General Practice, Solo & Small Firm DivisionMagazine
American Bar Association
General Practice, Solo, and Small Firm Division The Compleat Lawyer
Spring 1998 © American Bar Association. All rights reserved.
The Age Discrimination in Employment Act
Protection for Older Workers
BY RENÉ E. THORNE AND HOWARD SHAPIRO
René E. Thorne is an associate with McCalla, Thompson, Pyburn, Hymowitz & Shapiro in New Orleans, Louisiana. She represents management interests in labor and employment law. Howard Shapiro is a partner in McCalla, Thompson, Pyburn, Hymowitz & Shapiro. He represents management interests in labor and employment law, employment litigation, and employee benefits issues.
Although all federal labor and employment laws apply to older employees, the Age Discrimination In Employment Act (ADEA) in particular protects older workers.1
As the baby boomers age, and companies continue to experience layoffs, downsizing, and reductions in force, there will continue to be a surge of age discrimination lawsuits under the ADEA and corresponding state laws.
Who Is Covered?
The ADEA applies to private employers engaged in an industry affecting commerce who have 20 or more employees for each working day in each of 20 or more calendar weeks during the current or preceding calendar year.2 The ADEA also applies to employment agencies and to labor organizations (i.e., unions) if the organization maintains or operates a hiring hall, or has 25 or more members, and (1) is a certified bargaining agent under the NLRA, or (2) is otherwise recognized as a bargaining agent, or (3) has one of the specified relationships with a covered union.3 The ADEA also applies to states and their political subdivisions,4 but not to state military departments.5
Who Is Protected?
Age limits. The ADEA protects individuals who are at least 40 years of age.6 Generally, there is no upward cap on ADEA coverage under federal law. However, many state age discrimination statutes still provide an upward cap of 70 years of age.
Employees. The ADEA defines an "employee" simply as "an individual employed by any employer."7 Over the years, courts used a variety of tests to determine whether an individual is an employee for purposes of the ADEA. Some circuits use the "economic realities" test.8 Other circuits use the "hybrid test."9
Today, most courts have adopted a test that focuses on the control the putative employer exercises over the alleged employee, and may include as many as 11 other factors: (1) the kind of occupation; (2) the skill required in the particular occupation; (3) whether the "employer" or the individual in question furnishes the equipment used and the place of work; (4) the length of time during which the individual has worked; (5) the method of payment; (6) the manner in which the work relationship is terminated; (7) whether annual leave is afforded; (8) whether the work is an integral part of the business of the "employer"; (9) whether the worker accumulates retirement benefits; (10) whether the "employer" pays social security taxes; and (11) the intention of the parties.10
Bona fide executives. The ADEA allows the forcible retirement of an individual who is 65 years old and in "a bona fide executive or a high policymaking position" for the two-year period immediately before retirement, if that individual is entitled to a non-forfeitable annual pension benefit equaling $44,000.11
What Is Prohibited under the ADEA?
Prohibitions for employers. Employers cannot discriminate in any way against employees because of their age. Specifically, the act makes it unlawful for an employer:
(1) to fail or refuse to hire or to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's age;
(2) to limit, segregate, or classify his employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual's age; or
(3) to reduce the wage rate of any employee in order to comply with [the Act].12
Retaliation. Employers, employment agencies, and labor organizations are prohibited from taking adverse employment action against any individual because he opposed practices prohibited by the ADEA; or because the individual made a charge, testified, assisted, or participated in an investigation, proceeding, or litigation under the ADEA.13
Vacancy publishing restrictions. Employers, employment agencies, and labor organizations may not publish advertisements or notices seeking employment that contain age preferences, specifications, or discrimination.14
Notice posting requirements. Employers have a duty to post conspicuously a notice informing employees of their rights under the ADEA.15
What Is Not Prohibited under the ADEA?
Good cause. Of course, it is not unlawful "to discharge or otherwise discipline an individual for good cause."16 Among other things, "good cause" may consist of work rule violations or documented poor performance.
Bona fide occupational qualification. Distinguish-ing among employees is not unlawful "where age is a bona fide occupational qualification reasonably necessary to the normal operation of the particular business."17 The Supreme Court has held that the exception is narrow.18
This principle is illustrated by the case of Williams v. Hughes Helicopters, Inc.19 There, the court held the defendant could rely on the FAA's Age 60 Rule as a bona fide occupational qualification to validate its "stop flying" policy at ages 55 and 60 for test pilots.20
Reasonable factors other than age. Distinguishing among employees is not unlawful "where the differentiation is based on reasonable factors other than age."21 The Supreme Court has held that "a decision...to fire an older employee solely because he has nine-plus years of service and therefore is ‘close to vesting' would not constitute discriminatory treatment on the basis of age," although such conduct may be a violation of ERISA.22 The Supreme Court explained that the prohibited stereotyping (that is, "Older employees are likely to be______") did not come into play in such a decision. The Court cautioned, however, that "target[ing] employees with a particular pension status on the assumption that these employees are likely to be older" may constitute age discrimination.
The case of EEOC v. Insurance Co. of N. Am.23 is also illustrative. There, the court held that an employer had not discriminated against the plaintiff on the basis of age when it declined to hire him on the basis of his "overqualification" for a loss-control position. The employer argued that based on his 30 years of experience in the field, the plaintiff might delve too deeply into—and spend an inordinate amount of time examining—accounts. Agreeing with the employer, the court concluded that the employer acted for a legitimate business purpose and not pursuant to the plaintiff's age. The court cautioned, however, that rejecting an applicant based on overqualification might constitute age discrimination, where, for example, the job qualifications are not defined by objective criteria.
Bona fide seniority system. To the extent that terminations or layoffs are pursuant to a bona fide seniority system, the practice is lawful under the provisions of § 623(f)(2) of the ADEA: "It shall not be unlawful for an employer...(2) to observe the terms of a bona fide seniority system...."
The Older Workers' Benefit Protection Act
The Older Workers Benefit Protection Act (OWBPA) of 1990 was passed to amend the ADEA in several important respects. First, OWBPA defines the terms under which employers may observe the terms of a bona fide employee benefit plan:
It shall not be unlawful...to observe the terms of a bona fide employee benefit plan—
(i) where, for each benefit or benefit package, the actual amount of payment made or cost incurred on behalf of an older worker is no less than that made or incurred on behalf of a younger worker...; or
(ii) that is a voluntary early retirement incentive plan consistent with the relevant purpose of [the ADEA].
Notwithstanding [the above], no such employee benefit plan or voluntary early retirement incentive plan shall excuse the failure to hire any individual, and no such employee benefit plan shall require or permit the involuntary retirement of any individual [age 40 or older] because of the age of such individual. An employer, employment agency, or labor organization...shall have the burden of proving that such actions are lawful in any civil enforcement proceeding brought under this chapter....24
It is not unlawful under an ERISA plan to condition eligibility for normal or early retirement benefits on attainment of a minimum age. In addition, there are detailed sections concerning the legality of various provisions in pension plans.25
Waiver of rights under the ADEA. Another important concept under the OWPBA is that an employee can only waive his rights under the ADEA when the waiver is knowing and voluntary. The OWBPA defines the terms under which waiver is permitted:
(1) It must be written in understandable English as part of an employer-individual agreement;
(2) It must specifically refer to rights or claims arising under the ADEA;
(3) It may not waive the individual's rights or claims arising after its execution;
(4) There must be consideration exchanged for the waiver in addition to something to which the individual already is entitled;
(5) The individual must be advised in writing to consult with an attorney before entering the agreement;
(6) The individual has at least 21 days to consider the agreement
(a) This period is extended to at least 45 days if the waiver is sought in connection with an exit incentive or other termination program offered to a group;
(7) The agreement must allow at least 7 days after execution for its revocation by the individual and not become effective until then;
(8) If the waiver is sought in connection with an exit incentive or other termination program offered to a group, the employer must inform the individual, in writing understandable to the average participant, of
(a) What group is covered, the eligibility factors, and applicable time limits, and
(b) The ages and job titles of all potential participants, and the ages and job titles of all noneligible persons in the same job classification or organizational unit; and
(9) If the waiver is sought in settlement of an EEOC charge or a lawsuit brought under the ADEA, items 1-5 above must be met, and the individual must have reasonable time to consider the settlement.26
The burden of proving that a waiver is knowing and voluntary, in compliance with those standards, falls upon the party asserting its validity, and is an affirmative defense. No waiver will affect the EEOC's rights to enforce the ADEA, however.
In dealing with releases under the ADEA and OWBPA, practitioners need to be aware that the Supreme Court recently ruled that a release that does not fully comply with the OWBPA cannot be enforced by the employer even if the departing employee fails to tender back the consideration to the employer prior to instigating a lawsuit against the employer.27
Burdens of Proof and Defenses
Burden of proof in an ADEA case. It is a rare case in which the plaintiff will have direct evidence of discrimination. As such, in McDonnell Douglas Corp. v. Green,28 the Supreme Court set forth a detailed method of proof of intentional discrimination where there is no direct evidence of discriminatory intent. An employee must show the following:
- Membership in a protected class (i.e., 40 or older).
- Adverse personnel action (termination, failure to promote, etc.).
- A younger employee was treated more favorably.
- The plaintiff was as good or as qualified as the younger employee, or some other evidence of age discrimintion.
Once the plaintiff proves these four elements, and creates an inference of discrimination, the burden of going forward with evidence shifts to the defendant to articulate a legitimate, nondiscriminatory reason for the decision. If the employer successfully meets this burden, the plaintiff must then demonstrate that the proffered reason was merely a pretext for discrimination. The ultimate burden of proof of intentional discrimination, however, always remains with the plaintiff.
In recent years, the Supreme Court has modified the McDonnell Douglas model somewhat in age discrimination cases based on failure to hire or rehire. In O'Connor v. Consolidated Caterers Corp.,29 the Court held that the ADEA prohibits age discrimination even among persons within the protected group, so that the plaintiff need not demonstrate that the favored applicant or employee was outside the protected group.
Disparate treatment standards. The "disparate treatment" theory applies when "the employer simply treats some people less favorably than others."30 Liability in a disparate treatment case "depends on whether the protected trait (under the ADEA age) actually motivated the employer's decision."31 An employer may be liable under the ADEA where the employment decision at issue was based on a formal, facially discriminatory policy, requiring adverse treatment of all employees with that trait, or where the employment decision was motivated by the protected trait on an ad hoc, informal basis.
There are three ways a plaintiff can prove a prima facie case of disparate treatment: (1) direct evidence of intent; (2) statistical evidence; and (3) proof in accordance with the formula originally set out in McDonnell Douglas.
Enforcing the ADEA
Filing an EEOC charge. Under 29 U.S.C. § 626(d), "No civil action may be commenced by an individual under [the ADEA] until 60 days after a charge alleging unlawful discrimination has been filed with the [EEOC]."
Statute of limitations. A charge of age discrimination shall be filed with the EEOC: (1) within 180 days after the alleged age discrimination occurred, or (2) within 300 days of the alleged discrimination if the state in which the discrimination occurred provides a law prohibiting age discrimination and empowering a "state authority" to grant or seek relief from the employment discrimination.32
Tolling of the charge filing period. As a general rule, an employer's failure to post the required notice may toll, or suspend, the charge filing periods unless the employer can show other employee knowledge of the statute.33
Filing a lawsuit. The Civil Rights Act of 1991 amends the procedure for filing suit under the ADEA to comport with Title VII requirements. The ADEA requires the EEOC to notify complainants when a charge is dismissed or terminated. The charging party thereafter has 90 from receipt of the notice to file suit.34 The ADEA also gives employees the right to trial by jury.35
Arbitration. In Gilmer v. Interstate/Johnson Lane Corp.,36 the Supreme Court required a securities dealer on the New York Stock Exchange to arbitrate his ADEA claim against his employer. The employee had signed an agreement stating he would arbitrate any such claim. The Supreme Court held arbitration of an ADEA claim, pursuant to an arbitration agreement, does not contravene the purposes of the ADEA.
What Relief Is Available to Employees?
The ADEA provides remedies that include unpaid wages, reinstatement, promotion, liquidated damages in the case of willful violations, and "such legal or equitable relief as may be appropriate to effectuate the purposes of" the act.37
Back pay. Back pay awards may include lost wages, pension benefits, insurance benefits, profit sharing, and other benefits that the employee would have earned "but for" the discrimination. The claimant is obligated to mitigate damages.38 It is the defendant's burden to establish that the plaintiff failed to mitigate his damages in order to limit successfully a plaintiff's back pay award.39 To cut off a back pay award, defendants must prove that the plaintiff did not exercise "reasonable" diligence in seeking employment substantially equivalent to the position he lost.40
To limit a back pay award, an employer may make an unconditional offer of employment, i.e., offer a terminated employee a full and unconditional return to work.41
Liquidated damages. If an employer's violation of the act is "willful," the employee is entitled to double the amount of wages/salary due to her. The standard for proving a willful violation is set forth in Hazen Paper Co. v. Biggins,42 McLaughlin v. Richland Shoe Co.,43 and Trans World Airlines, Inc. v. Thurston.44 A "willful" violation occurs when an employer "either knew or showed reckless disregard for the matter of whether its conduct was prohibited by the ADEA."
In determining whether a "willful" violation occurred, it is irrelevant whether the employment decision was based on a formal, facially discriminatory policy, affecting all employees with that trait, or was based on an ad hoc, informal basis.45 Once an employee demonstrates a "willful" violation, the employee need not, as some appellate courts have required, additionally show that an employer's conduct was outrageous, or provide direct evidence of the employer's motivation, or prove that age was the predominant rather than a determinative factor in the employment decision.46
The Supreme Court has ruled that awards of back pay and liquidated damages are taxable under I.R.C. § 104(a)(2).47
Reinstatement or front pay. As an equitable remedy, a terminated age discriminatee can seek full reinstatement to her job. Where reinstatement is not feasible, front pay may be awarded to compensate an employee for future lost compensation. However, a court may not consider front pay unless it first determines that reinstatement is "not feasible."48
Compensatory and punitive damages. Courts have held that compensatory damages are not an available remedy under the ADEA.49 Also, punitive damages are not an available remedy under the ADEA.50
Attorney fees and costs. The ADEA incorporates the attorney fees provision of the Fair Labor Standards Act, and allows fees and court costs to a prevailing plaintiff.51
Injunction. Although a broad injunction barring any future discrimination of all similarly-situated employees may be an abuse of discretion, a narrow injunction protecting one individual—who had been subject to "widespread continuous antagonism" by the employer—may not constitute an abuse of discretion.52
- 29 U.S.C. § 621 et seq.
- 29 U.S.C. § 630(b).
- 29 U.S.C. §§ 630(c)-(e).
- 29 U.S.C. § 630(b).
- Frey v. California, 982 F.2d 399 (9th Cir. 1993), cert. denied, 113 S.Ct. 3000 (1993).
- 29 U.S.C. § 631(a).
- 29 U.S.C. § 630(f).
- See Mares v. Marsh, 777 F.2d 1066, 1067 n.1 (5th Cir. 1985).
- See Oestman v. National Farmers Union Ins. Co., 958 F.2d 303, 305 (10th Cir. 1992); EEOC v. Zippo Mfg. Co., 713 F.2d 32, 38 (3d Cir. 1983).
- Mangram v. General Motors Corp., 108 F.3d 61 (4th Cir. 1997); Garrett v. Phillips Mills, Inc., 721 F.2d 979, 980 (4th Cir. 1983); Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318, 322-23, 112 S.Ct. 1344, 1347-48, 117 L.Ed.2d 581 (1992) (applying common law principles to define the term "employee" under ERISA).
- U.S.C. § 631(c).
- U.S.C. § 623(a).
- 29 U.S.C. § 623(d).
- 29 U.S.C. § 623(e).
- 29 U.S.C. § 627; 29 C.F.R. § 1627.10 (1981).
- 29 U.S.C. § 623(f)(3).
- 29 U.S.C. § 623(f)(1).
- Western Air Lines, Inc. v. Criswell, 105 S.Ct. 2743 (1985); Johnson v. Mayor and City Council of Baltimore, 105 S.Ct. 2717 (1985).
- 806 F.2d 1387 (9th Cir. 1986).
- See also EEOC v. American Airlines, Inc., 48 F.3d 164 (5th Cir. 1995).
- 29 U.S.C. § 623(f)(1).
- Hazen Paper Co. v. Biggins, 113 S.Ct. 1701 (1993).
- 49 F.3d 1418 (9th Cir. 1995)
- 29 U.S.C. § 623(f).
- For the relevant portions of the OWBPA dealing with pension plans and early retirement benefits, see 29 U.S.C. §§ 623(i) and (l).
- 26 U.S.C. § 626(f).
- Oubre v. Entergy Operations, Inc., 1998 WL 23157 (1998).
- 411 U.S. 792; 93 S.Ct. 1817 (1973).
- 116 S.Ct. 1307.
- International Brotherhood of Teamsters v. United States, 431 U.S. 324, 97 S.Ct. 1843 (1977).
- Hazen Paper Co. v. Biggins, 113 S.Ct. 1701 (1993).
- 29 U.S.C. § 626(d)(2).
- See, e.g., Vance v. Whirlpool Corp., 716 F.2d 1010 (4th Cir. 1983), cert. denied, 104 S.Ct. 1600 (1984); and Kale v. Combined Ins. Co. of Am., 861 F.2d 746 (1st Cir. 1988).
- 29 U.S.C. § 626(e).
- 29 U.S.C. § 626(c).
- 111 S.Ct. 1647 (1991).
- 29 U.S.C. § 626(b).
- EEOC v. Sandia Corp., 639 F.2d 600 (10th Cir. 1980).
- Kehoe v. Anheuser-Busch, Inc., 96 F.3d 1105 (8th Cir. 1996).
- Ford Motor Co. v. EEOC, 458 U.S. 219, 102 S.Ct. 3057 (1982).
- 113 S.Ct. 1701 (1993), cert. denied, 115 S.Ct. 614 (1994).
- 486 U.S. 128; 108 S.Ct. 1677 (1988).
- 469 U.S. 111, 1055 S.Ct. 613 (1985).
- Hazen Paper Co. v. Biggins, 113 S.Ct. 1701 (1993).
- See Commissioner of Internal Revenue v. Schleier, 115 S.Ct. 2159 (1995).
- Hansard v. Pepsi-Cola Metropolitan Bottling Co., Inc. 865 F.2d 1461 (5th Cir. 1989), cert. denied, 493 U.S. 842; 110 S.Ct. 129 (1989).
- See, e.g., Maschka v. Genuine Parts Co., 122 F.3d 566 (8th Cir. 1997); Haskell v. Kaman Corp., 743 F.2d 113 (2d Cir. 1984).
- See, e.g., Pfeiffer v. Essex Wire Corp., 682 F.2d 684, 29 FEP 420 (7th Cir. 1982), cert. denied, 459 U.S. 1039; 103 S.Ct. 1039 (1982); Fiedler v. Indianhead Truck Line, Inc., 670 F.2d 806, 28 FEP 849 (8th Cir. 1982).
- 29 U.S.C. § 626(b).
- Malarkey v. Texaco, Inc., 983 F.2d 1204 (2d Cir. 1993).