It’s a familiar scenario these days: An older worker gets terminated because of the employer’s economic woes—and then turns around and sues the company for age discrimination. We’ll tell you the story of how one employer beat the charges.
Business Suffering
Charles Pottenger, 60, worked his way up over 32 years to vice president of the pulp and paper division for forest products company Potlatch Corp.
Between 1997 and 2000, the division Pottenger headed lost more than $200 million. In 1999, Potlatch president Richard Paulson decided major changes were necessary to improve the division’s economic performance. During a meeting with Pottenger and his team, Paulson referred to the pulp and paper division as an “old management team” using an “old business model.”
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Older Worker Loses Job
In early 2000, Pottenger’s annual performance review rated him as average at meeting job requirements. A few months later at a division cost-cutting strategies meeting, the Potlatch management committee, which included Pottenger, decided to eliminate “dead wood” by cutting some salaried positions.
The management committee met again the following month to discuss the reduction-in-force plan. That same day, Paulson and the company CEO met separately for about 15 minutes and decided to fire Pottenger.
Paulson told Pottenger he was being terminated because Paulson lacked confidence that Pottenger was committed to making the hard decisions necessary for Potlatch to succeed. Pottenger was replaced by Craig Nelson, 43, formerly the company’s consumer products vice president.
No Evidence of Bias
Pottenger sued Potlatch for age discrimination. But the federal Ninth Circuit Court of Appeal, which covers California, dismissed the case. According to the court, Potlatch offered a legitimate, nondiscriminatory reason for terminating Pottenger: it lacked confidence that he had the skills to turn around the ailing division. This reason was supported by the undisputed fact that the division had lost more than $200 million in the previous three years.
The court rejected Pottenger’s arguments the company had undermined its legitimate explanation for terminating him in a number of ways:
- Positive comments in the performance review. Although the review contained some positive observations about Pottenger, it also spelled out concerns with his performance in managing the division.
- Shifting justifications for the discharge. The company’s explanation for the firing was consistent with statements in the performance review.
- Age-based remarks. The court said phrases and terms Pottenger pointed to—”old management team,” “old business model,” and “dead wood”—aren’t generally associated with one’s age.
- Replaced by younger employee. Without more evidence of bias, Pottenger’s replacement by a younger employee didn’t suggest an illegal motive.
Business Discretion Upheld
Finally, the court observed that employers have leeway to make business decisions, even bad ones. And although it may have been unfair to blame Pottenger for the company’s losses, it’s not surprising that a company would change leadership in such a consistently troubled division.
Sensible Measures
This case’s outcome demonstrates you can legally make key business decisions even if they affect older workers’ employment. But you need to use caution to avoid age bias charges. As Potlatch did, be sure evaluations accurately reflect the good and bad aspects of an employee’s performance and that your reasons for discharge are consistent with prior reviews. And if an older worker is to be replaced by someone younger, make sure your legitimate reasons for making the change are fully documented and supportable.