Employer Issues in an Age of an Aging Workforce

As an attorney and an HR professional, we have often been presented with the following questions: “How do I fire my employee?” or “Can I fire my employee?” These are seemingly simple questions. In earlier times, we might have responded, “Well, of course you can. You walk into their office and tell them they are fired.” Nowadays, we might respond with a barrage of ostensibly non-politically correct questions: Man or a woman? How old is he? Does she have a disability? Did he take a medical leave of absence? Is she pregnant? Have they filed a worker’s comp claim?

While these questions may suggest that we are asking whether the company has engaged in discriminatory actions against an employee, this is not the case. Even though the company is not discriminating, it is up to the business to provide documentation to support its decision to separate, and without such documentation, the business is not protected from a discrimination lawsuit. Litigation is costly and time consuming, so employers are well advised to document performance and behavior to support termination and discipline decisions.

State and Federal Age Discrimination Laws
In Oregon, employees are protected from discrimination on the basis of race, color, religion, gender (sex), national origin, age, veteran status, sexual orientation, gender identity, disability, genetic information or any other characteristic protected by law, including leaves of absence under family medical leave laws and filing worker’s compensation claims. The list is quite extensive.

Our focus in this article is to review the intricacies of age discrimination. A claim of age discrimination, while (in our opinion is) disfavored by courts, has become a risk faced by many employers who have aging work forces.

According to the Society for Human Resource Management’s 2013 article “The Top Workplace Trends According to HR Professionals,” while HR professionals are preparing for the retirement of many valuable older employees, they are also getting ready for an increased proportion of older workers in the workforce, as many older workers will continue to put off retirement. Thus, issues related to aging are high on the list of demographic and social trends HR professionals forecast to influence the workplace in the coming years.”

Federally, all employees over the age of 40 are protected under the Age Discrimination in Employment Act (“ADEA”). If you think 40-years-old is actually “40-years-young,” Oregon employers must be aware that all employees 18 and older are also protected from age discrimination.

The ADEA defines an employer as those who have twenty or more employees. Oregon, however, defines an employer as having one or more employees. Thus, almost every small business in Oregon falls under the definition of “employer,” and must be aware of the laws that protect their employees from age discrimination.

When we are faced with the question how or can I terminate my employee, we evaluate any potential claim the same way as a court would. First, the employee has the duty to prove the prima facie (Latin for “on its face”) case for age discrimination. If an employee meets the prima facie case, there is a rebuttable presumption that the employee was fired because of his or her age. The burden then shifts to the employer. An employer can rebut the presumption of age discrimination by showing that the employee was terminated for a legitimate, non-discriminatory reason (i.e., the employee violated a company policy, budget cuts, etc.).

Determining whether an employee is discriminated against because of his or her age is a fact-intensive analysis. As such, legal and HR recommendations for how to handle the termination of an employee protected by their age will vary based on the entire set of facts. The following are examples of how we might evaluate a potential age discrimination case, but is not intended to be legal advice:

Example 1: Monica
In November 2012, XYZ Corporation (“XYZ”) hired Monica, 41, as a sales person in its Portland, Oregon office. Since she started, Monica has not met the company’s objective sales goals each month. Thus, XYZ placed Monica on a 90-day performance improvement plan, with intermediate milestones. Monica has not met any of the intermediate milestones and XYZ documented consistent feedback to Monica during these check ins and 45 days after implementing the plan, XYZ decides that it must terminate Monica.

Can XYZ terminate Monica with minimal exposure?

Monica’s case is fairly straightforward. If she is terminated, Monica meets the first and second prongs of a prima facie case – she’s over forty (eighteen in Oregon) and was fired. Even if she was fired, however, she cannot prove the third prong of her prima facie case—that she performed satisfactorily.

The Company was well advised to create a performance improvement plan for Monica. These kinds of plans work well when there are several areas of performance that must be addressed. The consistent check-ins were also important. Monica was getting feedback throughout her plan and was “on notice” that her job was on the line had her performance not improved.

NOTE: If you plan to introduce a performance improvement plan or some kind of probationary term it is important to make sure each plan is consistent (i.e., all plans should have 90 days terms)—this risk is discussed further below. Also, be sure that the probationary term “is not intended to guarantee permanent employment” and that employment is still “at-will and, notwithstanding the performance goals, employee can be terminated at any time and for any reason, without notice.” Without this language, you may inadvertently create a “for cause” employment relationship. For more advice on how to incorporate an effective performance plan, consult your HR professional or an attorney.

Example 2: Bob
At the same time it hired Monica, XYZ also hired Bob, 52, as a sales person. All sales people are hired at the same salary. Bob has met the objective performance goals, but with considerable help from XYZ’s management. Bob is also socially awkward and makes inappropriate comments to fellow employees and even some of XYZ’s most valued customers. XYZ verbally told Bob that he needs to work on his communication skills with customers and employees.

Yesterday, one of XYZ’s customers approached management about an interaction she had with Bob and requested to conduct all future business with another salesperson. Bob did not say anything outrageous, the customer only said that he is “weird” and makes her feel “uncomfortable.”

Can XYZ terminate Bob with minimal exposure?

Bob, at 52 years old, is in a protected class for his age. So, our inquiry jumps to the second, third, and fourth prongs of the prima facie case. Under XYZ’s objective performance goals, Bob was performing satisfactorily because he technically met those goals. If Bob is terminated, the third prong is met. For the fourth prong, Bob can show that Monica (a younger employee, even though within the same protected class) was treated more favorably, because she was placed on a performance improvement plan. Thus, Monica was given an opportunity, and was put on notice that she must correct her performance. Bob was not given the same opportunity. Moreover, if there are no employees that are near Bob’s age and if XYZ hires someone to fill the sales position that is significantly younger than Bob (even 40 years old), it would support Bob’s claim that he was treated differently because of his age.

If the court determines that Bob has met the prima facie case, the burden would then shift to XYZ to show that Bob was terminated for a legitimate, nondiscriminatory reason. Here, XYZ would argue that Bob was fired because of his inappropriate behavior, not his age. Perhaps there was a written policy regarding appropriate communication that the company could reference. Other facts to support XYZ’s position that Bob was terminated because of his behavior, not his age, include that (1) Bob was hired recently; (2) Bob was hired at the same rate of pay as other sales people; and (3) Monica’s poor performance related solely to the objective sales goals, not inappropriate behavior, which may open XYZ up to litigation from other employees or cause XYZ to lose its valuable customer base.

While its seems that Bob would struggle with proving the prima facie case and XYZ has a legitimate, non-discriminatory basis for firing him, there is a chance that he could prevail at trial—not to mention the exorbitant legal fees to fight such a claim.

For many employers, they are faced with those “between a rock and a hard place” questions: What are my options? I thought employment was at-will and I can fire anyone for any reason? The truth is that employers have many options. While these options might not prevent a lawsuit, they can minimize the exposure and the impact to your business should a claim arise. Here are some options for XYZ to consider:

1. XYZ could do nothing and allow Bob to keep working. XYZ may open itself up to litigation from other employees or third parties if Bob’s inappropriate behavior continues, becomes worse, or violates the Company’s harassment or professional conduct policies.
2. XYZ could terminate Bob, with the understanding that it is risking a claim by Bob against XYZ for age discrimination. Even if XYZ prevailed in court, litigation would be costly and time-consuming.
3. XYZ could implement a similar performance improvement plan for Bob that it implemented with Monica, with the condition that any inappropriate behavior or misconduct will lead to immediate termination. This would prevent Bob from arguing that Monica was treated more favorably, but he could still sue for age discrimination.
4. XYZ could terminate Bob but also offer him a severance package in exchange for a waiver and release of claims, including an age discrimination claim.

Severance Package
In many cases, offering a severance package in exchange for a waiver and release agreement may be an employer’s most cost-effective option. The Older Workers Benefit Protection Act (“OWBPA”)—a federal law protecting employees over the age of 40—provides very specific guidelines for drafting a severance waiver and release agreement. Some of the key requirements (there are others) under the OWBPA include the following: (1) the waiver and release agreement must be very precise as to what claims the employee is waiving, (2) the severance payment should exceed the company’s standard severance policy, and (3) the employee must have 21 days to decide whether or not they want to sign the agreement and 7 days to revoke their signature. Regardless of the employee’s age, however, severance agreements should be consistent. Many companies choose to use severance agreements when there is little written documentation to support the separation and to ensure that the business is protected. It is not uncommon to see 1-2 weeks of pay for every year of service, dependent on the nature and the reason for the separation. For instance, higher severance may be given to an employee that is being laid off than to an employee who is not meeting expectations.

Exit Interview
Exit interviews are generally conducted prior to an employee’s last day of work or closely thereafter to gather feedback on the employee’s experience at the worksite. Legally, an exit interview is not required. We recommend conducting an exit interview, however, even if the manager or HR knows the feedback may be negative. Exit interviews are often a great way to mitigate claims from a potentially dismantled ex-employee as it gives them a way to air their concerns, and the Company an opportunity to address those concerns and follow up.

The foregoing examples are practical tips for employers to mitigate potential age discrimination claims and are not intended to be legal or formal HR advice.