To calm the waters during layoffs, some organizations give severance to departing employees, even though they are not legally obligated to do so. But mistakes when creating severance offers can lead to Age Discrimination In Employment Act (ADEA) claims.
Severance Offer Equals Constructive Discharge?
A company launched a reduction-in-force (RIF) that involved both voluntary and involuntary. It would give a more generous severance package to employees who voluntarily took early retirement than to those it would be forced to terminate.
The company used a performance-based rating system to determine which employees would be part of the RIF. The rating system put a 52-year-old employee among the lowest ranked. His supervisor informed him that he could possibly lose his job if he didn't take the early retirement package. No one, however, pressured him into taking retirement or warned him that he would not get other employment with the company.
Eventually the employee accepted the early retirement package and signed a waiver on all claims except Age Discrimination in Employment Act claims. He later found out that openings became available because the voluntary retirement was so successful. The employee sued under the ADEA, alleging he was constructively discharged and the company committed discrimination by using age in the ranking process.
The possibility of termination, said a court, did not create intolerable working conditions necessary to prove constructive discharge. Court: The choice between taking maximum severance and potentially being unemployed, although a difficult choice to be made, "cannot be described as a take-it-or-leave-it situation."
As for the employee's age bias claims, he had no evidence that discrimination occurred in the RIF ranking. The court pointed to evidence that the company ranked a younger employee as low as it did him, and an older employee higher than him. If age had been a factor, one would not expect the oldest worker to rate so highly, the court said. (Rowell v. BellSouth Corp., 11th Cir., No. 04-10753, 2005)Layoff FYI: Retire or resign is a kind of "take it or leave it" situation, the court noted, that could more likely be interpreted as constructive discharge. However, the company offered severance even to those it planned to terminate. The employee's other option then was to decline the voluntary severance and face possible unemployment, but still receive severance if he was terminated. That situation lessened the "intolerable working conditions" necessary to show constructive discharge.