A California Court of Appeal has upheld a multimillion-dollar age bias verdict for a manager who claimed his employer had a long-standing policy of not promoting workers over age 40. We’ll explain what happened.
Employee Passed Over
Nestle SA acquired the Carnation Company, forming Nestle USA. Richard Herr began working for Carnation in Los Angeles as an auditor and was soon promoted to manager, just as the transition to Nestle USA was under way. Over the next few years, despite exemplary performance reviews, he was repeatedly turned down for promotion in favor of employees in their 30s with much less experience and sometimes poor work records.
Despite repeated inquiries, Herr was never told why he was passed over. Mike Mayhall, who had hired Herr at Carnation, allegedly told Herr that he wasn’t someone in his “early 30s that could be promoted” and that Herr’s “responsibility was going to be to train the young managers of Nestle.” Mayhall also allegedly reported that a vice president, Jack Mulhern, had stated that Herr “was getting a little bit long in the tooth.”
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Employee Alleges Illegal Policy
Eventually, after being transferred to a position slated for elimination, Herr resigned and sued for age discrimination. He charged that Nestle had a policy of promoting only younger employees. Herr presented evidence that at a management meeting held at the time Nestle USA was formed, executive vice president Robert Mason presented Nestle’s impression of its Carnation employees, saying they were older workers with an average age of 43. He also said it was Nestle’s “policy to promote young, energetic people in management positions,” that Carnation had a lot of “deadwood,” and that staff should “see about getting rid of the deadwood.”
Herr also pointed to an “objectives” memo from Nestle’s chief executive officer Helmut Maucher stating that Nestle should “[c]ontinue hiring, identifying and developing young people to have in the long-term enough resources for future management.” Also, vice president Mulhern promoted five people all ranging in age from 28 to 35, to manager or higher over four years.
Big Verdict
A Los Angeles jury awarded Herr $5,163,000 in damages, and the court tacked on $1.7 million in attorney’s fees. The court also ruled that by discriminating based on age, Nestle engaged in unfair competition under the California Unfair Competition Law. It ordered the company to distribute to all employees a copy of the final judgment and a repudiation of Helmut Maucher’s earlier objectives memorandum.
Age Bias Can Be Unfair Competition
A California Court of Appeal upheld the judgment. The court rejected Nestle’s contention that the unfair competition law couldn’t be used to block a business practice on the basis it discriminated against older workers. The court explained that age discrimination can amount to unfair competition. That’s because older workers are usually paid more than their younger colleagues. Thus, an employer that practices age discrimination may gain a competitive edge over employers who comply with the antibias laws because it can pay lower wages.
This means that employers could face multiple claims from workers for allegedly discriminatory acts and an employee could use a long existing business practice to win an unfair competition claim even if they can’t meet the requirements to prove discrimination.
Avoiding Claims
Here are some lessons learned from this case:
- Watch comments. Enforce a zero-tolerance policy for comments that refer to age or suggest age bias. Make sure such remarks don’t crop up in conversation or in memoranda.
- Document reasons for selection. Be sure you can support legitimate reasons for choosing one candidate over another, whether for hire, promotion, or transfer. This is crucial when evaluating highly experienced candidates.
- Pay attention to patterns. While a single instance of promoting a younger worker over an older one may not be a red flag for a corporate philosophy endorsing age bias, a series of similar employment actions—especially if the same decisionmakers are involved—would.
- Post openings. A scrupulously followed posting policy helps ensure that anyone interested in a position can apply for it. Otherwise, you open the door for managers to hand-select candidates who fit a certain image or preconceived idea of what’s required for the job, regardless of actual qualifications.