Age Discrimination in Employment

Age Discrimination is once again in the news after a recent ruling by the U.S. Supreme Court on an Age Discrimination Employment Act (ADEA) claim. And why not? In the last ten years, age discrimination claims have risen 61% to over 24,000 claims in 2008, according to Equal Employment Opportunity Commission. Since the ADEA was first passed in 1967, the balance between employer and employee rights has sporadically moved back and forth, altering the legal landscape as it progresses through statutory amendments and changing case law.

The ADEA

The Age Discrimination in Employment Act (ADEA) prohibits an employer from refusing to hire, fire, or otherwise discriminate against a person age 40 or older, solely on the basis of age. This includes denying an employee pay or fringe benefits because of age, or classifying employees into groups on the basis of age in a way that unfairly deprives individuals of employment opportunities. Generally, an employer may not discriminate against a person 40 years or older for a younger individual, even if that younger individual is over the age of
40. The ADEA is applicable to employers who have 20 or more employees for 20 or more calendar weeks in the current or preceding calendar year.

The ADEA in many ways is similar to Title VII Discrimination laws, which began with the Civil Rights Act of 1964, and were amended in 1991. Title VII provides that an employer may not discriminate against any individual with respect to compensation, terms, conditions, or privileges of employment because of the individual's race, color, religion, sex or national origin. Likewise, the Americans with Disabilities Act (ADA), which was amended in 2008 (and went into effect in 2009), prohibits discrimination against applicants and employees who meet the statute's definition of a qualified individual with a disability. Because in many instances the wording of the statutes is similar, courts have interchanged the interpretations for the acts; however, in other areas of the law, the statutory language differs, and this is where confusion in interpretation often arises.

Changing Landscape

Since the passage of the ADEA, a series of notable cases and statutory amendments have shaped the current state of the ADEA into an important anti-discrimination law of which employers must be continually aware. This continual evolution requires employers to stay abreast of current activity in this area of employment law, particularly when employers must engage in the often unpleasant task of conducting a reduction in force.

In 1993, the Supreme Court, in Hazen Paper v. Biggins, made a decisive ruling that was an important step for employers in finally clearing up an issue that previously resulted in inconsistency and no small amount of uncertainty among the circuit courts. While some circuits found termination of an employee to save salary costs based on seniority to be a violation of the ADEA (because senior employees are generally older by nature), other circuits distinguished between an employee's age and his or her years of service. The Supreme Court distinguished between the two, ruling, “there is no disparate treatment under the ADEA when the factor motivating the employer is some feature other than the employee's age.” In other words, termination simply because someone is highly paid is not age discrimination. Termination based on an employee's age is age discrimination.

A slight bump in the road for employers seemed to come in 2000, in Reeves v. Sanderson, when the Supreme Court addressed the issue of “pretext-plus” and found for the employee in an age discrimination case. In Reeves, the employer had fired the employee under the pretext of performance issues and argued that the employee should not only have to show the reason given for the firing was pretext, but must additionally prove the termination was made for discriminatory reasons. The High Court disagreed, knocking out the so-called “pretext-plus” belief, and holding the employee need only show that the employer lied about the real reason for the termination. This holding made the plaintiff's burden of proof less onerous in a pretext case. In the more recent Supreme Court ruling handed down in June of this year, the pendulum has swung back in favor of employers and made a distinction between the application of case law for the ADEA versus other anti-discrimination laws. In Gross v. FBL Financial Services Inc., the Court ruled that the burden-shifting framework that has historically been applied to Title VII mixed motive cases since the 1989 Price Waterhouse v. Hopkins case, never applies to mixed motive ADEA claims.

This means that once the employee has made a showing that discriminatory factors played at least some role in the employment action, instead of the burden shifting to the employer to articulate a legitimate reason for the adverse action, the burden remains with the employee to prove age discrimination was the “but-for” reason for the action.

A Line in the Sand

While many legal commentators have expressed surprise at this ruling, this is by no means the first time the Supreme Court has drawn a line in the sand between the ADEA and other discrimination statutes based on statutory variation.

As the Court explained in its most recent opinion, “When Congress amends one statutory provision but not another, it is presumed to have acted intentionally.” This approach is similar to the Court's 1991 ruling in EEOC v. Arabian American Oil Co. (which it references in its opinion), were it held that the ADEA applied to American employers overseas, but refused to apply the same standard to Title VII employees overseas working for an American employer. The Court reconciled this issue in 1991 by finding that Congress amended the ADEA in 1984 to apply to U.S. companies overseas who employed American citizens; however, Congress had failed to similarly amend Title VII. As such, the Court used this pinnacle idea to continue to define the differences between anti-discrimination statutes ' holding that what is good for one, is only good for the other if the statutory language provides such. This action, although logical and correct, leaves uncertainty in applicability of procedures for employers who have for years attempted to streamline their anti-discrimination efforts based on similarities among federal anti-discrimination case law.

This tradition of setting apart the ADEA from other anti-discrimination laws has been fluidly growing over the years. In fact, in 2005, the Court explained in Smith v. City of Jackson, Miss. that a disparate impact theory claim is available under the ADEA, but pointed out the scope for such claims is much more narrow than it is under Title VII claims. The Court explained that by statute, Congress modified the 1989 holding in Ward's Cove Packing Co. v. Atonio, (regarding disparate impact claims). Ward's Cove requires a discrimination plaintiff in a disparate impact claim to identify a specific test or practice that had an adverse impact on older workers. By passing the 1991 Civil Rights Act, which amended Title VII, the Ward's Cove requirements were not longer applicable to Title VII claims. However, as the Court pointed out, Congress did not make the same modifications to the ADEA, and thus, the Ward's Cove rule remains valid for ADEA claims.

Likewise, in this recent decision in FBL Financial Services, the Court distinguished between the statutory language in the ADEA versus the post-amendment language of Title VII; because Congress opted to change one and not the other, the Court reasoned, the changes only applied to the statutory scheme amended. This leaves open the opportunity for Congress to revisit and revise the ADEA to reverse this decision ' much like Congress did in January 2009 with the Supreme Court's decision on the Equal Pay Act in the Ledbetter v. Goodyear case.

RIFs ' Avoiding Problems

As employers see the distinctions made by the Court's recent decision, and the continued separation from ADEA and other anti-discrimination statutes, it is imperative that these distinctions be understood in light of severance packages and reductions-in-force. In today's economic climante, with continued efforts to cut costs and expenditures, many employers are faced with the dubious task of engaging in a reduction-in-force ' causing the Court's decisions and the ADEA to come to the forefront for companies. As such, the 1990, amendments to the ADEA, known as the Older Workers Benefit Protection Act (OWBPA), are crucial to consider in addition to the Court's recent and continued rules on ADEA matters.

The purpose of the OWBPA is to prohibit employers from discriminating against older workers by denying certain employee benefits. The OWBPA is one of the key legislative acts which an employer must keep in mind during its RIF procedures, specifically if the employer is offering severance packages in exchange for a waiver of the right to sue for possible discrimination. Typically, in the waivers, an employee will waive his or her right to make an age discrimination allegation. The OWBPA sets forth several specific statutory requirements designed to ensure that when an employee releases any legal age claims, this waiver is completely “knowing and voluntary.”

In 1998, the pendulum once again swung in employees' favor as the Supreme Court ruled in Oubre v. Entergy Operations, Inc. In Oubre, a terminated employee signed a release waiver in exchange for a severance payment. Later, she sued her employer for age discrimination. The waiver was defective for several significant reasons. The Supreme Court found the waiver to be defective because it was not “knowing and voluntary,” and therefore did not bar the employee's claim. To be knowing and voluntary, the Court noted, the waiver must meet the specific statutory requirements in the OWBPA. The Court also found failure to tender back the money received in a severance package did not ratify a defective waiver.

While some courts have subsequently refused to completely put “form over function” in close cases, the prudent route for any employer who is designing a severance package and waiver is to strictly follow the statutory requirements put in place by the OWBPA and not deviate. Employers implementing a reduction-in-force have additional requirements with regard to the information necessarily provided in conjunction with a waiver of age discrimination claims. One of these is the disclosure requirement regarding the employee's group or organizational unit. Regarding restructuring, RIF programs and early retirement plans, the OWBPA requires employers to provide information about the ages of both discharged and retained employees to those who are considering releasing their age claims. While the definition of an “organizational unit” is somewhat murky, taking the time to carefully design a reduction program is key.

Plaintiff claims have gotten more sophisticated over the years, with courts allowing statistical analysis such as a multiple regression analysis to show a disparate impact once reduction programs have gone into effect. Statistical evidence is used in both prima facie cases and to show pretext. This same evidence, however, can be used in favor of an employer to show a lack of discrimination or disparate impact.

Employers are encouraged to carefully structure these reduction programs to avoid potential problems. One of the most important things an employer can do is to ensure criteria used to eliminate employees cannot be construed as illegal factors. Employers should develop a clear, rational policy and apply it consistently. Elimination based on quantitative measures such as productivity, and job elimination of a single function across the board have consistently held up in court as appropriate reasons for termination.

Conclusion

For employers, compliance with the ADEA and the stringent statutory requirements of the OWBPA is of utmost importance, especially in light of the rapid growth of unemployment during the economic downturn ' and, in fact, employers can visit the EEOC's Web site, http://www.eeoc.gov/, for basic guidance on suggested release content and reductions-in-force. As unemployment grows, desperation sets in and may lead to employees questioning, through lawsuits, the employer's reduction-in-force process. Careful construction of waiver documents, particularly those that waive the right to age discrimination claims, is well worth the extra attention in the long run. Otherwise, employers may find themselves out of a severance package, and in court!

Bryce G. Murray and E. Fredrick Preis, Jr. are attorneys in the Labor and Employment Section in Lemle & Kelleher's New Orleans office, and exclusively represent management in all aspects of labor and employment law. Mr. Murray can be reached at [email protected]. Mr. Preis can be reached at [email protected].

Age Discrimination is once again in the news after a recent ruling by the U.S. Supreme Court on an Age Discrimination Employment Act (ADEA) claim. And why not? In the last ten years, age discrimination claims have risen 61% to over 24,000 claims in 2008, according to Equal Employment Opportunity Commission. Since the ADEA was first passed in 1967, the balance between employer and employee rights has sporadically moved back and forth, altering the legal landscape as it progresses through statutory amendments and changing case law.

The ADEA

The Age Discrimination in Employment Act (ADEA) prohibits an employer from refusing to hire, fire, or otherwise discriminate against a person age 40 or older, solely on the basis of age. This includes denying an employee pay or fringe benefits because of age, or classifying employees into groups on the basis of age in a way that unfairly deprives individuals of employment opportunities. Generally, an employer may not discriminate against a person 40 years or older for a younger individual, even if that younger individual is over the age of
40. The ADEA is applicable to employers who have 20 or more employees for 20 or more calendar weeks in the current or preceding calendar year.

The ADEA in many ways is similar to Title VII Discrimination laws, which began with the Civil Rights Act of 1964, and were amended in 1991. Title VII provides that an employer may not discriminate against any individual with respect to compensation, terms, conditions, or privileges of employment because of the individual's race, color, religion, sex or national origin. Likewise, the Americans with Disabilities Act (ADA), which was amended in 2008 (and went into effect in 2009), prohibits discrimination against applicants and employees who meet the statute's definition of a qualified individual with a disability. Because in many instances the wording of the statutes is similar, courts have interchanged the interpretations for the acts; however, in other areas of the law, the statutory language differs, and this is where confusion in interpretation often arises.

Changing Landscape

Since the passage of the ADEA, a series of notable cases and statutory amendments have shaped the current state of the ADEA into an important anti-discrimination law of which employers must be continually aware. This continual evolution requires employers to stay abreast of current activity in this area of employment law, particularly when employers must engage in the often unpleasant task of conducting a reduction in force.

In 1993, the Supreme Court, in Hazen Paper v. Biggins, made a decisive ruling that was an important step for employers in finally clearing up an issue that previously resulted in inconsistency and no small amount of uncertainty among the circuit courts. While some circuits found termination of an employee to save salary costs based on seniority to be a violation of the ADEA (because senior employees are generally older by nature), other circuits distinguished between an employee's age and his or her years of service. The Supreme Court distinguished between the two, ruling, “there is no disparate treatment under the ADEA when the factor motivating the employer is some feature other than the employee's age.” In other words, termination simply because someone is highly paid is not age discrimination. Termination based on an employee's age is age discrimination.

A slight bump in the road for employers seemed to come in 2000, in Reeves v. Sanderson, when the Supreme Court addressed the issue of “pretext-plus” and found for the employee in an age discrimination case. In Reeves, the employer had fired the employee under the pretext of performance issues and argued that the employee should not only have to show the reason given for the firing was pretext, but must additionally prove the termination was made for discriminatory reasons. The High Court disagreed, knocking out the so-called “pretext-plus” belief, and holding the employee need only show that the employer lied about the real reason for the termination. This holding made the plaintiff's burden of proof less onerous in a pretext case. In the more recent Supreme Court ruling handed down in June of this year, the pendulum has swung back in favor of employers and made a distinction between the application of case law for the ADEA versus other anti-discrimination laws. In Gross v. FBL Financial Services Inc., the Court ruled that the burden-shifting framework that has historically been applied to Title VII mixed motive cases since the 1989 Price Waterhouse v. Hopkins case, never applies to mixed motive ADEA claims.

This means that once the employee has made a showing that discriminatory factors played at least some role in the employment action, instead of the burden shifting to the employer to articulate a legitimate reason for the adverse action, the burden remains with the employee to prove age discrimination was the “but-for” reason for the action.

A Line in the Sand

While many legal commentators have expressed surprise at this ruling, this is by no means the first time the Supreme Court has drawn a line in the sand between the ADEA and other discrimination statutes based on statutory variation.

As the Court explained in its most recent opinion, “When Congress amends one statutory provision but not another, it is presumed to have acted intentionally.” This approach is similar to the Court's 1991 ruling in EEOC v. Arabian American Oil Co. (which it references in its opinion), were it held that the ADEA applied to American employers overseas, but refused to apply the same standard to Title VII employees overseas working for an American employer. The Court reconciled this issue in 1991 by finding that Congress amended the ADEA in 1984 to apply to U.S. companies overseas who employed American citizens; however, Congress had failed to similarly amend Title VII. As such, the Court used this pinnacle idea to continue to define the differences between anti-discrimination statutes ' holding that what is good for one, is only good for the other if the statutory language provides such. This action, although logical and correct, leaves uncertainty in applicability of procedures for employers who have for years attempted to streamline their anti-discrimination efforts based on similarities among federal anti-discrimination case law.

This tradition of setting apart the ADEA from other anti-discrimination laws has been fluidly growing over the years. In fact, in 2005, the Court explained in Smith v. City of Jackson, Miss. that a disparate impact theory claim is available under the ADEA, but pointed out the scope for such claims is much more narrow than it is under Title VII claims. The Court explained that by statute, Congress modified the 1989 holding in Ward's Cove Packing Co. v. Atonio, (regarding disparate impact claims). Ward's Cove requires a discrimination plaintiff in a disparate impact claim to identify a specific test or practice that had an adverse impact on older workers. By passing the 1991 Civil Rights Act, which amended Title VII, the Ward's Cove requirements were not longer applicable to Title VII claims. However, as the Court pointed out, Congress did not make the same modifications to the ADEA, and thus, the Ward's Cove rule remains valid for ADEA claims.

Likewise, in this recent decision in FBL Financial Services, the Court distinguished between the statutory language in the ADEA versus the post-amendment language of Title VII; because Congress opted to change one and not the other, the Court reasoned, the changes only applied to the statutory scheme amended. This leaves open the opportunity for Congress to revisit and revise the ADEA to reverse this decision ' much like Congress did in January 2009 with the Supreme Court's decision on the Equal Pay Act in the Ledbetter v. Goodyear case.

RIFs ' Avoiding Problems

As employers see the distinctions made by the Court's recent decision, and the continued separation from ADEA and other anti-discrimination statutes, it is imperative that these distinctions be understood in light of severance packages and reductions-in-force. In today's economic climante, with continued efforts to cut costs and expenditures, many employers are faced with the dubious task of engaging in a reduction-in-force ' causing the Court's decisions and the ADEA to come to the forefront for companies. As such, the 1990, amendments to the ADEA, known as the Older Workers Benefit Protection Act (OWBPA), are crucial to consider in addition to the Court's recent and continued rules on ADEA matters.

The purpose of the OWBPA is to prohibit employers from discriminating against older workers by denying certain employee benefits. The OWBPA is one of the key legislative acts which an employer must keep in mind during its RIF procedures, specifically if the employer is offering severance packages in exchange for a waiver of the right to sue for possible discrimination. Typically, in the waivers, an employee will waive his or her right to make an age discrimination allegation. The OWBPA sets forth several specific statutory requirements designed to ensure that when an employee releases any legal age claims, this waiver is completely “knowing and voluntary.”

In 1998, the pendulum once again swung in employees' favor as the Supreme Court ruled in Oubre v. Entergy Operations, Inc. In Oubre, a terminated employee signed a release waiver in exchange for a severance payment. Later, she sued her employer for age discrimination. The waiver was defective for several significant reasons. The Supreme Court found the waiver to be defective because it was not “knowing and voluntary,” and therefore did not bar the employee's claim. To be knowing and voluntary, the Court noted, the waiver must meet the specific statutory requirements in the OWBPA. The Court also found failure to tender back the money received in a severance package did not ratify a defective waiver.

While some courts have subsequently refused to completely put “form over function” in close cases, the prudent route for any employer who is designing a severance package and waiver is to strictly follow the statutory requirements put in place by the OWBPA and not deviate. Employers implementing a reduction-in-force have additional requirements with regard to the information necessarily provided in conjunction with a waiver of age discrimination claims. One of these is the disclosure requirement regarding the employee's group or organizational unit. Regarding restructuring, RIF programs and early retirement plans, the OWBPA requires employers to provide information about the ages of both discharged and retained employees to those who are considering releasing their age claims. While the definition of an “organizational unit” is somewhat murky, taking the time to carefully design a reduction program is key.

Plaintiff claims have gotten more sophisticated over the years, with courts allowing statistical analysis such as a multiple regression analysis to show a disparate impact once reduction programs have gone into effect. Statistical evidence is used in both prima facie cases and to show pretext. This same evidence, however, can be used in favor of an employer to show a lack of discrimination or disparate impact.

Employers are encouraged to carefully structure these reduction programs to avoid potential problems. One of the most important things an employer can do is to ensure criteria used to eliminate employees cannot be construed as illegal factors. Employers should develop a clear, rational policy and apply it consistently. Elimination based on quantitative measures such as productivity, and job elimination of a single function across the board have consistently held up in court as appropriate reasons for termination.

Conclusion

For employers, compliance with the ADEA and the stringent statutory requirements of the OWBPA is of utmost importance, especially in light of the rapid growth of unemployment during the economic downturn ' and, in fact, employers can visit the EEOC's Web site, http://www.eeoc.gov/, for basic guidance on suggested release content and reductions-in-force. As unemployment grows, desperation sets in and may lead to employees questioning, through lawsuits, the employer's reduction-in-force process. Careful construction of waiver documents, particularly those that waive the right to age discrimination claims, is well worth the extra attention in the long run. Otherwise, employers may find themselves out of a severance package, and in court!

Bryce G. Murray and E. Fredrick Preis, Jr. are attorneys in the Labor and Employment Section in Lemle & Kelleher's New Orleans office, and exclusively represent management in all aspects of labor and employment law. Mr. Murray can be reached at [email protected]. Mr. Preis can be reached at [email protected].