Employer
Reduction in Force Strategies
The Age
Discrimination in Employment Act, 29 U.S.C. '151
et seq. (AADEA@),
generally prohibits discrimination on the basis of age in employment
decisions. Subject employers
(those with 20 or more employees for each working day in each of 20 or more
calendar weeks during the current or preceding calendar year that are engaged
in an Aindustry
affecting commerce@)
should conduct any reduction in force (ARIF@)
in order to minimize ADEA exposure. Further,
employers who offer severance incentives, either in connection with a RIF or
as an alternative to a RIF, also typically secure from terminating employees a
comprehensive release of claims as a quid pro quo. Such releases, to the extent they cover ADEA claims, must
meet very specific statutory requirements, including a 45 day period in which
to consider and sign the release (a 21 day period applies if there is no Agroup
or class@
of employees being offered the incentive/release package).
ADEA exposure will be
presented any time an employee subject to a RIF can prove a prima facie case
by showing:
$
that he was within the protected age group (age 40 and over);
$
that he was performing in accordance with the employer=s
legitimate expectations;
$
that he was terminated; and
$
that others not in the protected class were treated more favorably.
Oxman v. WLS-TV, 846 F.2d 448, 455 (7th Cir. 1988).
As in other Title VII
cases, the employer must rebut a prima facie case by articulating a legitimate
non-discriminatory reason for its action.
If the employer does so, the plaintiff must then demonstrate that the
employer=s
justification is a pretext in order to prevail.
Employer strategies
to minimize ADEA exposure generally fall in the following categories:
(i)
Action taken pursuant to a Abona
fide seniority system@
is exempt by statute from ADEA liability so long as the action is not a
subterfuge to evade the purpose of the ADEA.
29 U.S.C. '623(f)(2)(A).
If layoffs are done on a Alast
hired, first fired@
basis, no ADEA liability should attach. However,
this pattern is usually inconsistent with the employer=s
business goals.
(ii)
An employer=s decision to eliminate departments,
shifts or job categories instead of selecting individuals for layoffs can
usually be justified as an exercise of business judgment which courts are
reluctant to second-guess. See, e.g.,
Kephart v. Institute of Gas Technology, 630 F.2d 1217, 1223 (7th Cir.
1980), wherein it is stated that the ADEA Awas
not intended as a vehicle for judicial review of business decisions,@
and courts Awill
not inquire into the defendant=s
method of conducting its business. . .@
To the extent the company may tie its RIF to the elimination of product
lines or staff Adepartments,@
this defense may be of some value.
(iii)
Employers can establish specific RIF procedures to identify employees to
be laid off on a performance basis. Normally
this is a two step procedure involving written performance appraisals based on
procedures stressing Aobjective@
criteria with review by a specially established RIF committee empowered to
compare performance appraisals and make final RIF decisions.
Once the RIF committee prepares a performance based list of employees who
are not to be retained, the list should be reviewed to determine whether it
adversely impacts any group by sex or race.
An adverse impact based on age may be tolerated, at least in the Seventh
Circuit. See Dorsch v. L.B.
Foster Co., 782 F.2d 1421, 1427 n. 6 (7th Cir. 1986), quoting with approval Laugesen
v. Anaconda Co., 510 F.2d 307, 313 (6th Cir. 1975) as follows:
in the
usual case, absent any discriminatory intent, discharged employees will more
often than not be replaced by those younger than they, for older employees are
constantly moving out of the labor market, while younger ones move in.
(iv)
Bona fide executives or high policy makers for two years before
retirement may be subject to compulsory retirement at age 65 if they will
receive at least $44,000 in annual retirement benefits, or the equivalent.
29 U.S.C. '631(d)(1).
(v)
ADEA exposure can be reduced or eliminated with a severance program or
other incentives to induce employees to Avoluntarily@
terminate employment. An employer
is specifically permitted by the ADEA to Aobserve
the terms of a . . . voluntary early retirement incentive plan,@
29 U.S.C. '623(f)(2)(B)
(ii), although such programs should not exclude any employees on the basis of a
maximum age, such as age 65.
The above presents a full plate of options and issues,
independent of any consideration of the structure of a severance or retention
program, which is beyond the scope of this article.
Andrew
S. Williams
Aronberg Goldgehn Davis & Garmisa
One IBM Plaza, Suite 3000
Chicago, Illinois 60611
312/755-3145
awilliams@agdglaw.com
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