Hanlon Niemann Blog | A Freehold, New Jersey Law Firm

Justices place burden of proof on employers

The Supreme Court enhanced the ability of older workers to bring job discrimination claims, in a decision that comes as the nation’s workforce is aging and many companies are downsizing and lying off workers.

By a 7-1 vote, the court ruled that when a company asserts layoffs of older workers that were based on factors other than the worker’s age, the company has the burden of proving those factors are valid.

The U.S. Equal Employment Opportunity (EEOC), which handles age complaints, reports that age claims have increased steadily over the past decade.  About 19,000 are filed annually.

Lawyers who represent employees cheered the decision, as business groups termed it a disappointment.  “Any other result would have made it virtually impossible for employees to successfully challenge (seemingly) neutral corporate policies… such as reductions-in-force… that some employers have used to target older workers”, said Fredrick P. Niemann, Esq., an elder law attorney in Freehold, NJ.

Employers can defend themselves by showing that the lopsided impact was based on “reasonable factors” other than age, such as performance criteria or needed skills.  The question was whether the employer bears the burden of proving that a policy was based on such non-age factors, or whether it is up to the worker to prove the factors were illegitimate.

Who wins or loses often hangs on who has the burden of proof.

Thursday’s dispute traced to the mid-1990s and the end of the Cold War.  Knolls Atomic Power Laboratory in Upstate New York, which had helped maintain nuclear-powered warships, was forced to scale back.  About 100 workers took a buyout offer, and 31 others were laid off.  Thirty of those laid off were at least 40 years old.  Clifford Meacham was among those who alleged that the layoffs were aimed at older employees.

Knolls had said they were based on objective factors such as performance, flexibility and critical skills.  Meacham won a jury verdict, but the U.S. Court of Appeals for the 2nd Circuit eventually ruled Meacham had not proven that Knolls’ justification was invalid.

In an opinion by Justice David Souter, the high court reversed based on the standard of proof used.  He said the act’s text and structure put the burden of proof on employers.

“There is no denying that putting employers to the work of persuading (judges) that their choices are reasonable makes it harder and costlier to defend” various policies, Souter wrote.  He added, however, that Congress “set the balance where it is” and that those who object to that interpretation should take it up with Congress.

The court adopted the position of the EEOC, which had sided with Meacham.  Justice Clarence Thomas was the lone dissenter.  Thomas, who was chairman of the EEOC during the Reagan administration, said he did not think the law extends to coverage for policies that do not directly discriminate.

Justice Stephen Breyer took no part in the ruling.

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The ADEA protects people 40 years of age or older from discrimination in the workplace or when applying for jobs.  The ADEA further protects workers from retaliation for openly opposing discriminatory practices based on age or from cooperating with or participating in litigation under the ADEA.  The ADEA covers employers with 20 or more employees, including state and local governments. To learn more about your rights under this federal statute, check out the EEOC’s ADEA page.

Millions spend golden years making green

Cecil Lawrence’s friends tease him that he’s crazy to work at his age. The 90-year-old glass salesman just laughs and suggests that they’re even crazier to sit at home and watch soap operas. “I guess they’re content to be old folks,” he said.

Like Mr. Lawrence, about 2.7 million Americans are skipping retirement and working into their 70s, 80s and even 90s.  Most remain on the job, retirement experts say, not for the money but for the personal satisfaction.  The lifelong workers still account for only 10 percent of their generation, but the proportion of over-70 Americans who have “retired retirement” has edged up since the 1990s as people live longer, enjoy better health and hold less physically demanding jobs.  And the number will only increase with the baby boomers. Seventeen percent say they expect to work indefinitely, though financial necessity will be a bigger reason for their passing up Golden Pond, according to the MetLife Mature Market Institute.

Policy analysts who fear an “entitlement crisis” with the retirement of 78 million boomers welcome the trend toward longer working lives, saying it offers financial benefits for older individuals and the economy as a whole.

Postponing retirement by just five years would boost the average worker’s annual retirement income by 56 percent and add $1 trillion a year to tax coffers by 2045, enough to erase Social Security’s deficit, says the Urban Institute’s Retirement Policy Center.

Older workers bear the burden of convincing businesses that they can remain productive, said William Zinke, a human resources executive who’s created a nonprofit group, the Center for Productive Longevity, to change employer attitudes.

“Although age discrimination is illegal, it exists far more than we’d like to think,” he said.  Many employers view older workers as particularly expensive, either because they demand higher salaries or incur more health care costs than younger workers, said Gordon Mermin, a policy analyst with the Urban Institute.  But by the time workers reach their 70s, many aren’t looking for traditional health benefits, because they’re covered by Medicare.

Only 15 percent have employer-provided health insurance, and 14 percent have pension coverage, the institute says. Only 27 percent work full-time, while 38 percent put in fewer than 20 hours a week.

Many businesses also worry that older workers are harder to train and will retire too soon for the investment in them to pay off. But older employees’ loyalty, sound judgment and even temperament can make them good role models for younger workers, Mr. Mermin said.

“The key is an understanding employer who’s willing to make some accommodations,” said Cynthia Metzler, president and chief executive of Experience Works, a national group that provides training and employment services to older workers.

Tax, pension and age anti-discrimination laws have discouraged employers from establishing formal “phased retirement” programs that allow workers to reduce their hours but stay on the payroll, Mr. Zinke said. But some employers do it informally. And plenty of older workers don’t need a boss’s approval. Among workers 70 and older, 42 percent are in business for themselves, the Urban Institute says.

KNOW THE TAX LAWS BEFORE YOU WORK

Some seniors complain that income tax laws discourage them from working.  Once you’re past your full retirement age, you won’t lose any of your Social Security benefits just because you’re working.  But a portion of your Social Security benefits may become taxable.

To determine whether you owe any federal income taxes on your benefits, the Internal Revenue Service looks at your “combined income.” That consists of your adjusted gross income (including wages from your job, pension payments and withdrawals from a 401(k) or IRA), any nontaxable interest income, plus half of your Social Security benefits.  If this combined income is between $25,000 and $34,000 (or between $32,000 and $44,000 for a couple filing jointly), you may have to pay income taxes on 50 percent of your Social Security benefits. That doesn’t mean you’ll pay half of your benefits in taxes. What it does mean is that 50 percent of your Social Security benefits must be added as income when filing your tax form.
 
If your combined income exceeds $34,000 (or $44,000 for a couple filing jointly), you may owe income taxes on up to 85 percent of your Social Security benefits. A tax adviser may be able to help you avoid this maddening situation: Say that on Dec. 31, the final dollar of annual income you earn from your job triggers taxes on your Social Security benefits.  That last dollar not only would be taxed as income, it also would prompt the taxation of a lot more income.

No matter how much you enjoy working in your golden years, you may wish you had stayed home that day.

The Age Discrimination in Employment Act (ADEA) and various state laws make it illegal for employers to make decisions that are motivated by an employee’s age.  Federal law limits age related lawsuits to persons who are 40 years of age or older.  However, other states such as New Jersey provide broader protections.
 
There are different legal standards and different levels of proof required depending on whether an employee is allegedly part of a reduction in force, terminated, not hired, or subjected to other adverse actions while still employed.  But one thing remains the same regardless of the type of adverse action that is premised upon an individual’s age, it is illegal. 
 
Many actions by an employer can indicate that age was a motivating factor in a decision that affected an employee or multiple employees. For example, references such as “grandpa,” “pops,” “old-timer,” or being stereotyped as slow or unable to learn new tasks (tricks) are all indicators of possible age discrimination.  Often times there are indications of age discrimination when an employee has been loyal and dedicated to an employer for a long period of time but is terminated or subjected to disparate treatment (along with other older employees) by a new supervisor or manager.