Age Discrimination in the Workplace: Causes, Laws & Impact

Introduction

We hear a great deal about race, gender, and sexual orientation discrimination on the job — and with good reason. America has a long and troubled history of racial and gender discrimination, and the past two decades have added sexual orientation discrimination to the list, particularly given well-publicized cases of gay service members being dismissed from the military.

African Americans, in particular, were long barred from certain occupations, and even after they were more fully integrated into the workforce during the 1980s, they continued to face a very low glass ceiling — as do women. Both African Americans (and minorities generally) and women encounter significant challenges when seeking promotions and raises that white male Americans rarely have to consider.

Today, the newest frontier in workplace discrimination is age discrimination. In reality, age discrimination has existed for a very long time; it is only now receiving serious attention and much-needed coverage in the press.

One reason for the recent spotlight on age discrimination in the workplace is the rise of the high-tech and information technology sectors. When an older employee is let go, speculation about age discrimination naturally arises — but in some cases it may simply reflect that worker's difficulty keeping pace with rapidly evolving technology. Or, in an even grayer area, it may come down to salary: the employee's compensation increases each year, and the organization discovers that a 22-year-old fresh out of college is willing to perform the same work with equal energy and quality for a fraction of the cost.

Legislation

Regardless of the rationale, it is important to study the causes and effects of age discrimination on organizations, as well as the legislative efforts in place to minimize the damage.

Laws prohibiting age discrimination in the United States trace back to the turbulent 1960s. Alongside the Equal Pay Act and the Civil Rights Act barring discrimination against women and minorities, the U.S. Congress passed the Age Discrimination in Employment Act (ADEA) in 1967. Many crucial questions about the rationale and effectiveness of age discrimination legislation have been addressed — and continue to be studied — by researchers in both economics and law, while many questions remain (Neumark, 4). These questions will undoubtedly become increasingly pressing as rapidly aging workforces in the United States and other industrialized nations threaten to significantly raise the social costs of any barriers to older workers' employment.

It is highly instructive to compare the United States' policies with those of the European Union. The United Kingdom and Australia, for instance, have highly developed bodies of age discrimination legislation.

Confronting many of the same demographic pressures as the United States — particularly a shrinking pool of younger workers — the European Union decided to combat age discrimination in the workplace. On November 27, 2000, the EU Council of Ministers adopted the European Directive on Equal Treatment, which required all fifteen EU member states to introduce legislation prohibiting employment discrimination on the grounds of age, sexual orientation, religion and belief, and disability by 2006.

Because the United States has had federal legislation prohibiting age discrimination in employment since 1967, the EU looked to the U.S. for expertise and experience. Perhaps the most significant lesson the U.S. has offered is that a well-crafted law is not a cure-all for eliminating age discrimination from the workforce. "Despite the fact that the United States' Age Discrimination in Employment Act (ADEA) has been in place for over 35 years, age discrimination in employment remains a pervasive force. In fact, charges of age discrimination filed with the Equal Employment Opportunity Commission (EEOC) have increased 41 percent since 1999." (McCann, 1) Part of the explanation may lie in the fact that Americans, as a society, simply do not view age discrimination in the same category as race or gender discrimination. Age discrimination is not broadly seen as morally wrong; it is often treated more as an economics issue than a civil rights matter. In short, when it comes to age discrimination, the United States tends to "talk the talk" but not "walk the walk." (McCann, 1)

How, then, does the European approach compare to the United States' legal framework? "With the exception that the European directive states that both direct and indirect age discrimination (the equivalent of our disparate treatment and disparate impact) is prohibited, the directive is not nearly as forceful as our ADEA in condemning age discrimination. Most significantly, the directive permits the Member States to continue to enforce mandatory retirement, whereas in the United States, mandatory retirement has been abolished except for a few very narrow exceptions." (McCann, 1)

The EU law also contains a provision stating: "Member States may provide that differences of treatment on grounds of age shall not constitute discrimination, if... they are objectively and reasonably justified by a legitimate aim... and if the means of achieving that aim are appropriate and necessary." (EU Statutes) This language can be interpreted to give Member States nearly unrestricted discretion to carve out broad exceptions to the prohibition on age discrimination. In practice, the directive resembles Lincoln's Emancipation Proclamation — a sweeping declaration that, on closer inspection, applied only to those over whom its author had limited actual authority.

Implementation of the EU directive was underway across Member States, but as of November 2001, very little measurable progress had been made. At a conference on anti-discrimination directives held in Copenhagen, Denmark, member states were asked to report on their individual legislative efforts. At that time, only the Netherlands had introduced a bill to comply with the directive. France reported that it had passed an amendment to an existing law adding age as a prohibited ground for employment decisions, and the United Kingdom's House of Commons had introduced a bill that went a step further. There remained a reasonable chance that other EU Member States would initiate the necessary procedures to meet the 2006 deadline.

The combination of loopholes in the EU directive and significant delays in national implementation suggests the EU remains far from either "talking the talk" or "walking the walk" on age discrimination. "If the United States and Europe hope to address the demographic challenges facing their labor forces, both must take more effective action to allow those older workers who want to continue to work to do so." (McCann, 2)

When it comes to actual age discrimination suits and their effect on businesses, one piece of advice stands out above all others: "The best shield an employer can devise against liability in an ADEA case, as in any other type of discrimination or employment case, is to have neutral policies based on considerations of merit or seniority, consistently applied. Sound business reasons and essential fairness to the individuals involved will in many cases avoid litigation or at least provide a viable defense. While protective laws such as the ADEA certainly create hazards for employers, the courts have repeatedly said that these laws are not vehicles to impede sound management or to allow courts and juries to second-guess business decisions." (Spero, 13)

In California, for example, discriminating on the basis of age in the workplace is illegal under both the federal ADEA and the California Fair Employment and Housing Act (FEHA). Under both laws, certain limitations apply regarding who may bring suit, based on who is covered by each statute.

Trends in Age Discrimination Cases

People under forty years old are not protected by workplace age discrimination laws. If an employer refuses to hire someone because that person is thirty-nine and therefore "too young," that refusal is not illegal. But if the refusal is because the person is forty and "too old," it is illegal. (Greenberg, 1)

Age discrimination also presents several unique circumstances that set it apart from other forms of employment discrimination. A few of these deserve specific attention.

First, there are golden handshakes. When companies downsize, they sometimes offer "golden handshake" packages — special incentives for employees who agree to take early retirement. This practice has become especially common in an era of corporate streamlining. Legally, golden handshakes are not considered age discrimination (Greenberg, 1). However, if they are deployed specifically to eliminate older workers solely because of their age, and a discriminatory motive can be demonstrated, the practice becomes illegal.

Second, there is the issue of replacing older workers. It is illegal to replace a person over 40 with a person under 40 if age is the sole or primary reason. It is also illegal to replace a worker over forty with a younger person who is also over forty. (Greenberg, 1)

Third, there is the question of replacing higher earners and its relationship to age discrimination. It is not, in itself, illegal to replace highly paid workers with less experienced employees who will accept lower wages — this is generally considered a matter of economic efficiency. "However, this usually means replacing older workers with younger ones. If the wage considerations are not the real motivator, and the employer is actually trying to replace older workers with younger ones, that is illegal. Here, the employee must prove that it is the age, not the wages, which is motivating the employer to fire the older workers." (Greenberg, 1)

Conclusion

Reasonable Cause: 443 (2.2%) | 753 (3.8%) | 474 (3.4%) | 726 (4.3%) | 467 (2.6%) | 726 (4.0%) | 622 (3.9%) | 1,281 (8.3%) | 1,207 (8.2%) | 1,247 (8.2%) | 801 (4.3%) | 557 (3.2%)

Successful Conciliations: 121 (0.6%) | 147 (0.7%) | 97 (0.3%) | 52 (0.5%) | 96 (0.4%) | 74 (0.7%) | 119 (1.2%) | 184 (1.6%) | 241 (2.7%) | 409 (1.1%) | 208 (1.0%) | 166 (1.0%)

Unsuccessful Conciliations: 322 (1.6%) | 606 (3.1%) | 377 (2.7%) | 674 (4.0%) | 371 (2.1%) | 652 (3.6%) | 503 (3.1%) | 1,097 (7.1%) | 966 (6.6%) | 838 (5.5%) | 593 (3.2%) | 391 (2.3%)

Merit Resolutions: 2,943 (14.7%) | 2,724 (13.8%) | 2,049 (14.7%) | 2,153 (12.6%) | 1,590 (9.0%) | 2,130 (11.7%) | 1,957 (12.2%) | 2,675 (17.3%) | 2,923 (19.9%) | 2,804 (18.5%) | 2,694 (14.4%) | 2,552 (14.7%)

Monetary Benefits (Millions): $57.3 | $40.7 | $42.3 | $29.4 | $31.5 | $44.3 | $34.7 | $38.6 | $45.2 | $53.7 | $55.7 | $48.9

(Source: EEOC)

The primary drivers of age discrimination differ meaningfully from those behind racial or gender discrimination. Hatred or outright bigotry are generally not at the root of age discrimination; the motivating force is typically a desire to improve an organization's economic efficiency. Companies seek to reduce costs, and for the reasons outlined above, employees nearing retirement age are frequently the first to be targeted.

Paradoxically, the absence of bigotry makes age discrimination harder to identify and prove than virtually any other form of discrimination. No organization genuinely harbors animosity toward older employees; as a result, the underlying motives are often more difficult to isolate and document.

Age discrimination may be the most difficult form of workplace discrimination to isolate and eliminate. Nevertheless, it is just as harmful as other types. That is why the United States must build on the momentum generated by the European Union's 2006 legislative deadline to strengthen protections ensuring that older Americans are not treated as second-class citizens in the workforce.

The challenges will not be purely legislative; they will also arise at the organizational level, particularly for small businesses operating under constant pressure to maintain profit margins. Such businesses may face difficult economic decisions in hiring and workforce management that carry real financial consequences.

That is why any serious legislative effort to combat age discrimination will encounter fierce resistance from those who favor minimal market regulation. However, such measures are necessary to protect an underappreciated and underserved segment of society — one whose vulnerability will only grow in coming years, especially as the long-term solvency of Social Security remains uncertain.