Age Discrimination in Employment Act

The Age Discrimination in Employment Act of 1967 (ADEA) protects individuals who are 40 years of age or older from employment discrimination based on age. The ADEA’s protections apply to both employees and job applicants. Under the ADEA, it is unlawful to discriminate against a person because of his/her age with respect to any term, condition, or privilege of employment, including hiring, firing, promotion, layoff, compensation, benefits, job assignments, and training. The ADEA permits employers to favor older workers based on age even when doing so adversely affects a younger worker who is 40 or older. It is also unlawful to retaliate against an individual for opposing employment practices that discriminate based on age or for filing an age discrimination charge, testifying, or participating in any way in an investigation, proceeding, or litigation under the ADEA. The ADEA applies to employers with 20 or more employees, including state and local governments. It also applies to employment agencies and labor organizations, as well as to the federal government. According to the U.S. Department of Labor more than 2 million workers ages 55 and older were unemployed as of June 2009. This is the greatest number in the last ten years. Today tenure counts for little with employers, reasons given for age discrimination in the workplace center around the higher costs of employing older workers, such as the cost of providing benefits or providing training. They are also stereotyped as less adaptable, less motivated, and less energetic. It could be said that that baby boomer generation may now suffer the impact of its own decisions and management style of being lean-and-mean (Wolgemuth, 2009). Employment demands also have changed in recent years; high growth occupations are far less physically demanding and far less likely to involve difficult working conditions than slower-growing jobs. While less physically demanding, fast-growing occupations require more cognitive and other nonphysical demands, are more stressful, require more interpersonal skills, and are more likely to require the latest skills than slow growing occupations. While the nature of work has been changing, ongoing shifts in the characteristics of older adults might also affect employer demand for older workers. As work has become more cognitively demanding, older adults have become more educated. According to the Urban Institute between 1971 and 2007, the share of adults’ ages 55 to 74 with a four-year college degree has increased from 9 to 27 percent. The idea that an older worker may not be as capable physically of performing a job is mostly irrelevant given that the vast majority of jobs in America are not really physical in nature (Wolgemuth, 2009). To test whether age discrimination existed in the workplace four professors from Ohio State University sought to prove three assumptions related to age discrimination in the workplace. They relied on social closure theory as well as age stereotypes and factors such as power and status as the basis for their tests. They thought workers both skilled and semi-skilled were discriminated against because of their age for a number of reasons. Age stereotypes were often connected to work competency—older workers are perceived to be less able to do the job. They also found that financial and market conditions were influential in age discrimination. To test these assumptions they examined more than 12,000 cases on age discrimination in employment that were filed with the Ohio Civil Rights Commission between 1988 and 2003. The data contained in these files included information on race, gender, employer, company location, reason for the case, specific charges and the disposition of the case. A total of 120 cases which were focused on were limited to self reported information by the aggrieved worker. In the cases examined workers around the age of 50 experienced considerable age discrimination. It was thought that worker aged 50 would still have many productive years left to contribute in the workplace. Workers (skilled and semi-skilled) in the manufacturing and construction industries, for example, were most often subject to age discrimination. Moreover, termination was found to be the most popular way to exercise age discrimination (used in 66% of cases). Other forms of age discrimination included harassment (12%) and exclusion from hiring (10%). It was also found that there was a theoretical relationship between social closure and stereotyping. For example, they discussed the case of a 72-year old salesman whose hours were reduced as the result of an alleged downturn in business. However at the same time, a younger salesperson’s hours were increased. This was a clear suggestion of the existence of age discrimination. Another example was that of a 50-year old employee that had her hours reduced because she allegedly lacked “drive”. In addition she was also told that she was not the right person for her position because the business sought to attract younger customers. The same company steadily reduced her hours and hired three younger people to replace her. Race apparently had little to do with age discrimination in the workplace while age and gender was a larger issue. Men and woman were discriminated against because of age and gender at the same rate. Interestingly, they noted that some companies used financial costs, personal liability, harassment, and “rightsizing” as mechanisms for discriminating against older workers (Roscigno, Mong, Byron & Testor, 2007).

How the Economy Has Impacted Retirement Decisions – 3

In the past, many workers who lost their jobs at age 62 or older would drop out of the labor force, choosing to retire and collect Social Security benefits instead of searching for new jobs. As a result, relatively few older adults were included within the ranks of the unemployed. In 2009, however, unemployment rates for older workers have reached record levels, partly because fewer workers eligible for early retirement benefits are dropping out of the labor force. Growing concerns about the adequacy of retirement savings and whether people will have enough money to live comfortably in retirement, magnified by the 2008 stock market collapse, appear to have discouraged early retirement. Instead, older workers are now remaining in the labor force and searching for work after they lose their jobs (Johnson, 2009). Today’s older workers are healthier, more able, and more interested in working. Social Security changes have increased work incentives at older ages. Overall, most employers appear to consider older workers to be at least as productive as younger workers. The Center for Retirement Research survey found that 56 percent of employers reported that older professionals and managers were more productive than their younger counterparts (Munnell, Sass, and Soto 2006). The normal retirement age for full Social Security benefits recently increased from 65 to 66 and will reach 67 for those born after 1959. For those retiring early, these changes the portion of lifetime earnings replaced by Social Security, thereby making continued work necessary to maintain living standards in retirement. Changes in employer-provided pension and retiree health benefits are also likely to encourage boomers to remain at work. Traditional defined benefit retirement plans that provided for a lifetime annuity have been replaced with defined contribution plans. Employers typically make specified contributions into individual DC accounts, which workers may access at retirement, generally as lump sum withdrawals. Because contributions continue as long as plan participants remain employed and workers with a given account balance can receive the same present value of lifetime benefits regardless of when they chose to begin collecting benefits, The defined contribution plan is at risk for change due to changes in economic conditions. Employers have elected to reduce and in some cases eliminate matching which placed further strain on retirement saving. Retirement incentives cause people with defined contribution plans to work about two years longer on average than defined benefit participants. The continuing shift to DC plans will likely further increase older Americans’ labor supply (Johnson, Mermin & Toder, 2008). Another factor that will force older workers to continue working is the need for health benefits. Retiree health insurance that pays health expenses for early retirees who have not reached the Medicare eligibility age of 65 discourages work by reducing retirement costs that arise from the loss of employer health benefits. Workers offered retiree health benefits by their employers retire earlier than workers who lose their health benefits when they leave the firm (Blau and Gilleskie 2001; Johnson, Davidoff, and Perese 2003; Rogowski and Karoly 2000). Working longer may be the best solution for those approaching retirement with inadequate savings (Munnell and Sass 2008). By extending their careers, seniors accumulate more Social Security and 401(k)-plan credits, receive additional earnings that they can save for retirement, and shorten the period over which their savings must be spread. Long before the current recession, older Americans had already begun working more than they did a few years ago. Between 1991 and 2008, labor force participation rates at age 65 to 69 increased 11 percentage points for men and 9 percentage points for women (BLS 2009a). These are substantial gains. In relative terms, they signify a 44 percent increase for men over the period and a 55 percent increase for women. The gains for men are particularly striking because they reverse a sharp downward trend in older men’s labor supply that lasted for most of the 20th century. The recent economic turmoil further compounds the issue, leaving employees with underfunded retirement accounts and forcing many to put off retirement until after an economic recovery.

Statistical Look at EEOC and the Recent Growth in Claims – 4

As unemployment intensifies in the economic downturn, claims of age discrimination are soaring. Figures obtained from the federal Equal Employment Opportunity Commission (EEOC) show a sharp increase in age discrimination allegations for the fiscal years ending September 30, 2007 to September 30, 2009. From 2006 to 2007 allegations increased 15.4% to 19,103 complaints, for the fiscal year ended September 30, 2008 a total of 24,582 complaints were filed an increase in allegations of 28.7%. For the fiscal year ended September 30, 2009 complaints filed totaled 22,778 a slight decrease from 2008, however the number of complaints remains higher than any period of time over the last ten years. According to the EEOC while overall employment discrimination complaints are also at a record high up 15% to 95,402 the most dramatic increase was in age- related complaints. Given the current economic climate, there us an increased focus on age discrimination claims. The Equal Employment Opportunity Commission (EEOC), which enforces many of the federal discrimination laws (including the ADEA), is devoting substantial resources to age discrimination claims. On November 11, 2010 the EEOC heard testimony that age discrimination is causing older workers to have a difficult time remaining employed or find new employment. This problem the EECO has been exacerbated by the economic downturn. A number of experts were called to testify on the impact of the economy on older workers. Dr. William Spriggs, Assistant Secretary for Policy, U.S. Department of Labor indicated that the rate of unemployment for people aged 55 and over “rose from a pre-recession low of 3.0 percent in November 2007 to 7.3 percent in August 2010 making the past 22 months the longest period of high unemployed workers in this age group for 60 years”.

Recent Case Law on Age Discrimination – 5

Employment Discrimination laws seek to prevent discrimination based on race, sex, religion, national origin, physical disability, and age by employers. The current economic recession has brought a significant increase in age based lawsuits. The ADEA contains explicit guidelines for benefit, pension and retirement plans. During the 2007-2008 term, the U.S. Supreme Court clarified the statute in three distinct areas. First, disparate impact claims filed under the ADEA now require proof of discriminatory motive behind the plan that has created the alleged disparate impact. A disparate impact claim is a claim that an employer has created plan or scheme that on the face seems to be neutral but in actuality discriminates on the basis of age. One very key item of concern is that the plaintiff (employee) bears the burden of proof that a discriminatory act took place. In Gross v. FBL Financial Services, Inc., the Supreme Court raised this critical question regarding the appropriate burden of persuasion to impose on ADEA plaintiffs. The statutory language at the core of this issue is the phrase “because of in section 623(a) (l) of the ADEA. States, in relevant part, that “[i]t shall be unlawful for an employer . . . to fail or refuse to hire or to discharge any individual or otherwise discriminate against any individual. . . because of such individual’s age”. (Graham, 2008) Before this case, a two-step approach had been used (as is still the law in other federal discrimination cases). If the plaintiff could prove that age was a factor in employment decision, then the burden shifted to the employer to prove that it had a legitimate, non-age related reason for the decision.