If your organization is planning an extensive reorganization or creating an entirely new subsidiary, take care to consider the impact on older workers. If, in the process of leaving one company entity or subsidiary and going to another, older workers lose substantial benefits they used to enjoy, you may be courting an Age Discrimination in Employment Act (ADEA) lawsuit.
Recent case: Garold Allen and a group of Sears employees age 40 and older worked as HVAC sales associates. They worked on commission from home, receiving reimbursements for expenses and mileage. They got paid holidays, vacation and personal days based on their average commissions.
But then Sears acquired several other home-improvement companies and decided to combine them into an entirely new wholly owned subsidiary. Sears terminated the HVAC associates and the new entity hired them—at drastically lower compensation. Their commissions were restructured so they earned less and their business expenses were no longer reimbursed. Plus, employees lost accumulated paid time off.
The older workers sued, arguing the new compensation plan had a disparate impact on them, compared to younger employees—hitting them harder, for example, because they had the most time accumulated. Sears argued it couldn’t be liable because the sales associates couldn’t point to a specific policy that caused the disparate impact.
The court disagreed. It concluded that the reorganization itself might be considered the suspect policy and ordered a trial. The sales associates will now try to prove that the reorganization created the disparate impact. (Allen v. Sears, No. 07-11706, ED MI, 2007)
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