“ Ageism is as odious as racism and sexism. ” --- Claude Pepper

1. “Ageism is as odious as racism and sexism.” --- Claude Pepper Background of the ADEA -- 1964 Title VII Debates • Age considered as possible protected class • Congress could not decide if it should be placed under the FLSA or Title VII • Age discrimination was considered a by-product of false beliefs and stereotypes • Congress wanted research on impact of discrimination on older workers and the economy

2. Some Data Given the ADEA’s focus on the effects of prejudice and stereotypes in limiting the opportunities of older workers (e.g., a belief that job performance declines with age), here are some facts: • Cleveland and Landy (1983) reviewed the gerontology literature and found chronological age notto be a valid predictor of performance for a specific individual in a particular job • Evidence from a meta-analysis (Waldman & Avolio, 1986) found nosignificant differences between age groups in objective work performance measures. Rather, the analysis indicated that older workers received lower performance scores when subjective supervisory ratings were used • Laczko and Philipson (1991) reviewed studies of age effects on job performance and learning ability. It was found that older workers are as productive as younger workers, they are almost as capable of learning (despite less formal education), and have an energy, flexibility, and willingness to learn

3. History of ADEA • Secretary of Labor’s findings: • Older workers are disadvantaged in retaining jobs and finding new jobs when displaced • Arbitrary age limits set without consideration of job performance potential can put older workers at a disadvantage • The deterioration of skill, moral, and hire ability due to high rates of unemployment and long-term unemployment is common in older workers and the problem is increasing • Age discrimination adversely affects commerce

4. Year Overview 1974 Extension of coverage to state, local, and federal entities 1978 EEOC is put in charge of ADEA administration and enforcement, age extension 1984 Extension of coverage to overseas subsidiaries 1986 Guaranteed contributions to pension plans for employees that work past 65 in ADEA, ERISA, and IRS Tax Code 1987 Age cap eliminated 1990 OWBPA protections for benefits, early retirement, and voluntary waivers 1991 CRA lengthens time for right to sue ADEA Amendments • 1967: Age 40–65 protected • 1984: Age 40–70 protected

6. ADEA Basics • Protected Group --- Individuals 40 years old and above • Class is continuous, not categorical • The favored person does not have to be under 40 for the decision to be deemed discrimination • Replacement must be “substantially younger” than plaintiff • Favorable treatment of employees over age 40 compared to those under 40 is • allowed • Covered Entities: • Private. and public entities with 20 or more employees • Coverage extends to U.S. subsidiaries but not when ADEA laws conflict with foreign laws (e.g., mandatory retirement ages)

7. ~ ADEAExemptions ~ • Mandatory retirement at age 65 for“bona fide executives” or“high policymaking employees" • Hiring and forced retirement for Safety Officers (e.g., police and firefighters) consistent with State and local laws (e.g., not allowing firefighters to enter force after age 35). Unless state and local laws are a ploy to evade ADEA • Bona fide apprentice programs (e.g., can refuse to accept those over a given age). Need to be able to show that age at entry is a BFOQ) • Commercial airlines(pilots 65 years old). • See: The Fair Treatment for Experienced Pilots Act (2007) • Air traffic controllers(those past 30 can be refused for hire; except retired military air traffic controllers). But, they must retire at age 56 • Certain kinds ofelected or appointed officials(e.g., State judges)

8. ADEA Burden of Proof Process • Phase 1: Challengers must establish a prima facie case by providing evidence of age discrimination by showing that: • They are 40 years old or older • They were qualified for the position in question • They were victims of an unfavorable employment decision (e.g., not hired, • promoted, fired) • The organization favored an individual who was substantially younger than • the challenger or • Show differential treatment in comparison with similarly situated younger employees (for cases where no obvious replacements, e.g., RIFs) Phase 2: Companymustarticulate that alegitimate, nondiscriminatory reason exists for their decision (& age-specific factors of small age differences, same actor defense, RIF, reorganization plans) Phase 3: The challenger proves that the organization's reason for their rejection is a pretext for discrimination

9. Affirmative Defenses in the ADEA • BFSS • BFOQ (e.g., public safety) • Bona Fide Benefits Plan (BFBP) • Good Cause (really a subset of RFOA) • 5) RFOA (Reasonable Factor Other Than Age)

10. BFOQ Defense 1) “That the BFOQ is reasonably necessary to the essence of the business” and 2) “That it has reasonable cause, i.e., a factual basis for believing that all or substantially all persons within the protected age group would be unable to perform safely and efficiently the duties of the job involved, or whether it is impossible or impractical to deal with persons in the protected age group on an individual basis” (Usery v. Tamiami Trail Tours, Inc. 1976, pg. 1241-1242).

11. Role of Individual Assessment Western Airlines v. Criswell (1985) Brief facts: --- Western Airlines policy forced flight engineers to retire at age 60; --- Criswell filed an ADEA suit and met his Phase 1 burden under the ADEA • Phase 2: Western Airlines claimed that age was a BFOQ • Their primary business was the safe transportation of passengers • They had a rational basis for believing those over 60 were not qualified • Testing the ability of all flight engineers age 60 or above was impractical

12. Supreme Court Decision in Criswell ADEA intended a BFOQ to be a relatively narrow exception; a lot of individual variation exists The Court said that the ADEA indicates a: “ ... preference for individual evaluation expressed in the language and legislative history of the ADEA. Under the Act, employers are to evaluate employees … on their merits and not their age. In the BFOQ defense, Congress provided a limited exception to this general principle, but required that employers validate any discrimination as "reasonably necessary to the normal operation of the particular business." It might well be "rational" to require mandatory retirement at any age less than 70, but that result would not comply with Congress' direction that employers must justify the rationale for the age chosen.”

13. Other problems with Western Airline’s position • Other airlines did not require mandatory retirement before age 70 • Western Airlines used individualized tests in other, comparable • situations • The Federal Aviation Administration believed that • individualized testing was practical for such jobs • Criswell won.

14. O'Conner v. Consolidated Coin Caterers (1996) • O’Conner, 67 years old, was replaced him with someone age 40 (i.e., someone in the protected age group) • The organization said the O’Conner did not establish a prima facie case because he was replaced by an individual who was also in the protected age group Supreme Court: The ADEA was meant to disallow discrimination because of age. Therefore, the critical evidence for age discrimination in this case was that the person who replaced the fired employee was substantially younger. Generally, age difference of between 8-10 years in considered substantial. But, smaller age differences may be sufficient given additional evidence of age animus “The fact that one person in the protected class has lost out to another person in the protected class is thus irrelevant, so long as he has lost out because of his age. … there can be no greater inference of age discrimination … when a 40 year old is replaced by a 39 year old than when a 56 year old is replaced by a 40 year old. … the fact that a replacement is substantially younger than the plaintiff is a far more reliable indicator of age discrimination than is the fact that the plaintiff was replaced by someone outside the protected class.”

15. ~ Same Actor Defense ~ “When the same person was responsible for for hiring and terminating an individual, who was already a member of the ADEA protected class when hired, there is an inference that age was not the reason for the termination.” (From White v. Omega Protein, 2003) • Introduced by Proud v. Stone (1991) • Proud was both hired and fired by Klauss -- terminated 6 months later for poor performance • Klauss had attempted to help Proud improve performance • Klauss was responsible for the hiring and firing of Proud within a six-month time frame, and the evidence of his enumerated job deficiencies in a supervisory position makes any inference of discriminatory animus unwarranted. • But, supplemental evidence can counter same-actor defense • Madel v. FCI Marketing (1997) • Carlson had hired and recommended termination for both Madel and Brennen • Substantial evidence of age-based derogatory remarks by Carlson • Plaintiffs have created a fact issue as to whether FCI’s proffered reasons are pretextual, and Carlson’s age-based epithets create a reasonable inference that age was a determinative factor in the termination • decision. [emphasis by authors]

16. Mixed-Motive Scenarios • Gross v. FBL Financial Services (2009) • Gross presented indirect evidence that he was demoted for age-based reason -- similarly situated younger workers were treated less harshly • Trial judge ruled FBL could only prevail by proving a legal motive for the demotion, Gross awarded $46,000 • 8th Circuit ruled burden of proof could only pass to defence if Gross had direct evidence of illegal motive • Burden of proof should have stayed with plaintiff, jury should have decided if Gross proved age was the determining factor in the decision

17. Price Waterhouse v. Hopkins • Supreme Court decision: • Proper defense standard for proving a legal motive is a “preponderance of evidence” (not “clear and convincing evidence” used by lower courts) • Disagreement on whether an illegal motive (e.g., sex) must be a motivating factor or a substantial factor • O’Conner stated that proof of an illegal must be in the form of direct evidence (used by subsequent lower courts even though she was alone on the Court in this belief) • “… What is required is what Ann Hopkins showed here: direct evidence that decision makers placed substantial negative reliance on an illegitimate criterion in reaching their decision.” • Note: Even though O’Conner was alone in requiring direct evidence, the majority of lower courts used this standard in mixed-motive cases

18. Supreme Court ruled ADEA is not governed by Title VII mixed-motive precedents or Price Waterhouse (must use McDonnell-Burdine framework)  Struck down the use of Mixed-Motive Scenarios in ADEA claims From CRA of 1991 Except as otherwise provided in this subchapter, an unlawful employment practice is established when the complaining party demonstrates that race, color, religion, sex, or national origin was a motivating factor for any employment practice, even though other factors also motivated the practice. *** Congress may act to alter this ruling

19. Adverse Impact Scenarios • In the 1980s courts evaluated ADEA adverse impact following Title VII rules • Geller v. Markham (1980) • 55-year-old teacher was accepted for an immediate opening and then replaced by a 25-year-old who was on a lower salary step • Defendant claimed that steps of a salary schedule was job related (preference to those below the 6th step; cheaper) • Courts rejected this defense due to the correlation between age and steps (those 40 & over were much more likely to be over the 6th step)

20. Adverse Impact Scenarios • Leftwich v. Harris-Stowe (1983) • During an RIF: a 47-year-old tenured professor was released, while a 33-year-old nontenured and 62-year-old tenured professors were retained • Defendant used cost-cutting defense by equating age with higher costs to the employer (also average age of retained and released faculty were the same -- CT v Teal bottom line denied) • Courts ruled for plaintiff due to the correlation between tenure and age • Such decisions were changed with Hazen • Summary: • In 1980s, adverse impact claims under ADEA used Title VII rules (3 Circuit courts) • Cost cutting not job-related defense (2 courts) and not usable as RFOA (1 court) • EEOC Guidelines rejected RFOA in ADEA in adverse impact cases

21. Adverse Impact Scenarios • Hazen v. Biggens (1993) • Biggens fired at age 62 after 9 years on the job (10 years needed to be vested in the company’s retirement plan; timing was a few weeks before he was eligible) • Unanimous Supreme Court ruled that decision may be motivated by RFOA even if the motivating factor is correlated with age When the employer's decision is wholly motivated by factors other than age, the problem of inaccurate and stigmatizing stereotypes disappears. This is true even if the motivating factor is correlated with age, as pension status typically is. On average, an older employee has had more years in the work force than a younger employee ….. Yet an employee's age is analytically distinct from his years of service. An employee who is younger than 40 may have worked for a particular employer his entire career, while an older worker may have been newly hired. Because age and years of service are analytically distinct, an employers can take account of one while ignoring the other, and thus it is incorrect to say that a decision based on years of service is necessarily “age based.” • The Hazen Court never ruled on adverse impact, but noted that disparate treatment captures the essence of what Congress sought to prohibit in the ADEA, implying that adverse impact does not. Plurality thought that it was WRONG to use Title VII adverse impact analysis to the ADEA. The ruling caused many Circuit courts to begin rejecting ADEA adverse impact claims

22. Biggins was able to show ERISA violation --- e.g., fired soon before being vested (10 years) Section 510 of the ERISA partly states: It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan, [or ERISA] . . . or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan, [or ERISA] Intended to prevent unscrupulous employers from discharging or harassing their employees in order to keep them from obtaining vested pension rights. • ERISA Framework: • Plaintiff must show (with direct or indirect evidence) that he/she was: • covered under an employer’s plan; • subjected to adverse employment action; • 3) meeting the employer’s reasonable expectations; and • discharged under circumstances giving rise to some basis for believing prohibited intent • existed • Need to show that employer’s denial of benefits was a motivating factor • Articulation of legitimate, non-discriminatory reason for adverse action and proof of pretext are next steps

23. Summary of AI Cases Prior to Smith v. City of Jackson • In 1980s courts treated adverse impact in ADEA with Title VII rules (e.g., Geller v. Markham, 1980 & Leftwitch v. Harris-Stowe, 1983) • In Hazen v. Biggens (1993), the Court rules --- employer decisions may be motivated by "factors other than age ... even if the motivating factor is correlated with age." • 3 Justices also stated that there are good reasons to preclude adverse impact claims in the ADEA • After Hazen, most circuit courts rule that adverse impact is unavailable in ADEA as a matter of law, but some courts rule otherwise

24. Brief Facts in Smith v. City of Jackson • Police officers and dispatchers with less than 5 years experience get higher percentage increases • Those over 40 sue on grounds of adverse impact via ADEA (significant difference of 4 SDs in average age of 2 groups) • Lower courts ruled adverse impact is unavailable in ADEA as a matter of law • Supreme Court takes case to settle split among circuit courts

25. Supreme Court Ruling in Smith • Adverse impact is available in the ADEA (sort of) • Plaintiffs did not form a prima facie case. They failed to identify “any specific test, requirement, or practice within the pay plan that has an adverse impact on older workers” • [the Smith plaintiffs failed to identify any specific test, requirement, or practice within the pay plan that had an adverse impact on older workers] 
 • RFOA identified. Raising salaries for lower level employees to compete with those in surrounding areas is a RFOA (goal was to retain police officers). Scalia wanted to use Title Vii (business necessity)! while Stevens used Wards Cove to justify RFOA defense! Why? RFOA is a mandated statutory defense. • CRA ‘91 rejected Wards Cove for Title VII -- NOT the ADEA. • Using Wards Cove confused things – implied production burden in Strep 2 • Adverse impact follows same prima facie (Phase 1) rules in Title VII and ADEA --- Statistical evidence of an identified employment practice that disproportionately excludes protected group members • Unlike Title VII, which demands proof of job-relatedness & consistency with business necessity (in Phase 2) forcing the plaintiff to prove an equally valid practice with less or no adverse impact (in Phase 3) the ADEA permits the RFOA defense in Phase 2 forcing plaintiffs to prove that factors advanced are not reasonable or pretext (Phase 3)

26. Meacham v. KAPL (2004)[BeforeSupreme Court ruling in Smith] • KAPL instituted an RIF for employees with 20 or more years of experience • Over 98% of RIF victims are 40 or older (30/31 laid off) • KAPL articulates non-discriminatory reason(s) for its decisions (criticality of skills and flexibility for retraining) • Step 2 under Wards Cove • Plaintiffs proved there are alternatives with less adverse impact, including (a) hiring freeze and (b) extension of a voluntary separation plan to employees with less than 20 years of service • Plaintiffs Win • But --------->

27. Meacham v. KAPL (2006)AfterSupreme Court ruling in Smith [SC agreed to Meacham case but sent it back to 2nd Circuit after its Smith decision) • 2 Circuit judges agree that KAPL’s articulation was sufficient to satisfy an RFOA ( • Plaintiffs required to prove the articulation was unreasonable -- which they could not do • >>> Plaintiffs lose 2-1 • 3rd judge writes long dissent (e.g., RFOA is an affirmative defense and thus requires persuasion/proof)

28. Supreme Court Ruling inMeacham v. KAPL • Supreme Court unanimously agrees with the dissenting judge, listing numerous reasons why statutory defenses such as RFOA are affirmative defenses • The ADEA’s text and structure indicate that the RFOA exemption creates an affirmative defense, for which the burden of persuasion falls on the employer. The RFOA exemption is listed alongside one for bona fide occupational qualifications (BFOQ), which the Court has recognized to be an affirmative defense ..... this Court has spoken of both the BFOQ and RFOA as being among the ADEA’s “five affirmative defenses.” • Court rules 7–1 for Meacham that the employer must meet the burden of persuasion (i.e., provetheir RFOA, not simply articulate it)

29. ~ Moral of Smith and Meacham ~ • Very hard for plaintiffs to win with factors that are correlated with age (as in Smith) • However, actual decisions that negatively affect actual employees (as in a RIF) are problematic for employers (e.g., Meacham) • Recommendation: In a RIF, avoid criteriasuch as “flexibility” and “criticality” unless you can affirmatively prove they are reasonable

31. The BFBP Defense • Originally legal to discriminate in benefits based on age if a plan was “not a subterfuge (a scheme) to evade the purposes of the ADEA” • The DOL and EEOC defined subterfuge as any differential treatment of older versus younger workers in benefits (unless the benefits were more costly for older workers) Not law --- struck down in subsequent cases (e.g., McMann, Betts)

32. The BFBP Defense • United Airlines v. McMann (1977) • McMann signed up for a retirement plan in 1964 and retired in 1973 at age 60 • ADEA enacted to protect older workers in 1967 McMann challenged the plan as a subterfuge/scheme to avoid ADEA • Any plan that predated ADEA could not be labeled as a subterfuge/scheme • Congress amended ADEA in 1978 and deemed any plan forcing retirement below the protected age limit (unlimited now) to be a subterfuge regardless of implementation date • The 1978 amendment did not codify EEOC regulations on actuarial costs

33. The BFBP Defense • Retirement System of Ohio v. Betts (1989) • Betts was over 60 and disabled • Forced to choose between unpaid medical leave and retirement benefits paying $158.50/month • If she was under 60 she would have received disability benefits paying $355/month • Based on McMann, the Supreme Court ruled the plan could not be proved to be a subterfuge/scheme because the Congress 1978 amendment was not applicable since it only applied to involuntary/forced retirement • So, plaintiff needed to show that Ohio used a scheme to intentionally discriminate against older people ---- Betts lost. Use of age and no evidence of increased costs for older employees

34. The BFBP Defense • Congress reversed Bettsin Title 1 of the OWBPA by: • - Eliminating the term subterfuge/scheme as it pertains to benefits in ADEA language • BFBP can only be used when: • Benefits are more costly for older workers (codified EEOC regulations) • Plan is part of a legitimate voluntary early retirement package that is consistent with ADEA

35. The BFBP Defense • Kentucky Retirement System v. EEOC (2008) • Workers under 55 who were disabled were given retirement benefits (years added to pension) that were not given to workers over 55 who became disabled • Defendant claimed retirement package was based on years of services, age, and eligibility for retirement (e.g., decision was not motivated by age) • Courts ruled that a plan based on factors correlated with age (using Hazen v. Biggens case) is exempt from OWBPA coverage • As a result, the burden is on the plaintiff to show pretext • >>> Minority (using Congress’ objection to Betts) thought defendants have the burden of proof to show increased costs basis for plan • >>> Odd decision and odd combo of judges; stay tuned for how this case will be interpreted by courts and Congress’ role

36. Older Worker Benefits Protection Act of 1990 (OWBPA) • Addresses four issues: • Bona Fide Benefits Plan (BFBP) statutory defense • Early retirement packages • Voluntary early retirement • Voluntary waivers of ADEA rights • Title I—addresses the Bona Fide Benefits Plan (BFBP) • Title II—addresses voluntary waivers of ADEA rights

37. Voluntary Early Retirement (Basics) • OWBPA makes early retirement packages legal as long as they are not coercive and inconsistent with the purposes of ADEA • Plans that do NOT have maximum ages are legal • It is legal for packages to be enhanced where older workers receive more benefits than younger workers even within the protected group • The legal packages are often based on a combination of years of service and starting age

38. Voluntary Waiver Rules Rule 1 It is clearly written and easily understood by the average individual Rule 2 It refers to rights or claims that fall under ADEA Rule 3 Does not include claims that may arise after the waiver is signed Rule 4 Benefits must offer something new; not something of value that the individual is already entitled to Rule 5 Employees are advised in writing of their right to seek counsel Rule 6 It provides 21 days for individuals (45 days for groups) to make a decision Rule 7 It is revocable within 7 days of signing Rule 8 For group offers, employees must receive extensive additional information about all employees ~ OWBPA ~

39. Some Compliance Issues • Do not include any age limitations or wording that deters older workers from applying in advertisements • Do not ask questions that elicit age-related information on applications (such as graduation dates) • Although cost cutting is a viable RFOA (as an affirmative defense), if it is used as a pretext then it is illegal: Carras v. MGS (2008) • Discourage age-based remarks, even those made in jest; avoid hostile, derogatory remarks • Be cognizant of age differences in replacements

40. Carras v. MGS (2008) • 62-year-old was terminated and a younger worker was hired • Cost-cutting factors were cited as the reason for termination • However, Carras had offered to take a pay cut in order to keep his job • The new hire was being paid more than Carras had offered to work for • Carras showed pretext and the courts ruled in his favor