Benefits and Compensation

Can You Terminate Those with the Highest Salaries?

While salary level may be a legitimate factor in determining which employees to lay off, it cannot be the determining factor if it adversely affects older workers, says Tinnin, who is a partner with Tinnin Law Firm in Albuquerque, New Mexico, and editor of New Mexico Employment Law Letter.

In 2005, he adds, the U.S. Supreme Court ruled that age discrimination claims based on a facially neutral policy or practice that has a disparate impact on older workers may serve as the basis for age discrimination claims. However, you can avoid liability if you can show that the policy or practice leading to the disparate impact is based on reasonable factors other than age.

Thus, Tinnin says, while it is theoretically possible to escape liability by showing that factors other than salary level played into the decision, relying too heavily on salary may ultimately lead to liability for age discrimination because higher salary correlates to years of service, which in turn correlates to age.

As an alternative, Tinnin suggests, you may wish to look at structuring a lawful early retirement or exit incentive program with the assistance of an experienced employee benefits attorney. But whatever you do, be careful. The strategy you choose can be the difference in a win-win situation or ill feelings, bad publicity, and legal liability.

Routine HR actions can give the appearance of age discrimination, says Tinnin and with Baby Boomers nearing retirement, it’s a looming issue.

We’re all aghast, says Attorney Joan Farrell, BLR® Senior Legal Editor, when we read about direct evidence of discrimination, like the manager who allegedly said he fired an employee because she was “old and ugly.” But most age discrimination claims are based on circumstantial rather than direct evidence. Take, for example, the age discrimination case the Equal Employment Opportunity Commission (EEOC) recently settled with AT&T for $250,000.

AT&T’s $250,000 Assumption

According to the EEOC, AT&T violated the federal Age Discrimination in Employment Act (ADEA) when it fired a 53-year old manager while it treated younger, lower-performing managers more favorably by retaining them or allowing them to transfer.

More favorable treatment of younger, similarly situated employees can be circumstantial evidence of age discrimination. Other examples of circumstantial evidence include comments by an employee’s supervisor or other decision maker that may reflect age bias.

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For example, comments by supervisors about an employee’s retirement plans can often create problems for employers. In a recent age discrimination case, an employee claimed he was denied a promotion because his supervisor said he “was ready to retire” and she wanted to fill the position “on a consistent basis for years to come.” Israel v. Geithner, 1:12-CV-346 ENV SMG, (E.D.N.Y. Aug. 6, 2013).

Although the employee was eligible to retire based on his age and years of service, he claims he had no intention of retiring and that his supervisor’s comment was evidence of age bias. The court denied the employer’s motion to dismiss, so the supervisor’s comment may turn out to be a costly one for the employer.

In another recent case, an older worker who was fired for yelling and swearing at his supervisor presented evidence that the employer’s decision to terminate his employment was not typical of the company’s policy or practice. The evidence indicated that heated arguments were relatively common in the factory and that no other employees had been fired for yelling and swearing. Ridout v. JBS USA, LLC, 716 F.3d 1079 (8th Cir. 2013).

In addition, because younger employees received more lenient treatment for violations of comparable seriousness, the court ruled there was sufficient evidence of age discrimination to allow the case to proceed to a jury trial.

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In tomorrow’s Advisor, the delicate business of asking older employees about retirement, plus an introduction to the practical guide to avoiding—or solving—wage and hour hassles.

1 thought on “Can You Terminate Those with the Highest Salaries?”

  1. But to be clear, you can certainly fire high paid workers for documented performance issues–even if it rarely seems to happen!

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