Age Discrimination In The Workplace

This article was originally published in the Spring 1998 edition of The Successful California Accountant.

By David H Greenberg & Jeremy Pasternak

By now, every employer knows about the dangers of employment discrimination lawsuits. Employee lawsuits against employers and former employers are increasing yearly. Since Clarence Thomas and Anita Hill, and most recently with President Clinton and Paula Jones, sexual harassment cases have been getting a lot of attention in the press. One type of employee lawsuit that is often overlooked is the age discrimination case.

Age discrimination cases can be a particular risk to employers, both because of the large amount of a potential verdict, and because of the frequency with which age discrimination occurs. This article will examine some of the reasons that age discrimination cases are becoming more prevalent, what rights older workers do have, and what employers can do to avoid discriminating against older workers and exposing themselves to suits.

Age Discrimination - The Most Potentially Damaging Case

First, the concept of age discrimination bears some brief explanation. It is not illegal to discriminate against someone for being "too young." In fact, the anti age discrimination laws do not protect anyone under 40. The purpose of these laws, and the way they are written, are to protect workers from discrimination on the basis of being "too old."

It is the conventional wisdom among many attorneys who represent employees that age discrimination cases can receive the largest damage awards from juries, even compared to the more publicized sexual harassment cases. There are a variety of reasons for this. Some are strictly legal; others have more to do with the emotional attachment jurors often have to age discrimination cases.

In any type of wrongful termination case the employee must claim that there was a reason the termination was unlawful. The termination may be alleged to be because of age, race, gender, or another type of "civil rights" category. In these instances, an employee suing in California for a violation of Californian civil right laws can recover his past and future lost wages and benefits, compensation for his emotional distress, attorney fees, and punitive damages. In age discrimination cases, all of these damages can be particularly high.

Lost Wages - Older Worker Often Equals Higher Pay

First, older workers are more likely to have been with a company for a longer period of time. They are therefore more likely to be in a senior position, or at the very least have had many years to receive raises. Therefore, they are more likely to have higher salaries than their younger counterparts. This increases the damages for past and future lost wages and benefits.

Finding A New Job

Damages for lost wages and benefits are also increased by the fact that it is harder for older workers to find new employment. When an employee brings a wrongful termination case, he or she must "mitigate" damages. That is, he or she must make reasonable efforts to replace the job that was lost. It is more difficult for a high-level, highly paid employee to replace a lost job with a similar job. This is more likely to be the situation with an older worker. But even if the older worker was in a low-level position, it is still more difficult to mitigate damages. First, as stated above, that employee, because of the length of employment, probably makes more than younger counterparts in the same position. But if the older worker is applying for a new low-level position, he or she will have to start over at the bottom of the pay scale. This has two effects. First, the older worker is required to try to find "comparable" employment. The employee doesn't have to take just any job. There is no formula for "comparable," and no percentage of former pay that the employee is required to accept. However, a bill recently introduced in the California Legislature would require workers who are claiming wrongful termination to accept positions which earn 70% or more of their past salaries. What if the worker can't find a comparably remunerative position? Answer: the employee doesn't have to take it. In that instance, the employer can be on the hook for all the lost wages. Because the employee tried to mitigate but couldn't, the employer doesn't get any "discount" for wages that the employee earned elsewhere after the termination.

Second, older workers have more difficulty getting a job. Older workers suffer from the common discrimination that goes on all the time, whether on the basis of age, race, or something else: people often hire people who are "like" themselves. Younger workers just think they will be more comfortable working with persons like themselves. But older workers also face a special set of problems. Even aside from flat-out age discrimination, there are common and more-subtle reasons for employers' reluctance to hire older workers. For instance, employers realize that the older worker cannot have the long-term career with the company that a younger worker can. Arguably, this is age discrimination. But the employer might not think so, insofar as the decision not to hire the older workers isn't motivated by a particular animus against older people as a whole. There might be assumptions about the older workers' attendance because of presumed health problems. Again, this isn't legal, but people often think these assumptions are fair and sensible to make.

Older workers often face special problems in "new" industries, such as high-tech. Youth-dominated companies might describe or perceive themselves as looking for "new" ideas and "innovative" employees. There is no reason this should exclude older workers; unfortunately, it often does.

The bottom line is this: it is more common and more understandable that an older worker who is fired will never work again at a comparable pay and position. That means that damages for future lost wages will be higher. That means a higher cost to the employer, whether they settle the case or lose at trial.

Emotional Distress and Punitive Damages

In an age discrimination case, the employee can sue for emotional distress and punitive damages. These are subjective, and are really up to the jury. Here, the jurors' emotions are the most important factor.

Empathy is important to jurors. A juror who can see herself in the same position as the person suing is understandably more likely to award higher damages. A man may not be able to put himself in the place of sexually harassed woman. A white can't empathize with an African-American. This doesn't mean they won't award damages for emotional distress and punitive damages. But it can be a barrier.

The difference with age discrimination is this: everyone hopes or expects to grow old. In some respect, all jurors can see themselves in the place of the older worker who claims discrimination. While this theory is difficult to prove, and its effect difficult to quantify, it stands to reason that it to some extent accounts for the large size of jury verdicts in age discrimination cases.

The Implied Contract - A Common Factor

We have previously written in these pages on the implied contract of employment whereby an employee with a long service record, promises of future employment, retirement and profit-sharing programs, progressive discipline policies, and the like, can get around California's legal presumption that employees are "at will" and can be fired at any time, for no reason at all. No one of these factors is essential. But the first, length of service, is the most significant. It makes sense: the longer you've been with a company, the more reasonable it is to expect that it will continue to employ you.

It is therefore more likely that the older worker, more likely to be a long-term employee, has an implied contract.

  • What does this mean?

    It means that even if the older worker doesn't have a claim for age or discrimination, there might still be a claim. If the employee did have an implied contract, and was fired without cause, then he or she can still sue for past and future lost wages and benefits. The employee can't sue for emotional distress or punitive damages. But, as illustrated above, the lost wages alone can be substantial.

    It should also be noted that the employee may have lost certain benefits, like a pension plan. For example, it is not uncommon for a seventeen-year employee who is fired to receive half the pension benefits which would have been received had the employee been fired after twenty years. To recover this money, the employee might have to sue under a special Federal law, which is beyond the scope of this discussion. But the risk to the employer remains.

Special Pitfalls For Small-to-Medium Companies

Small companies are particularly susceptible to engage in practices which are, or might be, perceived as, age discrimination.

As mentioned above, there are special problems with "new" companies and industries. These are more likely to be the small-to-medium sized companies. There are other problems as well. A common one is management turnover. The smaller the company, the easier it is for there to be a complete management change in a short period of time. For example, it doesn't matter who takes over the position of Chair, CEO or President of IBM. Tens of thousands of managers are not going to be replaced. But if a company with only five employees gets a new executive, that executive can bring in his own new management team. Again, people hire others like themselves. If "old" management is replaced with "new" management, it is possible that "newer" management will end up looking like "younger" management. Even if the new 35 year-old President was just hiring his MBA school buddies, and has nothing against older workers, the situation will look a lot like age discrimination. The company may get a lawsuit without having any idea it's coming.

The message is, be careful. When instituting management changes, give thought to who is being fired and why. Consider that "new blood" sounds an awful lot like "young blood." And consider that the older worker might have more to offer than you think.

Discriminating Without Meaning To; Recent Changes in the Law

Companies can be sued for discrimination in two ways:

  1. "Disparate Treatment," where the employee is discriminated against because the employer doesn't like the employee because of age, race, gender, etc.

  2. "Disparate Impact," where the employer isn't motivated by any particular bias, but uses a facially-neutral employment policy which adversely affect employees on the basis of age, race, gender, etc.

    An example: applicants to be firefighters are required to be able to lift 150 pounds. Fewer female applicants are hired, because women generally can't lift as much. This is "disparate impact." It's perfectly legal, as long as the 150-pound lifting requirement is really necessary. If that's absolutely required, there's no problem. If it's not necessary, or fewer pounds are really required to be lifted, then there is illegal disparate impact.

A recent case in California has had a major impact upon disparate impact age discrimination cases. In Marks v. Loral Corporation, a number of older employees were laid off because they made high salaries, largely because of their length of service. The company wanted to replace them with new employees, who would earn less money. Obviously, there was a disparate impact upon older workers. But a California appellate court ruled that this was not illegal disparate impact, because companies have the right to institute such money-saving measures. The California Supreme Court declined to hear an appeal, so the ruling is now the law.

This does not mean that a company can just use the excuse every time it wants to fire an older worker. The decision would presumably have to be part of a larger-scale layoff and if there really was age discrimination (in the sense of bias of disparate treatment) going on, the fired employee might have another way to prove it. But the case does not bode well for older workers.

On the other hand, it should be noted that in other rulings, the California courts have expanded protections for older workers. There does not appear to be a movement against them. But one theory of liability has been cut off.

Insurance Coverage

We have written before about insurance coverage for employment suits. The wary employer should be reminded that business and errors and omissions policies rarely cover discrimination suits. Usually, special policies or riders must be purchased. And there is never coverage for breach of contract, including the implied contracts discussed above. The take-home message is that if the employer is sued in a case of this type, the legal fees and any settlement of judgment will probably have to be paid by the employer, not the employer's insurer.

Why Discriminate?

One subject that hasn't been discussed is the value of older workers. They have experience, wisdom, and a breadth of knowledge that younger workers very rarely have. They may also be the institutional memory of the company. They know what has worked in the past and what hasn't.

As attorneys who specialize in employment law, we have been involved in many age discrimination cases. It has not been our experience that there is any reason to believe that older workers have old ideas, or are under or unwilling to accept new ones. In fact, it is often the older worker who is intrigued and energized by an idea which is new to him, even though a younger worker might find it old hat. One anecdotal example: we have a web site on the Internet. A plurality of our hits are made by people searching for information on age discrimination. These people obviously have computers, and presumably are themselves older people. But computers are considered "new" and for the "young." In our experience, that's not true. A common assumption, that computers are for the young, here seems incorrect. Obviously, you can teach an "old dog" new tricks.

The age discrimination laws, like all the employment discrimination laws, exist for a reason: employers shouldn't make assumptions based on age, race, gender, etc. Cliches and stereotypes aren't necessarily accurate, and shouldn't form the basis for decisions that affect others. The best way for companies to protect against age discrimination suits is to have their employees take to heart the rationales behind the age discrimination laws. If the company and its employees value older workers, then they aren't going to discriminate in the first place, and they are far less likely to be hit with a lawsuit.