When designing compensation plans, employers should take into consideration whether the pay schedules have a negative impact on older workers. Several pay discrimination cases have reached the Supreme Court in recent years.
The first case was General Dynamics v. Cline, 540 U.S. 581 (2004). At issue was whether an agreement that gave greater health benefits to workers over age 50 than to those between 40 and 50 violated the ADEA. The Supreme Court concluded it did not and ruled that favoring the oldest among the old was not illegal age discrimination.
In 2005, the Supreme Court ruled that the city of Jackson, Miss., didn’t violate the ADEA when it instituted a new pay plan that gave slightly smaller pay increases to police officers with more experience, almost all of whom were over 40. However, the court did state that workers can sue employers when they can identify “any specific test, requirement, or practice … that has an adverse impact on older workers.” In the court’s view, the officers suing in this case failed to meet that standard. Smith v. City of Jackson, 125 S. Ct. 1536 (2005)
The Supreme Court’s subsequent decision in Meacham v. Knolls, No. 128-2395 (2008), made it easier for employees to bring disparate impact suits under the ADEA:
In 1996, Knolls Atomic Power Lab conducted an involuntary reduction in force. The laboratory asked supervisors to rank employees from 0 to 10 on three factors—performance, flexibility and the criticality of their skills—and then add up to 10 points for years of service. Based on the resulting scores, Knolls laid off 31 workers. All but one of the workers was over age 40. The workers sued, claiming that the subjective scoring criteria discriminated against older workers. A circuit court found for Knolls, ruling that the workers had failed to show that the scoring system was unreasonable. The Supreme Court overturned that decision, finding that it was up to Knolls to prove that its criteria were reasonable.
Bottom line: Employers should always be sensitive to how changes affect older workers and never make employment decisions based on age.
The EEOC has been actively pursuing age discrimination cases. In October 2007, the agency announced it had reached a $27.5 million settlement with Chicago-based law firm Sidley Austin LLP for a group of 32 lawyers who either retired under the firm’s age-based retirement policy or were expelled during a 1999 restructuring.