Legal Corner

An age-old problem


Many roofing contractors often are unsure of whether an employment decision complies with the law. One particular concern that faces roofing contractors as aging employees slide into their 50s is whether taking an employment action against an older employee will lead to an age-discrimination lawsuit. However, such a concern often is unfounded and stems from the fact that many roofing contractors do not possess the necessary knowledge and understanding of the Age Discrimination in Employment Act (ADEA).

The law

ADEA, which was enacted in 1967, applies to all employers with 20 or more employees. ADEA prohibits these employers from discriminating against employees in terms, privileges and conditions of employment on the basis of age. Those workers who are 40 years old or older fall into the protected class. Although employers with fewer than 20 employees are not covered by ADEA, they are not immune from liability for age discrimination because employees still may file tort claims, such as for wrongful discharge or intentional infliction of emotional distress, if they believe they are victims of age discrimination.

Age discrimination can take many forms. It can consist of age-related comments made by managers or executives accompanied by some type of adverse employment action or decision, such as a failure to grant a promotion, less-than-favorable employment conditions or disciplinary proceedings. Age discrimination also may consist of a pattern by which older workers are treated differently. Or such discrimination may consist of an older worker being selected to be laid-off while younger employees with less experience are retained. The key to determining whether ADEA has been violated is whether comments about age or age-discriminatory actions were the reason or part of the reason for an adverse employment action.

Exceptions

Despite the potential threat of a lawsuit alleging age discrimination, you need not feel restricted in making personnel decisions and running your business as you see fit. There are several exceptions to ADEA’s anti-discrimination prohibition.

For example, an employment decision is not a violation of ADEA if age is a bona fide occupational qualification reasonably necessary to the usual operation of a business. Other exemptions apply with regard to bona fide seniority systems, benefit plans, and certain executive or policy-making employees. Most important, an employment decision is not a violation of ADEA if it is based on reasonable factors other than age.

The U.S. Supreme Court made clear in its unanimous opinion in Hazen Paper Co. v. Biggins that age actually must motivate an adverse employment decision and have a determinative influence on the decision’s outcome. This means that just because an employee who is older than 40 suffers an adverse employment action, a viable age-discrimination claim does not automatically follow.

The exemption for adverse employment actions based on bona fide qualifications is extremely narrow and only applies if an employer can prove age is reasonably necessary to the essence of the business and either all or substantially all individuals excluded from a particular job are disqualified because of age or some traits that could not be ascertained except by reference to age.

Terminations and layoffs

Recently, ADEA has become a bigger concern for roofing contractors. With the current uncertain economy, many contractors are faced with the difficult decision of having to lay off employees. But because of the fear of a potential ADEA claim, many contractors decide to reduce employees’ wages rather than reduce their work forces. Although making this decision certainly helps establish an employment decision was made because of cost concerns rather than age, these decisions often do more harm than good.

For example, an employee who receives a pay cut may become resentful, and productivity and morale may decline. Such employees also may choose to leave a company as soon as something better comes along. You can feel safe in making the decision to lay off employees as long as age is not a motivating factor in the decision. Regardless of the decision made, it consistently should be applied to all employees.

If a laid-off employee is replaced shortly after a cost-cutting move, the layoff is likely to be viewed as a pretext, or a lie or phony reason for some action, and you may face an ADEA claim.

This particularly is true if the replacement employee is younger than the previous employee. Performance issues should, therefore, be addressed honestly and openly to avoid verdicts that more often than not result against employers for age discrimination. Performance issues, as well as all employment decisions, should be accurately and thoroughly documented.

Roofing contractors often are surprised to find themselves facing a claim under ADEA from a former employee who was replaced by someone who is older than 40. You should be aware that an employee in the protected age group still can bring a claim against you if he is replaced by an employee also within the protected age group. But the Supreme Court has stated all plaintiffs bringing such claims under ADEA must show they were replaced by someone who is “substantially younger.”

For example, it will be more difficult for a 40-year-old employee to argue he was the subject of age discrimination when his replacement was 39 and, therefore, not covered under ADEA than it would be for a 58-year-old replaced by an employee 42 years old despite the 42-year-old being in the protected group.

The hiring process

You also should be aware you can encounter pitfalls of ADEA during the hiring process. An ADEA claim most likely will arise in the hiring process if an applicant is told he is overqualified. Although not choosing to hire someone because he is overqualified may not directly be based on age, it generally is viewed as being correlated with age.

Stating a candidate is overqualified becomes dangerous if the decision is made after a face-to-face interview. Because an applicant’s qualifications presumably are known before an interview, a face-to-face interview often is the first time an applicant’s age can be evaluated. As a result, rejection after an interview indicates at least the potential for age discrimination. However, you can make the decision not to hire an applicant older than 40 because of your subjective opinion of how the applicant performed during the interview.

A plaintiff bringing a claim under ADEA is not allowed to recast an employer’s nondiscriminatory reasons or substitute business judgment for that of the employer. Provided a reason not to hire someone is one that might motivate a reasonable employer, a prospective employee must rebut the reason and cannot simply quarrel with the wisdom of that reason. Courts also will not sit as a personnel department that re-examines an entity’s business decisions. Rather, courts limit inquiry to whether an employer honestly explained his behavior.

Courts recognize that a subjective reason can constitute a legally sufficient, legitimate, nondiscriminatory reason for making an employment decision. Courts also recognize that subjective evaluations of a job candidate often are critical to the decision-making process, especially in service-oriented industries. A subjective reason will be upheld as legally sufficient if an employer articulates a clear, reasonably specific factual basis on which he based his subjective opinion.

Early retirement

In addition to termination and hiring pitfalls, be careful how you address retirement with employees. You are prohibited from requiring employees within the protected age group to retire because of age though there are certain limited exceptions set forth in ADEA. As a result of the prohibition against mandatory retirement because of age, you cannot give employees an ultimatum to accept retirement under a special early retirement plan or be subjected to adverse treatment such as demotion, reduction in pay or diminished chance of career advancement. However, purely voluntary early retirement programs that are offered to reduce costs are legal.

For example, offering a laid-off employee an option to receive a lump-sum payment or early-retirement option does not violate ADEA. ADEA allows you to offer voluntary retirement packages as long as the triggering event is unrelated to age.

The courts

A plaintiff bringing an ADEA claim must be able to establish a prima facie case. A prima facie case requires a plaintiff to show he was a member of the protected class; he was performing his job to his employer’s legitimate expectations; despite his performance, he suffered an adverse employment action; and substantially younger, similarly situated employees were treated more favorably.

When determining whether similarly situated younger employees were treated more favorably than an affected employee, courts focus on the particular criteria or qualifications identified by the employer as the reason for the adverse action. The courts do not subjectively weigh factors they consider important. Rather, to prevail, a plaintiff must point to evidence from which a person reasonably could infer that the plaintiff satisfied the criteria identified by the employer or the employer did not actually rely upon the stated criteria.

If the plaintiff is able to prove his prima facie case, the burden shifts to the employer to present a legitimate, nondiscriminatory reason for the adverse employment action. An employer only is required to produce or state a legitimate, nondiscriminatory reason. An employer can create a permissible reason for an adverse employment action if the action was taken by the individual who hired the plaintiff and relatively quickly after hiring. Once an employer offers a legitimate and nondiscriminatory reason, the presumption of discrimination dissolves, and the burden shifts back to the plaintiff to establish the reason is a pretext for discrimination.

Whether an employer’s legitimate reason is a pretext does not depend on the correctness or desirability of reasons offered for employment decisions. Rather, the issue of pretext addresses whether the employer honestly believes in the reasons offered. Therefore, a plaintiff will lose his claim if the employer honestly believes in the nondiscriminatory reasons offered even if the reasons are foolish, trivial or baseless.

A plaintiff only can prove a reason is pretextual by showing a discriminatory reason most likely motivated the employer, such as the company’s reasons were not the sole determining factors or the employer’s explanation is unworthy of credence.

Obtaining waivers

Roofing contractors often inquire whether they can ask employees to sign waivers releasing their ADEA claims at the time of termination or other adverse employment action. But unlike other waivers, ADEA requires more than an employee signing a document that simply releases his potential ADEA claims.

The Older Workers’ Benefit Protection Act of 1990 amended ADEA. It specifically lists the required elements that must be contained in a wavier if it is to be considered valid under ADEA. A waiver must include the following seven elements:

  • The waiver must be part of an agreement between the employee and employer that is written in a clear, understandable manner.

  • The waiver specifically must refer to claims arising under ADEA.

  • The employee must not waive the right to claims that may arise after the date the waiver is signed.

  • The employee must be given something of value in addition to that which the employee already is entitled. For example, the employee can be given severance pay to which he otherwise is not entitled or some other form of compensation in exchange for the waiver of age-discrimination claims. With regard to severance pay, if the employee’s agreement with the company at the time he is hired provides for him to receive severance at a specified amount, money in addition to that amount must be given to the employee for the waiver to be effective.

  • The employee must be advised in writing to consult an attorney before signing the waiver.

  • The employee must be given at least 21 days to consider the proposed waiver.

  • The employee must be given seven days after signing the waiver to revoke it.

If a waiver is requested in connection with an exit incentive or other termination program, such as an early retirement program, offered to a group or class of employees, the time period for consideration of the waiver is extended to 45 days.

On the first day of the 45-day period, each employee who is offered participation in the program must be informed in writing of the class of individuals covered by such a program; the program’s eligibility requirements; the time limits applicable to such a program; the job titles and ages of the employees eligible or selected for the program; and the ages of all employees in the same job classification who are not eligible or selected for the program.

Final points

You should continue to be careful in all employment decisions. The touchstone in a discrimination case typically is a question of disparate treatment. Be ready to prove you had a legitimate, nondiscriminatory basis for taking action. Documenting the reason for any employment decision is critical—many discrimination claims are fabricated by disgruntled employees. Documentation establishes credibility for your reason and helps avoid a situation where it is your word against the employee’s word.

You also should be able to demonstrate that different people across different age lines—and, for that matter, different races and sexes—were subject to the same standards, held to the same expectations, and given a fair opportunity to perform and clear notice of what was expected of them. This can be accomplished through the use of an employee handbook or job descriptions. It also is helpful to consistently conduct reviews of employees’ performances and document what occurs in the reviews.

Philip J. Siegel is an attorney with the Atlanta-based law firm Hendrick, Phillips, Salzman & Flatt.

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