Compass Newsletter - Articles

Avoiding Age Discrimination Claims

by Michael C. Petersen
July 2005

The number of older employees in the workplace is increasing. In fact, it has been estimated in the Bureau of Labor Statistics that by 2010, 51% of the workforce will consist of employees 40 years old or older. Conversely, the number of workers 29 to 35 years old is estimated to decline by nearly 6% during that time period. Given those shifting demographics, it is particularly important for employers to avoid conduct that puts them at risk for age discrimination claims.

As a general matter, discrimination can take one of two basic forms. The first type of discrimination occurs when an employer specifically treats a person in a protected class (i.e., classes based on race, age, national origin, sex, among other characteristics) differently from persons not in a protected class. That type of discrimination is called disparate treatment discrimination. The other type of discrimination occurs when a policy or practice that is neutral on its face disproportionately disadvantages persons in a protected class.

The very recent United States Supreme Court case of Smith v. City of Jackson not only highlights the issue of disparate impact discrimination claims under the federal Age Discrimination in Employment Act, but it also officially recognized such claims under that statute. In that case, the City of Jackson, Mississippi, revised its employee pay plan for police officers and dispatchers. The City's goal was to bring its starting salaries up closer to the regional average. Accordingly, the City decided to give proportionately greater raises to officers with less than five years of service. Officers with greater seniority received proportionately lower raises. A group of officers with more than five years seniority filed a lawsuit claiming that the City's pay plan discriminated against them due to their age. The lower federal courts dismissed the officers' claims.

Although the Supreme Court affirmed the dismissal of the officers' claims, it broadened the reach of the federal Age Discrimination in Employment Act by recognizing that employers can be held liable for policies that are neutral on their face, but which disproportionately impact employees based on their age. Prior to the Supreme Court's decision, the lower federal courts were in disagreement as to whether employees could bring disparate impact claims under the Age Discrimination in Employment Act.

Although Oregon 's federal and state courts already recognized disparate impact claims for age discrimination, the Supreme Court's decision provides a good reminder that employers should avoid policies and practices that tend to disadvantage older workers. In particular, employers should pay particular attention to the following:

  1. Hiring Practices, Policies, and Decisions : Job advertisements and application materials should not indicate any preference, limitation, specification, or discrimination based on age. Expressing a preference for "young" workers, workers within certain age ranges, or even college students can give rise to discrimination claims. Finally, employers should document their legitimate, non-discriminatory reasons for not interviewing or hiring job applicants.

  2. Employment Benefits : Employers should make sure that their non-ERISA benefits, like sick leave and vacation leave, apply equally to employees of all ages. Age-based distinctions are permissible in formal employee benefit plans, like group health insurance plans, as long as the distinctions are legitimately cost-justified.

  3. Promotion Decisions : Employers can refuse to promote older workers as long as that decision is not based on age or other criteria that tends to disfavor older workers. Employers should document their legitimate, non-discriminatory reasons for not promoting an older worker.

  4. Terminations and Layoffs: Again, employers should document all legitimate, non-discriminatory reasons for firing older workers. Employers should also carefully consider and document the criteria used to determine layoffs to make sure that older workers are not disproportionately targeted. To avoid any risk of age discrimination claims, employers can pay older workers to release their claims in severance agreements.

It appears inevitable that the age of the American workforce is on the rise. Consequently, employers must be more aware of their practices and policies in order to avoid age discrimination claims. Careful attention to the issues set forth above should help decrease your exposure to such claims.