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BY MINDY CHAPMAN, Esq.

Does your organization have a policy requiring employees to retire (or step down to a lesser position) once they hit a certain “unbecoming” age? If so, a groundbreaking $27.5 million EEOC settlement shows that you’d better retire those policies … not the people.

Here’s why: The federal Age Discrimination in Employment Act (ADEA) prohibits employers from requiring their employees (over age 40) to retire when they reach a particular age.

In the past, some organizations skirted the law by drafting agreements that classified certain employees as “partners” under state partnership law. As so designated, they’d be one of the firm’s “employers” and, thus, excluded from the ADEA. But that old trick no longer works.

Case in Point: A few years back, the Sidley Austin law firm initiated a restructuring plan. In a bid to enhance leadership opportunities for younger partners, the firm required partners over age 40 to either quit or take demotions.

Three dozen affected partners complained to the EEOC, which sued on their behalf. After Sidley Austin lost in lower courts, the firm agreed to settle by dishing out a total $27.5 million to the partners. (EEOC v. Sidley Austin LLP, N.D. Ill., No. 05 C 0208)

“This settlement ought to send a signal that if you are thinking about discrimination on the basis of age … you had better think three times before you do it,” said John Hendrickson, the EEOC regional attorney in Chicago. He noted that the ruling shows a dramatic shift in the legal understandings of the boundaries of “partnership.”

3 Lessons Learned

1. Identify any old policies that require employment decisions be based on age. Some company policies need to be dusted off and read closely. Mandatory retirement policies are not uncommon. If you have one in place, “deep six” it immediately.

2. Succession planning is about skills, not age. Succession plans should identify gaps in knowledge and then provide your work force with the opportunities to gain experience in those areas. Firing, demoting or laying off older workers should never be a part of your succession plan.

3. Never retaliate … ever. Make sure managers know it’s illegal to discipline, demote or fire employees because they exercised their rights under the ADEA or any other federal or state anti-discrimination laws.

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Mindy Chapman is an attorney and president of Mindy Chapman & Associates LLC. She is a master trainer, keynote speaker and co-author of the ABA book, Case Dismissed! Taking Your Harassment Prevention Training to Trial.

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