Be Careful to Consider Bias and Age Discrimination Issues When Terminating Older Employees

Forty is the old age of youth; fifty is the youth of old age. (Victor Hugo)

It is often said “age is just a number”. Usually, this well-worn quote is used to imply that one’s abilities or goals are not limited or defined by their age. For U.S. employers, on the other hand, the actual age of their employees can be a number of great importance if that number is 40 or higher. That is the age at which the federal Age Discrimination in Employment Act (“ADEA”) and many state laws establish rights for workers against age-related bias and discrimination.

With the median age of the workforce rising as the population ages and birthrates continue to drop, the ADEA’s prominence in the employer-employee relationship is also increasing. According to a Pew Research study, the median age of adult workers in the U.S. in 2023 was 42 – up from 39 in 2000. In 2023, more than a third (34%) of the adult workforce were aged 50 or older, compared with less than a quarter (24%) in 2000.

Accordingly, it is important that employers have a solid understanding of the ADEA and any applicable state laws that impact upon their workforce.

What is the ADEA?

The ADEA was originally enacted by the federal government in 1967 to prohibit age discrimination in the workplace while promoting the employment of older workers on the basis of their ability rather than their age. The ADEA applies to companies and government entities with 20 or more employees and is enforced by the Equal Employment Opportunity Commission (EEOC). (Note that state laws can apply age discrimination prohibitions to companies with less than 20 employees, including California – see below.)

Broadly, the Act prohibits age-based discrimination in all aspects of the employment cycle (e.g., hiring, compensation, training, promotion, and termination), as well as harassment based on age, and retaliation against employees who file age discrimination claims or participate in EEOC investigations of a workplace.

Violations of the Act can result in fines, reinstatement, and back pay, among other remedies. Note that the ADEA does not allow for punitive damages or compensatory damages for pain and suffering, unlike other anti-discrimination laws.

What are some common, and not-so-common, ways age discrimination can arise in the workplace?

• Asking an job candidate for their age or birthdate (or even an age range) in an application, interview, or any other pre-hire communication. (Employers subject to specific legal requirements or more than 100 employees may inquire about a candidate’s age for record-keeping purposes only.)

• Setting a limit on the experience allowed for a job candidate (e.g., “no more than 5 years’ experience”).

• Posting a job ad that seeks “someone young and energetic to join our team”, or “searching for a recent college graduate or early career professional”.

• Mandatory retirement age policies, unless required or allowed by law for specified professions. Note that retirement and pension plans are similarly prohibited from requiring retirement at a specified age.

• Workplace harassment on the basis of age, including comments or jokes about an employee’s age, length of employment, or appearance.

• A company lay off where older workers are disproportionately released for financial or operational purposes (e.g., keeping younger employees working at lower wages).

Can an employee agree to waive their rights under the ADEA?

Employees can waive their right to make an age discrimination claim, such as in an employment, settlement, or severance agreement, but the ADEA provides strict guidelines around such a waiver. In particular, the waiver must be “knowing and voluntary”. Some of the requirements for a “knowing and voluntary” waiver are: (1) it must be in writing; (2) the employee is advised in writing to consult a lawyer; (3) the employee is given a 21-day period to consider the agreement containing the waiver; (4) the agreement containing the waiver includes a clause granting the employee the right to revoke that agreement for at least 7 days after the commencement of the agreement.

One particular example of where ADEA waivers commonly arise is a severance agreement for an employee over the age of 40. In such cases, employers offer severance compensation and other benefits, such as continuing health insurance coverage, in exchange for a general release by the employee of any claims they may have against the company. The ADEA requires that the severance agreement comply with its “knowing and voluntary” requirements. While the employee can choose to sign the agreement before the 21-day period ends, the employer is not allowed to induce that signature before the end of the 21-day period by further “sweetening the deal” or threatening the withdrawal of the offer. Furthermore, the 7-day revocation period following the commencement of the agreement is mandatory and cannot be waived by the employee or employer for any reason.

Thus, such severance agreements can present unanticipated complications to the timing of a termination that employers should take into consideration.

What is the age discrimination law for employment in California?

In California, the Fair Employment and Housing Act (FEHA) prohibits employers from discriminating against or harassing employees on the basis of protected characteristics, including age. As with the ADEA, the FEHA applies to employees over the age of 40. However, the FEHA applies to smaller companies with at least 5 employees (less than the ADEA’s application to companies with more than 20 employees).