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REDUCTIONS IN WORKFORCE CAUSED BY A RECESSIONARY ECONOMY MAY SPAWN CLAIMS OF AGE DISCRIMINATION

Discrimination in employment of persons over 40 years of age is prohibited by the federal Age Discrimination in Employment Act (ADEA; 29 U.S.C. § 621 et seq.) and the California Fair Employment and Housing Act (FEHA; Government Code § 12941). The ADEA, with some exceptions, covers all governmental employers and all persons engaged in industries affecting commerce who have at least 20 or more employees for 20 or more weeks of the year. The FEHA, also with some exceptions, covers all California employers who regularly employ five or more individuals. One significant difference between the ADEA and FEHA is that punitive damages are available under the state, but not the federal, statute.

One business situation that is likely to increase in frequency if the economic recession continues and which may give rise to allegations of age discrimination is the decision to implement a reduction in force (RIF) in the workplace. In order to establish a prima facie case of age discrimination in the context of a reduction in the workforce a plaintiff must show: (1) he or she was in the protected group and was adversely affected by the employer's decision; (2) he or she was qualified to assume another position; and, (3) a trier of fact might reasonably conclude that the employer intended to discriminate. In order to rebut such allegations, the employer must show that "a reasonable factor other than age motivated the decision." 629 U.S.C. § 623(f)(1), Western Airlines v. Criswell (1985) 472 U.S. 400. Plaintiff may then attempt to prove that the reasons asserted by the employer are pretextual. The plaintiff need not prove that age was the sole determining factor, only that age was a determining factor. Cancellier v. Federated Dept. Stores (9th Cir. 1982) 672 F.2d 1312.

An employer facing RIF decisions should take care to insure that if employees are to be laid off, it is done for the right reasons. In general, courts are not concerned with whether the decision to cutback had a substantial business-related basis, but rather did the employer appropriately select particular individuals to be separated. A particularly difficult situation can occur when some individuals affected by the RIF are transferred to other jobs while others are discharged.

The absence of clearly articulated selection standards for dismissal/retention of employees during a RIF places an employer at risk for age discrimination claims. Courts have held that acceptable standards for making RIF decisions include seniority, reasonable production standards, and proven performance and skill (if fairly applied). Standards that include consideration of factors such as compensation, pension-eligibility, and subjective performance standards, are potential problems. Total job elimination will usually not support a claim of age discrimination unless some employees holding that job are retained and others are not.

Early retirement plans are often used as part of the means to accomplish a reduction in force. Although such plans obviously involve older workers, when properly instituted they are not discriminatory based on age. Early retirement plans, however, can violate the ADEA or FEHA if the alternative is "constructive discharge." That is, if the older employee is forced or coerced into accepting retirement upon threat of discharge.

In conclusion, fairness and careful planning can effectively eliminate an employer's vulnerability to claims of age discrimination should a reduction in force be undertaken. If you have any questions on this topic, or require any further information, please contact Jackson & Associates at (310) 473-3100.