The Age Discrimination in Employment Act of 1967 (ADEA) protects individuals who are 40 years of age or older from employment discrimination based on age. The ADEA’s protections apply to both employees and job applicants. Under the ADEA, it is unlawful to discriminate against a person because of his/her age with respect to any term, condition, or privilege of employment, including hiring, firing, promotion, layoff, compensation, benefits, job assignments, and training. The ADEA permits employers to favor older workers based on age even when doing so adversely affects a younger worker who is 40 or older.
It is an unlawful employment practice for a covered employer "...to fail or refuse to hire or to discharge any individual or otherwise to discriminate against any individual with respect to his compensation, terms, conditions or privileges of employment, because of such individual's age." 29 U.S.C.
If your employer decides to terminate your job, you may be given a severance agreement that requires you to waive your right to sue for wrongful termination based on age, race, sex, disability, and other types of discrimination. Although most signed waivers are enforceable if they meet certain contract principles and statutory requirements, an employer cannot lawfully limit your right to testify, assist, or participate in an investigation, hearing, or proceeding conducted by the EEOC or prevent you from filing a charge of discrimination with the agency. An employer also cannot lawfully require you to return the money or benefits it gave you in exchange for waving your rights if you do file a charge. While this document is not intended to cover all of the issues that arise when your employer informs you that you are being terminated or laid off, the following checklist may help you decide whether or not to sign a waiver.
Example 12: A company eliminated almost all of its direct sales positions and offered terminated employees six months of severance benefits in exchange for signing a waiver. In response to the employees’ suit alleging age discrimination, the company indicated that it was suspending any further severance payments and was discontinuing other benefits provided under the waiver agreement. A court held that the company could not cut off severance payments or demand repayment of benefits because the employees filed suit challenging the validity of the waiver.
Example 8: An employee who was told that his termination resulted from “reorganization” signed a waiver in exchange for severance pay. After a younger person was hired to do his former job, he filed a lawsuit alleging age discrimination. The company then changed its position and claimed that the real reason for the employee’s discharge was his poor performance. The employee argued that his waiver was invalid due to fraud and that if he had known that he was being terminated because of alleged poor performance, he would have suspected age discrimination and would not have signed the waiver. The court held that fraud was a sufficient reason for finding the waiver invalid.
In conclusion, the author notes "the coming decades will witness sizeable increases in the share of the population aged 65 and over, an age range in which many workers leave their long-term career jobs and move into part-time or short-term jobs. As a consequence, potential problems stemming from age discrimination in hiring may become more important than they have been in past decades. The evidence on both the enforcement and effectiveness of the ADEA is troublesome in this regard, because it suggests the ADEA may be relatively ineffective with regard to hiring of older workers. There may be limitations on how effectively the regulatory and legal system addresses discrimination in hiring, and it would be useful to consider whether this effectiveness can be increased."
An interesting critique of the ADEA comes from the literature on optimal employment contracts. A seminal paper argues that because of the difficulty of monitoring workers' effort, firms use pay schemes to create incentives to work hard. According to the theory, workers and firms enter into implicit long-term contracts that pay workers less than what their output is worth to the firm when they are young and more than what it is worth when they are old. Firms use mandatory retirement to prevent workers from working past the point when they have been fully paid for their work. By ending mandatory retirement, the ADEA may have made it more difficult for workers and firms to enter into such contracts and thereby harmed both parties, even if age discrimination laws boost the employment of older workers. However, as the author notes, in the absence of the ADEA, firms could more easily terminate employment before workers had received the full value of their services,and thus the ADEA may have actually strengthened such contracts. The author finds that earning profiles were steeper for cohorts entering the labor force after the passage of the ADEA, which supports the latter view.
Employee reductions and terminations have been an unfortunate result of the current economic downturn. Even in good economic times, however, businesses of every size carefully assess their operational structures and may sometimes decide to reduce their workforce. Often, employers terminate older employees who are eligible for retirement, or nearly so, because they generally have been with the company the longest and are paid the highest salaries. Other employers evaluate individual employees on criteria such as performance or experience, or decide to lay off all employees in a particular position, division, or department. An employer’s decision to terminate or lay off certain employees, while retaining others, may lead discharged workers to believe that they were discriminated against based on their age, race, sex, national origin, religion, or disability.
Are age discrimination laws helpful in combating this phenomenon? One useful way to explore this is to compare the employment rates of older workers in states that did and did not enact age discrimination laws paralleling the ADEA, in the period before the ADEA was enacted. Studies using this approach by the author and others have found that these laws increased the employment rate of workers age 60 and above quite substantially. These studies do not identify the mechanism for higher employment rates, which could include a reduction in terminations of older workers or an increase in their hiring. Paradoxically, however, the ADEA could in fact deter the hiring of older workers by making it harder to terminate them. The author carefully considers the small literature on this question and concludes that it does not support this theory, though he notes that the logic of the argument and hence the hypothesis may still be correct.
To minimize the risk of potential litigation, many employers offer departing employees money or benefits in exchange for a release (or “waiver”) of liability for all claims connected with the employment relationship, including discrimination claims under the civil rights laws enforced by the Equal Employment Opportunity Commission (EEOC) -- the Age Discrimination in Employment Act (ADEA), Title VII, the Americans with Disabilities Act (ADA), and the Equal Pay Act (EPA). While it is common for senior-level executives to negotiate severance provisions when initially hired, other employees typically are offered severance agreements and asked to sign a waiver at the time of termination. When presented with a severance agreement, many employees wonder: Is this legal? Should I sign it?
To determine whether an employee knowingly and voluntarily waived his discrimination claims, some courts rely on traditional contract principles and focus primarily on whether the language in the waiver is clear. Most courts, however, look beyond the contract language and consider all relevant factors – or the totality of the circumstances -- to determine whether the employee knowingly and voluntarily waived the right to sue. These courts consider the following circumstances and conditions under which the waiver was signed: