Issue: How to structure early-retirement offers in the most legally safe way.
Risk: Plans that force employees to take the deal or be fired may be viewed as illegal "constructive discharge."
Action: Draft plans that allow for possible job retention.
If you plan to lay off employees, structure early-retirement offers carefully to avoid age-discrimination lawsuits.
In particular, avoid making "take-it or leave-it" offers that force employees to choose between resigning with a severance package or being terminated. Courts may view take-it-or-leave-it plans as "constructive discharge," concluding that older employees have no alternative but to take the offer, since the only choice is discharge.
On the other hand, courts say early-retirement offers will be legal if structured properly. Plans that use relative rankings and allow for the possibility of job retention probably won't be challenged.
Case in point: Norman Rowell, a BellSouth lineman for 30 years, accepted an early-retirement offer as part of a reduction-in-force.
The deal offered a year's severance to anyone who accepted the offer. Rowell was ranked among the bottom two employees in his five-person group. All five were offered the same deal, but if fewer than two accepted the offer, those with the lowest performance ranking would be terminated and not earn the severance.
Rowell took the severance but still sued, alleging that the severance plan violated age-bias law. But the court upheld it because Rowell never had to choose between termination or resignation. It was still possible that two others in his group would take the money and run, allowing him to keep his job.
The court may have let his lawsuit go through if BellSouth had handed him a "no-choice" plan: Take the severance or be fired. (Rowell v. BellSouth, 04-10753, 11th Cir. 2005)
Final tip: Since designing early-retirement plans is tricky, use an expert to draft and/or review your plan.