregate retirement benefit of at least $44,000 from any combination of employer- sponsored retirement plans.” In Indiana, the employee must meet the federal exception requirement and be over 70 years old for an employer to mandate retirement. Other exceptions need to prove a bona fide reason for age being the factor necessitating retirement.
Voluntary incentivized retirement programs are legal. However, the policy and plan need to clearly demonstrate the true voluntary nature and comply with Employee Retirement Income Security Act (ERISA). Employers and their legal counsel need to draft voluntary retirement plans in a way that neutralizes the age factor. One method is to consider years of service rather than age. The Northwest Airlines v. Phillips case points out the benefit of having several factors in the plan, which may include age. After all, retirement and age are connected.
Retirement is not the only employment decision affected by the ADEA. “The intent of the ADEA is to protect a relatively old worker from discrimination that works to the advantage of the relatively young,” according the Supreme Court in the General Dynamics Land Systems Inc. v. Cline case. The collective bargaining agreement eliminated the company’s obligation to provide health benefits to future retirees, except for currently employed workers over 50 years old. Those who were between 40 and 50 sued. The Supreme Court reversed the 6th Circuit decision, stating they could not base their suit on those who were older being treated more favorably.
Another Supreme Court case, O’Connor v. Consolidated Coin Caterers Corp established that to allege age discrimination, employees do not need to demonstrate a loss to those under 40 years old, only to those substantially younger. The 7th Circuit adopted a 10-year bright line rule; meaning a 60 –year-old losing a promotion to a 49-year-old may have a case. And a 45-year-old may not have a case, if the employee lost a position to a 39-year- old applicant, even though the 39-year-old is outside of the protected class.
The ADEA’s grip is a bit looser than most protected classes. In the Smith v. Jackson, Miss case, the Supreme Court views disparate impact under the ADEA differently. An employer needs to show that the employment decision was based on reasonable factors other than age (RFOA). In this case, police officers and dispatchers sued because younger officers received substantially higher pay increases. The city’s legitimate goal was to make the junior officers’ positions more competitive with neighboring cities.
Like other protected classes, employers need to treat employees equally. Older workers have a lot to offer employers. If their performance falls off, they need to be informed about their failure to meet expectations and have an opportunity to improve. Avoiding performance issues because of a protected class is a mistake.
Another mistake employers make is allowing cavalier remarks about age in the workplace. Supervisors need to be trained to avoid age based comments, such as “How would you feel working with everyone who is much younger than you?”
At—Will Statement Scrutiny
Most non-union, private employers establish their at-will employment relationship through the employee handbook. In fact, best practice has been to include an at-will acknowledgement as part of the Employee Handbook acknowledgement. At–will means either party can terminate the employment relationship at any time, for any lawful reason, with or without notice.
The National Labor Relations Board (NLRB) challenges at-will statements violate Section 7 of the National labor Relations Act (NLRA). Section 7 of the NLRA allows employees to engage in concerted activities and prohibits employers who retaliate against employees who seek to form a union.
The Red Cross Arizona Blood Services Division requires its employees to sign an at-will acknowledgement. Part of the acknowledgement included “ the at -will employment cannot be amended, modified or altered in any way.” This was enough for an administrative law judge to agree with the NLRB; viewing it as a violation of the employees’ rights under Section 7.
Hyatt’s at-will acknowledgement stated the at-will relationship could be changed, but only by certain company officials. The NLRB challenged this policy, too. Hyatt settled, and changed their verbiage before the case went before the judge.
Employers need to review their at-will statements and delete the inability to amend, modify or alter the at-will relationship, as well as allowing only certain executives to change the relationship. Lafe Solomon, the NLRA’s General Counsel is making sure non- union employers and employees understand Section 7 of the NLRA applies to them.