The maturing of the ADEA

Workforce, Oct, 2002 by Gillian Flynn

With little hoopla, the Age Discrimination in Employment Act celebrates its 35th birthday this year. Created in 1967 as an amendment to the Fair Labor Standards Act, the ADEA protects people age 40 and older from discrimination on the basis of age. That means that under federal law, a company can't use a person's age to make negative decisions regarding hiring, firing, promotions, transfers, or pay--as long as that person is 40 or older. It sounds simple. But as our workforce gets grayer, the law is being tested, and complications are arising. Larry Lorber, a partner in the Washington, D.C., office of Proskauer Rose LLP, says that the ADEA is beginning to show new wrinkles.

How is ADEA case law changing?

As the law develops under the ADEA, you're finding more mature issues which haven't been faced yet. These issues just haven't come up because even though the ADEA is 35 years old, it's a more limited statute: You can't discriminate on the basis of age. But now the United States has an aging workforce. We're also, in this economy, seeing the need to cut payrolls and how that applies to employees' age. All those issues which never really had a face in many respects are now coming out. So we're finding that more subtle issues concerning benefits are coming to light. We're also seeing disparate impact as applied to the age act becoming a major issue.

How does a disparate-impact claim come up under the ADEA?

When companies go through major layoffs, they often try to eliminate people at higher pay levels. The employees who generally hold those positions are age 40 or older. So if these older workers get laid off disproportionately to younger workers, they may make a disparate-impact claim. The issue right now is, does the ADEA recognize a course of action under disparate impact? Last year, the Supreme Court agreed to review a circuit court case filed against Florida Power. It would have been helpful in giving some answers about what ADEA does and does not cover. The issue was: When a layoff occurs and it turns out that older workers were disproportionately terminated, is there a case under the ADEA for disparate impact? Ultimately the Supreme Court decided not to review the case, but the question remains.

What has the trend been so far concerning this issue?

Courts have said that even though older people tend to get paid more, job reductions directed at limiting payroll costs are not necessarily [linked to] age discrimination. You can't necessarily make the connection between higher salary and age for purposes of ADEA. But the issue is sitting there, waiting for some final ruling by the Supreme Court as to what it really means.

A recent high-profile ADEA case concerned not hiring or firing, but benefits. What is the basis of this case?

The Sixth Circuit Court case, Cline v. General Dynamics Land Systems Inc., claims reverse discrimination under the ADEA. The question there is: If you offer a benefit to people who are 50 or older, are you violating the ADEA if you don't offer that same benefit to people 40 to 49? The issue in the case is that General Dynamics used to give full health benefits to retired workers with 30 years of seniority. In July of 1997, a new collective-bargaining agreement revoked those health benefits--except for employees who had reached the age of 50 at the time that the contract was changed. In other words, if you were 50 or above, you were grandfathered in. If you were under 50, you lost your promise of full health benefits after retirement.

So what was the basis of the complaint?

The question concerned employees over 40 but under 50. They claimed age discrimination, a type of reverse age discrimination because they're old enough to be covered by the ADEA, but too young to be included in the new health-benefits arrangement.

What was the ruling?

The 2-to-1 ruling by the circuit court panel said there was reverse discrimination. They said that the ADEA protects employees 40 and older, and that the health-benefits ruling in effect discriminated against older workers--age 40 to 49--who are covered under the ADEA yet are younger than those employees over 50 who were benefiting.

What happens next in the case?

General Dynamics has requested that the entire Sixth Circuit Court, not just the panel, rehear the case. If that's denied, the question then is whether General Dynamics will petition the Supreme Court for review. They've already changed their policy, so there's a question as to whether General Dynamics wants to appeal something which really doesn't affect them anymore.

This sounds like it could have far-reaching effects.

It could be a big issue. There are lots of benefits policies in which the starting age is not 40 but something older than that. A lot of severance plans consider age 55 and above as qualifying for early retirement. If the theory of this case stands, you have all sorts of questions. One big one is, can you have early-retirement options that start later than age 40? The question considered in the General Dynamics case is going to become more and more important, because you keep reading about cutbacks in medical benefits. If companies en masse start grandfathering in certain senior levels of employees, you're going to find cases challenging that under the ADEA. It's going to be a major concern of the benefits folks. It's a big deal.