Age Discrimination and Early Retirement Incentives
Employers who want to thin the herd of highly paid, older employees often offer early retirement incentive packages that trade off an increased pension benefit or severance package in exchange for an employee agreeing to voluntarily retire early. Early retirement is typically offered to a large number of employees before the company decides to engage in a layoff or reduction in force (RIF). Early retirement offers often target older employees. They are most likely to have the most generous pension benefits and highest compensation.
Early retirement offers are easy ways to thin out the highest compensated employees in multiple departments without violating age discrimination laws like the federal Age Discrimination in Employment Act and the Texas Labor Code. Rather than penalizing older employees by firing them, a common approach in earlier days, the company can offer preferred benefits to older employees to entice them to walk away from the company. Generally there is no problem with discriminating favorably towards older employees. The company can eliminate highly paid employees and replace them with cheaper, younger employees withoutage discrimination claims. As long as the early retirement offers occur correctly.
The truth about early retirement incentives
Most of the time early retirement incentives are offered and paid in a legitimate fashion. Companies offer these incentives to avoid liability for age discrimination claims; so it makes little sense for employers to do a shabby job with the early retirement incentive. By mismanaging the early retirement, the employer risks paying the early retirement incentives and getting hit with age discrimination claims. However, some employers have poor management and personnel processes and end up bungling the early retirement incentive offer. Early retirement offers are essentially severance packages but perform the specific role of enticing the employee to terminate employment.
The early retirement offer may include a non-compete agreement or other terms, similar to most other severance agreement. It is extremely common, if not always the case, that employers seek a waiver of age discrimination claims as part of the early retirement incentive package. When the employer includes an age discrimination waiver, the employer must provide the information on the package at least 21 days before the deadline if the offer is made to an individual employee or 45 days if the offer is made to a group of employees. Sometimes employers fail to meet this deadline and lose the protections of their waiver.
Involuntary early retirement incentives
Another common way that employers bungle the protections against age discrimination claims is to make the early retirement incentive involuntary. What usually happens is that the employer gives you the incentive and tells you that your employment will end regardless of whether you accept the incentive, so you might as well accept it and leave “voluntarily”. That is wrong, wrong, wrong. It is one thing for an employer to forewarn employees that if enough employees do not accept the early retirement incentive that a RIF will occur but it is quite another to tell the employees who received the offer that they are the individuals who are going to be terminated regardless of acceptance of the offer.
Yet another way the employer may botch the early retirement incentive occurs when enough employees do not accept the offer. If the employer cannot reach its targets for workforce reduction then it may choose to proceed with involuntary termination through a layoff–more commonly called a reduction in force. Although the older employees may have received the incentive offer and rejected it; the employer cannot target only older employees for termination in the RIF. That would be a pretty clear case of age discrimination.
Reductions in Force
A key piece of information for employees to remember when offered an early retirement incentive is that even if the employer complied perfectly with the law in extending the incentive, if you reject the offer you may still lose your job in a subsequent reduction in force. It’s better to take the incentive and lose your job than to not take the incentive and lose your job.
On the other hand, you may want to take the chance that enough other employees will accept the offer or that you will not lose your job in a RIF if enough employees do not accept the incentive. There are serious consequences to consider. If the early retirement incentive will bridge your financial gap between your current financial situation and your savings targets for retirement then it might be an easy decision and tremendous fortune that the company gave you the offer. For most employees that tends not to be the case.
What to do if you receive an early retirement incentive offer
You need to consider both the financial and legal effects of the incentive offer. First consider how the incentives and loss of your job will affect your current and future financial situation. You should also consider the probability that you will lose your job if you do not accept the offer. You also need to speak with an employment lawyer about the legal effects of the offer. Do you have other age discrimination claims against your employer? Any other non-age-based claims against your employer?
It is important to weigh the incentives against the value of your other claims. Will the incentive package make it difficult to find replacement employment through a non-compete agreement? Does the language adequately describe the terms of the incentive? What other rights may you be giving up? These are all questions that your employment attorney can address with you.
If you received an early retirement incentive offer, contact my office today to schedule an appointment to review the offer.
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Adam Kielich is an employment attorney, divorce lawyer and principal attorney at The Kielich Law Firm in Bedford, Texas. The Kielich Law Firm represents clients in employment law and family law matters across the Dallas and Fort Worth area. Attorney Adam Kielich helps clients with employment discrimination, wrongful termination, overtime pay, FMLA, contested and uncontested divorce, modifications, QDROs and more.