Employment Law

Was CEO’s ‘New Face’ Comment a Mask for Age Discrimination?

“Peter,” a senior information technology (IT) director of a retail order fulfillment company, was terminated when his position was eliminated in an IT department restructuring. Was the CEO’s statement that the company wanted a “new face” enough for Peter to establish direct evidence of age discrimination?

age discrimination

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Corporate Change Results in IT Management Review

Skybridge Americas, Inc., is a Minnesota business that provides retail order and fulfillment services. It has two divisions: (1) a warehouse and distribution branch that fulfills orders and (2) a call center. After Skybridge purchased the company that employed Peter in 2011, it hired him as an at-will employee to be senior director of IT. He was 61 at the time.

In November 2011, one of the company’s new hires, “David,” 57, became the CEO of Skybridge. In a September 2012 report, David summarized his views that the fulfillment division’s performance needed improvement and that IT management was not at an optimum level.

He raised concerns about Peter’s performance, identified numerous discussions about improving Peter’s communication and leadership skills, and stated he lacked confidence in the IT department’s ability to get things done. David stated that the company should explore other options for managing the IT department.

Around the same time, Peter became frustrated with Skybridge and its executive team, claiming the IT department was underfunded and understaffed. He informed David that if the issues continued, he would begin searching for a new job. The two men discussed the need for a centralized IT department headed by a chief IT officer. David explained the situation to another executive, “Steve,” who commented that it would be unfortunate if Peter left the company while it was still evaluating the IT department.

In March 2013, the company hired “Jimmy,” an external consultant, to perform an audit of its operations. Jimmy met with Peter to gather his ideas on improving the IT department’s functions. Jimmy recommended that the IT department be placed under one chief technology officer (CTO) and considered Peter the best internal candidate for the proposed position because he was a “strategic thinker.” Interestingly, the company asked Jimmy if he was interested in the new CTO position. He declined.

CEO ‘Lays It on Thick’

David met with Peter to inquire whether he was interested in applying for the CTO position since Jimmy considered him the sole current employee capable of performing the job. Peter indicated his interest. David replied, “Good. I would be disappointed if you weren’t” and “You’ve got the inside track. Steve really likes you.” Peter described the comments as “laying it on thick.” Importantly, however, David stated that Peter was not guaranteed to get the position.

Because of what he considered to be a positive meeting with David, Peter ceased searching for a job outside of Skybridge. David said “good” when he found out that Peter had stopped his job search.

In April 2013, Peter was formally interviewed by David and another executive. They spent several hours interviewing Peter but did not say he had the job, did not discuss a salary or start date for the new CTO position, and stated he would have another interview with Steve.

Company Wants a ‘New Face’

In May 2013, Jimmy introduced “Tom,” 50, to Skybridge as a candidate for the CTO position. Tom was a former top-level IT manager who had served as chief information officer (CIO) consultant and director of operations for a private accounting and wealth management firm.

He interviewed with David, Steve, and another executive. He had experience in running both fulfillment operations and call centers, and that combination of experience was discussed specifically during his interview. Ultimately, the company chose Tom as its new CTO and extended an offer to him in June 2013. He accepted.

David met with Peter in his office and explained that he did not get the job and that the company made an offer to Tom. David explained that Steve made the decision because he wanted a “new face.” Peter believed the comment was related to his age, especially since David repeated the phrase four times during the conversation. However, Peter did not quit his job.

A month later, David informed Peter that his position had been eliminated because the IT department was being reorganized. Peter was 63 at the time. Two other employees were also terminated at the time because their positions were eliminated. Both employees were over 60.

Peter Sues for Age Discrimination

Peter filed a charge of age discrimination and received a right-to-sue letter. He then filed a lawsuit in federal court alleging age discrimination in violation of state and federal law. Skybridge filed a motion for summary judgment (dismissal without a trial), and the district court granted the motion.

Peter appealed to the U.S. 8th Circuit Court of Appeals—which covers Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota. (Note that Minnesota law recognizes age as a protected characteristic, as does federal law under the Age Discrimination in Employment Act (ADEA), which prohibits employers with 20 or more employees from discriminating against individuals age 40 and over. However, South Dakota law does not recognize age as a protected characteristic.)

In his appeal, Peter alleged that there were two adverse employment actions: (1) Tom’s hiring and (2) his termination. To establish an age discrimination claim, Peter had to show direct evidence of discrimination or prove his claim through indirect (circumstantial) evidence.

Direct evidence is used to show a specific link between the allegedly discriminatory statement or action and the challenged decision that would be sufficient for a fact finder to conclude that an illegitimate criterion actually motivated the adverse employment action. An example would be an employer saying, “You are old, so we need to terminate your employment to make room for younger employees.”

On the other hand, “stray remarks” by non-decision makers or decision makers’ statements that are unrelated to the decision-making process and are facially and contextually neutral do not rise to the level of direct evidence.

Court Finds ‘New Face’ Comment Facially Neutral

While Peter argued that David’s “new face” comment constituted direct evidence of age discrimination, the court disagreed, finding the comment was facially and contextually neutral. The court said the comment was akin to a “stray remark.”

When there is not direct evidence of age discrimination, the analysis follows a burden-shifting framework. The employee first must establish a prima facie (minimally sufficient) claim of age discrimination. To do that, he must show:

  1. He was at least 40 at the time of the adverse employment action.
  2. He was qualified for the position.
  3. He suffered an adverse employment action.
  4. He was rejected in favor of someone who was sufficiently younger, permitting the inference of age discrimination.

The court found that Peter met the first three elements, but questioned whether the 13-year age difference between Peter and Tom was enough to infer age discrimination. However, the court assumed, without deciding, that Peter established a prima facie case.

Lack of Experience Was Reason for Decision

In the next step of the analysis, the burden shifted to Skybridge to articulate a legitimate nondiscriminatory reason for selecting Tom for the CTO position instead of Peter and for ultimately terminating Peter.

The court noted that Tom had both fulfillment and call center experience and that Peter had only fulfillment experience. Moreover, the decision to terminate Peter was based on Jimmy’s external audit of the IT department. He recommended consolidating Skybridge’s IT departments, making Peter’s position redundant.

No Pretext

During the final step of the analysis, the burden shifted back to Peter to show that his former employer’s reasons for the adverse employment actions were in fact pretexts (excuses) for age discrimination. He could do that by demonstrating that Skybridge’s explanation was not worth believing because it had no basis in fact. Also, he could show that a prohibited reason likely motivated the employer’s actions.

The court noted that substantial changes in the employer’s offered reason for the termination over time can support a finding of pretext. However, the court went on to point out that there were not substantial changes in the reasons given for Peter’s termination and that the reasons submitted by Skybridge remained constant.

Therefore, no pretext could be inferred. Also, the court pointed to the frequently cited statement that courts “do not sit as super personnel departments reviewing the wisdom and fairness of employment decisions and business judgments made by employers, except to the extent [they involve] discrimination.”

In addition, the court was not persuaded that Peter could show that his age likely motivated his former employer’s decisions. He alleged that the interview process was predetermined. However, the court found that it was not because the company did not know about Tom until after David approached Peter about his interest in the CTO position.

Finally, Peter argued that there were conflicting positions about his work performance that created evidence of pretext. He pointed to David’s critical remarks in his September 2012 report and the positive comments encouraging him to stay at the company and apply for the CTO position.

The court noted that while poor performance may constitute pretext when compared with previous positive performance reviews, that was not the case here because Skybridge did not offer Peter’s poor performance as a reason for hiring Tom. Therefore, it could not show pretext.

In the end, the court found that Peter could not meet his burden of showing direct or indirect evidence of age discrimination. The court affirmed the dismissal of his case.

Bottom Line

Always be careful in how you communicate employment decisions, especially when they involve hiring, terms and conditions of employment, or termination. However, you should be relieved to know that not every comment will rise to the level of direct evidence of discrimination. Comments such as “fresh face” or “new face” likely will be seen as stray remarks, not evidence of age discrimination.

However, this case is a reminder that when making employment decisions such as reductions in force, you must document the reason with a detailed business explanation. That will support your legitimate business reason for the decision and make an age discrimination claim much harder to prove. Finally, it is always a good idea to train managers to avoid the use of inflammatory words or phrases that could be taken out of context. As the “old” saying goes, the best defense is a good offense!

Jennifer S. Frank is an editor of South Dakota Employment Law Letter and an attorney with Lynn, Jackson, Shultz & Lebrun, P.C. She can be reached at jfrank@lynnjackson.com.