HOWE, ANDERSON & STEYER, P.C.

The Equal Employment Opportunity Commission (EEOC) has been focusing its attention in recent months on corporate reorganizations and downsizing that violate age discrimination laws.  The EEOC's efforts have resulted in a number of multimillion dollar settlements against employers.  Individual age discrimination cases also are on the rise.  Employers contemplating reorganizations or reductions in force should plan carefully to protect against possible age discrimination claims.

The Age Discrimination in Employment Act (ADAE) prohibits discrimination against persons aged 40 and over.  The ADEA applies to employers of 20 or more employees.  Employers that violate the ADEA may be liable for back pay, attorneys' fees and, in cases of "willful" violations, liquidated damages effectively doubling back pay awards.  There are also various state laws barring age discrimination that may be applicable to employers with fewer than 20 employees.

Consolidate overlapping departments, eliminate unneeded positions and other reasons that promote economy and efficiency. Before undertaking a reorganization, employers should plan carefully to ensure that decisions about who stays and who goes are not made on the basis of age. The age of employees should not be a factor in planning a reorganization. Avoid making any statements that could be misinterpreted to suggest that the age of any employee played a role in the decision making.

The following are additional steps that the employer can take to protect against age discrimination claims resulting from a reorganization or corporate downsizing.

♦  Define the objectives. The first step in any planned reorganization is to define and articulate the business reasons for the change and the desired outcome. This step is critical to achieving a successful outcome and will provide the foundation for a legal defense should an employer's actions later be challenged.

♦  Select the decision makers. Decisions relating to the reorganization and its implementation should not be the sole responsibility of one individual. The CEO should select a team of senior management to plan and carry out the reorganization. The management team should work closely with outside advisers such as accountants and legal counsel.

♦  Prepare job descriptions. Each position should have a job description. The job description should include a summary of the required/desired qualifications, the duties and responsibilities, and the goals or objectives of the position. Properly drafted job descriptions help in the selection of the right person for the position and provide support in the event of a legal challenge. Employers also should consider whether each position will be treated as exempt or nonexempt from federal wage and hour (overtime) laws, and the position description should be drafted to satisfy the applicable legal requirements. Individuals employed in bona fide executive, administrative and professional positions may be exempt from overtime requirements.

♦  Decide on a strategy. There are a variety of ways to make personnel changes in a reorganization. The following four options are not necessarily mutually exclusive:

●  Eliminating jobs. Jobs may be eliminated or consolidated for reasons of economy and efficiency, thus making layoffs necessary. This may be particularly appropriate if technology or changing times have made the job(s) unnecessary. A "riffed" employee would not have a right to other employment with the employer (such as by displacing a "junior" employee) unless the employer promised such a right.

●  Restructuring jobs. It is legally permissible to change the duties and responsibilities of a given job and to reduce the salary level, provided the actions are taken for legitimate, nondiscriminatory reasons. For example, an employer may assign some of the functions of a particular job to another employee or redefine the job and the salary level to meet the employer's needs. Employees displaced from jobs should be allowed to apply for newly created or restructured jobs, if they are qualified, without a guarantee that they will be selected.

●  Performance. An employer may use employee job performance as a factor in determining which employees to retain or terminate in a reduction in force. Employers should have in place a procedure for regularly evaluating employees and documenting problems or shortcomings that may lead to warnings and/or termination. Absent such documentation, an employer may be vulnerable to a claim that performance-based decisions are merely a pretext for discrimination.

●  Voluntary retirement. With few exceptions, an employer cannot require its employees to retire at a given age. An employer may, however, offer incentives to qualified employees who voluntarily retire. Employees may qualify for early retirement based on a combination of factors selected by the employer, such as length of service, salary level and minimum (but not maximum) age.

♦ Compensate terminated employees. Employees who are discharged or who resign are entitled to receive their earned wages upon discharge or shortly thereafter. There is no statutory requirement for severance pay, although an employee may be entitled to severance pay if the employer has clearly established policy of paying severance in certain circumstances. An employer may wish to consider additional exit incentives such as severance pay to induce employees to voluntarily resign and sign a release (see discussion below).

♦ Obtain releases. To protect against employment-related claims, an employer should consider obtaining releases from each employee terminated as a result of the reorganization. Such releases must be carefully drafted to meet legal requirements under the ADEA. Releases that fail to comply with ADEA requirements may be unenforceable. Releases also must be supported by consideration. "Consideration" means something of value above and beyond what the employee would ordinarily be entitled to under law, contract or guaranteed under company policy. Some examples of consideration include: severance pay, continued paid health insurance and out-placement assistance.