Is it better to terminate an older employee with severance or offer a retirement package? How do we decide?
Quick Answer
A severance package is preferable because the use of the word “retirement” can form the basis for an allegation of unlawful age bias.
Legal Perspective
Bryan Cave Leighton Paisner
Chicago, Illinois
The word “retirement” should never be mentioned in connection with a termination decision, says employment law attorney William Wortel ( bill.wortel@bclplaw.com) of the firm Bryan Cave Leighton Paisner LLP. The reason is it can be used as the basis for age discrimination claims.
But that doesn’t mean you can’t terminate the employee for poor performance – even if the performance is related to the employee’s age. What matters is the performance; the underlying reason for the drop in performance is irrelevant.
If you want to terminate the employee, you must do so based on a legitimate, non-discriminatory reason – such as performance. Any suggestion that an employee should choose to retire can be used to argue that age discrimination was the true reason for termination.
Relevant Case Law
Lowe v. Walbro LLC
Rowell v. BellSouth Corp.
Zbuka v. Marathon Ashland Petroleum, LLC
HR Insight
Westside Family Healthcare
Wilmington, Delaware
To avoid any issue of discrimination when you terminate older employees, there should be no difference from when you terminate other employees, says HR Director Aggie Flores.
To terminate for reasons other than performance, or to offer anything to some and not to others can lead to claims of discrimination or wrongful discharge. While there can always be exceptions, one should be careful about how those exceptions are applied.
Alcoa Community FCU
Benton, Arkansas
This depends heavily on the industry and tenure of the employee, says HR Specialist Andrea Rose.
The Older Workers Benefit Protection Act (OWBPA) and Age Discrimination in Employment Act of 1967 (ADEA) offer specific guidance on the do’s and don’ts when terminating older employees.
An older employee cannot be forced into an involuntary retirement but may be requested to waive and release their rights under ADEA when offered a severance package and given at least 21 days to consider the written offer with seven days to revoke their signature after signing.
Most employees who intend to retire have active participation in their leaving the workplace and are aware of their retirement options. The most important principle is never to terminate for a reason that discriminates against a protected class. Communication and respect are important in the process for a smooth transition.
The Cost of Noncompliance
Employer pays nearly $400K to settle age bias claims
Who was involved: Davis Automotive Group, Inc., d/b/a BMW Cleveland, an automobile dealership in Solon, Ohio, and three former employees.
What happened: The EEOC sued to allege the company refused to rehire a former employee because of her age (52) and also fired two sales employees because of their ages (67 and 70).
Result: The company agreed to pay a total of $390,000 to the three individuals. It also entered into a two-year consent decree that:
- Enjoins the company from future discrimination based on an employee’s age.
- Enjoins the company from retaliating against any employee who asserts their rights under the decree; by filing a charge of discrimination with the EEOC; or by participating in an ADEA investigation or proceeding.
- Requires the company to maintain a policy prohibiting discrimination and retaliation and a complaint procedure designed to encourage employees to come forward with complaints of discrimination or retaliation.
- Requires annual training on discrimination and retaliation for all employees, including supervisors, management and HR personnel.
Info: Davis Automotive Group / BMW Cleveland to Pay $390,000 to Settle EEOC Age Discrimination Suit, 12/20/21.
Age discrimination? Employer pays $300K to fired employees
Who was involved: AZ Metro Distributors, LLC, a distributor of Arizona Iced Tea products, and two former sales associates in New York.
What happened: The dispute stemmed from the terminations of a department’s two oldest sales employees, who were aged 64 and 66 at the time. That same day, a supervisor allegedly said that the company wanted to hire younger workers and move the sales force in a “different direction.” The EEOC sued to allege age discrimination, and a jury agreed. After the EEOC declined to accept a lesser award of monetary relief proposed by the court, the parties reached a settlement rather than going to trial a second time over damages.
Result: The company agreed to pay a total of $300,000 in lost wages and damages to the employees. It also agreed to:
- Prohibit employee termination on the basis of age.
- Update relevant company policies.
- Provide training to employees in the Brooklyn and Queens branches on age discrimination.
- Report to the EEOC any internal complaints of age discrimination or retaliation for two years.
Info: AZ Metro to Pay $300,000 to Settle EEOC Age Discrimination Lawsuit, 10/4/21.
‘Ready to retire yet?’ — Does question amount to age discrimination?
Who was involved: Burrow Global Services, LLC, an engineering and construction company headquartered in Houston, Texas, and a former employee.
What happened: The EEOC alleged that a senior electrical designer over the age of 60 was subjected to age discrimination when a much younger supervisor began to repeatedly ask the worker when he planned to retire. Shortly afterward, the lawsuit alleged, the supervisor terminated the employee and the company offered the position to a younger person.
Result: The company paid the employee $50,960 in back pay and damages. It also entered into a three-year consent decree that required it to:
- Conduct training regarding the ADEA.
- Update its ADEA policies.
- Post a notice prohibiting discrimination.
- Provide regular compliance reports to the EEOC.
Info: Burrow Global to Pay $50,960 to Settle EEOC Age Discrimination Lawsuit, 3/29/21.
Key Takeaways
- Membership in a protected class, such as advanced age, does not absolutely insulate employees from adverse job actions, including employment termination.
- Using the word “retirement” in connection with a termination decision relating to an older employee may lead to a claim of unlawful age bias.
- Job termination decisions must be supported by some legitimate and nondiscriminatory reason, such as poor job performance.
- Employers who wish to secure a waiver of age discrimination claims from a terminated older employee must ensure that the waiver is knowing and voluntary.
- Special considerations apply in cases involving group layoffs of older employees.
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