America’s workforce is reaching a crossroads. Baby boomers, who represent the largest segment of the country’s workforce, are or should be on the road to retirement. Instead, many boomers are extending their careers in the face of inadequate savings and underfunded 401(k) accounts. Add that trend to an uneven economy and the fact that companies shrink as well as grow, and it’s almost inevitable that age discrimination claims are going to rise in the next few years. While some claims undeniably will have merit, many age discrimination claims are brought against companies that have made legitimate business decisions in which an employee’s age is not a factor. A recent age discrimination case tried before a jury in federal court exemplifies the dilemma facing employers today.
Recipe for a discrimination claim
A corporation in the energy sector hired a 52-year-old engineer who had very solid "on paper" credentials and relevant experience, and interviewed very well. The company viewed the candidate as someone who could help build and train a project management team and lead the company into the future. The company also hired the engineer knowing he had accepted an early retirement package from his prior employer.
Initially, the engineer did well. He successfully led the creation of a project management manual and accompanying training program. He was well respected within the organization. Once this project was completed, however, the company expected the engineer to actively manage a number of major projects. This job included considerable travel and relentless attention to detail, as projects were expected to be delivered on time and within budget. The job also required that the engineer learn the company, as an understanding of other employees’ various capabilities was essential.
As the engineer’s primary focus shifted from teaching others to managing projects, his performance suffered, largely because of his lack of commitment. It was no secret that he was wanted to retire in the near term. He was not interested in traveling to job sites and delegated many tasks to others. While his younger supervisor demanded performance from all members of the team, the engineer was looking to work for five years until company retirement benefits vested. The engineer also believed, at least subjectively, that he knew more about the job than his younger counterparts, many of whom he had trained.
As time passed, the engineer’s performance continued to slip, and problems continued to arise on his projects. Accordingly, upper management pressed his supervisor to address the problem. The engineer was placed on a performance improvement plan, but resented the fact that he was being disciplined at all. Moreover, the engineer’s boss was 13 years younger and had more of a business background, but less project management experience than the engineer.
Despite a number of counseling sessions, the engineer’s performance problems continued while he was on the performance improvement plan, and he was terminated. The company offered him a severance package, which he rejected. Notwithstanding the objectively valid reasons for the company’s decision and the considerable efforts made to help the engineer improve over time, the engineer sued the company for age discrimination.
Defending against the claim
Recognizing these facts, consider what the engineer was able to say: His boss was 13 years younger than him. He was the oldest member of the project management team. Other, younger project managers received better reviews. Two of these project managers even received promotions shortly after the engineer was terminated, albeit to the same position he had held. The engineer also tried to use his inquiry into retirement requirements against the company, indicating that the inquiry had influenced the company’s actions.
These facts, in large part, allowed the case to proceed to trial. While many employers would have tried to settle the dispute out of court, the company chose to fight the claim, knowing that it had done no wrong.
Over the course of trial, the company relied on a theme of "accountability, not age." The company was able to demonstrate that it repeatedly advised the engineer of what was required of his position, even citing the project manual that the engineer helped to create during the first year of his employment. Even with the technical requirements of the job, the company was able to communicate its fair dealing with the engineer during the trial. The jury understood what was expected, in simple terms, and was told again and again about the employee’s refusal to be held accountable for the problems on his projects. While others may have contributed to these problems, the buck stopped at the project manager’s desk.
By relying on these consistent themes and documents that confirmed them, the company was able to overcome a fundamental disadvantage associated with a defense against age discrimination claims: Every juror can envision being an older worker (or is an older worker) and may well know someone who was terminated before he or she was ready to retire. Furthermore, every person subjectively wants to retire on his or her own terms. In other words, companies don’t have an even playing field if an age discrimination case gets to trial.
After nearly two years of litigation, the company prevailed. But there was a price, of course. Litigation not only entails paying lawyers, but has another considerable cost—time spent on the lawsuit means time not spent on the business of the company. Yet ignoring performance problems, including those of older workers, can be even more costly. A company cannot succeed without a motivated workforce that shares a common vision. If certain employees are just putting in time, productivity and morale inevitably suffer. Such consequences can have a long-lasting effect on relationships with clients, vendors, partner companies and stakeholders.
A shifting market gives rise to claims
With an economy that seems to be moving toward recession, the likelihood of litigation based on age discrimination claims is exacerbated. Many workers have seen their savings and retirement accounts take significant hits, thanks to a weakened stock market. The slumping real estate market compounds the problem. Equity that otherwise could be used for retirement is not available. Family homes sit with "for sale" signs in the yard, and many people are strapped with multiple mortgages. All these factors increase the likelihood that baby boomers will look to the courts if they are terminated, no matter what the actual reason might have been.
The challenge for companies, then, is creating a structured employment environment that lessens the likelihood and potential severity of discrimination claims. Companies should:
Set expectations: In dealing with all levels and generations of employees, the first mandate is to clearly and repeatedly communicate the objective expectations of all positions. The playing field has to be even. Employees cannot reasonably be expected to meet the responsibilities of their positions if at the time of hire they do not clearly understand their ongoing targets and a defined set of boundaries in terms of reporting relationships and roles.
Deal with problems: Do not be afraid to address performance problems as soon as they arise. One of the biggest mistakes that companies make is to allow an employee who is not meeting expectations to continue down the path of mediocrity. In the case of baby boomers, there is often a sense of deference that is expected or implied because of tenure. There also often is an accompanying sense that younger workers should be the "hard chargers." These beliefs have no place in a successful workforce. All employees, regardless of age, need to abide by the same set of expectations. Ultimately, the employee will benefit from proper guidance and the company will benefit from obtaining desired performance. Applying consistent approaches across all generations and levels of employees ensures that some persons are not viewed as a protected class while others are not afforded due respect. If expectations are not being met, the problem must be addressed as soon as possible.
Consider the role of communications in management training: Different generations of workers communicate differently. What resonated with boomers and preceding generations at work won’t necessarily work with Generation X, which is seeing a rise in prominence at the management level. With a flood of Generation Y employees entering the market, the styles and forms of communication will continue to shift. Understanding these differences will greatly help in providing guidance and setting expectations. Successful communication across all generations is essential to an organization’s success.
Instill solid policies and procedures: Seek counsel on the development and implementation of management training and performance-review policies. Beyond looking to other companies or industry associations for best practices, look to legal counsel for assurance that policies and procedures are uniform across all employee groups and that exposure to discrimination claims is minimized. The benefits derived from bringing in an attorney at this stage far outweigh the costs associated with fending off discrimination claims, even those that are frivolous.
Consult with legal counsel when trouble arises: At the first sign of trouble with an employee, especially one who is nearing retirement, is in a highly compensated position or who has an unusual sense of entitlement, consult with legal counsel. Whether in developing a performance improvement plan, reassigning roles and responsibilities or simply addressing dissatisfaction, legal counsel can help manage risk from a more emotionally removed perspective. The best money spent is money that avoids the escalation of problems into litigation.
Consider the circumstances in terminations: Even with best practices in place, companies will sometimes need to end employment relationships, including those with workers who are nearing retirement. Be mindful of retirement-benefit eligibility when making decisions and crafting severance packages. While a company must strive for uniformity in policies and procedures across all levels, particular risks have to be identified and factored into consideration when terminating older workers.