What are valid reasons for an employer to fire an older worker?
Under the ADEA, there has to be a valid reason — not related to age — for all employment decisions. Examples of valid reasons would be poor job performance by the employee or an employer's economic trouble. In the case of layoffs, a company cannot use age as the basis for determining who is laid off and who is kept on. If most people who are laid off are 40 or older, and the majority of workers kept on are younger, there may be a basis for an ADEA complaint or lawsuit, especially if the employer has hired younger workers to take the places of workers over 40.
Can I be fired or not hired because a younger employee costs the company less?
It depends. A valid reason other than age a company may use to justify the hiring of a younger worker is that the younger worker has less experience and a lower salary history, and may be willing to work in the same job for a lower salary than the older worker. If the company bases the hiring decision on this reason, it is not illegal.
However, an older worker cannot be terminated on the basis that the company either currently or in the near future will be required to pay retirement benefits or more costly insurance benefits (see the next section).
Can I be fired to stop my pension benefits from vesting or because my health insurance is more costly?
Firing workers in order to prevent them from earning their promised pensions is a technique some employers use to save money, but it is not legal. When the Older Workers Benefit Protection Act (OWBPA) was passed in 1990, it became clearly illegal for employers:
- to use an employee's age as the basis for discrimination in benefits, and
- to target older workers for their staff cutting programs on the basis that benefits were too costly.
An employer cannot terminate an older worker on the basis that benefits are too costly. The company must follow the “equal benefits or equal cost” rule, by providing either equal benefits to older and younger workers, or paying the same benefit costs for all employees. The law only allows an employer to reduce benefits based on age only if the cost of providing the reduced benefits to older workers is the same as the cost of providing benefits to younger workers. In other words, if an employer pays only $100 in monthly premiums for each worker, this policy does not violate the ADEA even if it causes the older worker to make a higher employee contribution or to have lesser benefits than a younger worker.
An employer could not, however, refuse to pay for the health benefits of all workers over 55 on the grounds that “it costs too much,” if the employer pays the benefits of younger workers, or terminate all older workers so that the pool of employees for insurance purposes is less costly to insure.
Can my employer make me retire?
As long as an employee is performing his or her job duties, generally the answer is no. If an employee can no longer perform his or her job duties, however, the employer is allowed to discharge that person.
The ADEA does have special exemptions for police and fire personnel, tenured university faculty and certain federal employees having to do with law enforcement and air traffic control. Executives or others “in high policy-making positions” can be required to retire at age 65 if they would receive annual retirement pension benefits worth $44,000 or more. If these exceptions may apply to you, check with your personnel office or an attorney for details.
However, in an effort to save the company money or to reduce the size of the workforce without resorting to involuntary layoffs, employers will often offer older employees early retirement. Offering voluntary early retirement does not violate the ADEA. In exchange for increased retirement benefits or severance, employers may ask employees to waive their rights under the ADEA. In order to be legally effective, the waiver you are asked to sign must follow certain requirements (see next section).