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HR MATTERS E-TIPS
THIS WEEK’S E-TIP: Mandatory Retirement Age Q&A
Published by Personnel Policy Service, Inc.
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THIS WEEK’S E-TIP: Mandatory Retirement Age Q&A
Is it ever legal to require an employee to retire at a certain age? Find
out
the limited circumstances when the ADEA allows mandatory retirement. |
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THIS WEEK’S E-TIP: Mandatory Retirement Age Q&A
Q: Can we require employees to retire at a certain age? We have a
few upper level managers who are approaching 70, and they have
become less productive in the last few years.
A: As a general rule, employers may not impose a mandatory
retirement age on most employees. A mandatory retirement age usually
is considered age discrimination under the Age Discrimination in
Employment Act (ADEA). When the ADEA was first passed in 1967, it
did limit the age discrimination protections to employees who were
between the ages of 40 and 65. Subsequent amendments to the Act
increased the upper age limit to 70 and then eliminated it, except
for
certain employees, discussed below. (Download
free Retirement model
policy.)
The ADEA makes two exceptions. One allows a mandatory retirement
age for certain executives and high-level policymakers when
particular
criteria are met. Since this provision is an exemption from the
ADEA’s
requirements, it is narrowly interpreted and the burden is on you to
prove
that all of the elements of the exemption have been met. The
exemption
applies to any employee who is:
(1) At least 65 years of age;
(2) Employed in a bona fide executive or high policymaking position
for the two-year period immediately before retirement; and
(3) Entitled to an immediate, nonforfeitable annual retirement
benefit
from an employer pension, profit-sharing, savings, or deferred
compensation plan, or any combination of those plans, which equals
in
the aggregate at least $44,000 per year.
According to Equal Employment Opportunity Commission (EEOC)
regulations, the exemption for executives does not apply to middle
management employees, no matter how great their retirement income.
It
applies only to top-level employees who exercise substantial
executive
authority over a significant number of employees and a large volume
of
business. Similarly, the phrase “high policymaking position” is
limited to
certain top level employees who have little or no line authority but
whose
position and responsibility are such that they play a significant
role in the
development and implementation of corporate policy. |
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The second ADEA exemption allows you to require employees to retire
at a certain age if you can show that age is a bona fide
occupational
qualification (BFOQ) “reasonably necessary to the normal operation
of
the particular business.” Like the exemption for certain highly
compensated executives, the age BFOQ is limited in scope and
application and must be narrowly applied.
The EEOC regulations implementing the ADEA indicate that any
employer using the BFOQ exemption must prove that: (1) the age limit
is
reasonably necessary to the essence of the business; and either (2)
all
or substantially all individuals excluded from the particular job
are in fact
disqualified; or (3) some of the excluded individuals possess a
disqualifying trait that cannot be ascertained except by reference
to age.
Mandatory retirement at a specified age rarely has been upheld under
the BFOQ exemption, though the courts have recognized the BFOQ
defense when safety issues are involved. However, you have the
burden of proving that age materially affects an employee’s job
performance. In addition, you must show that substantially all older
employees are similarly affected or that there is no way, other than
basing the decision on age, to determine the capabilities of
individual
older employees.
If you cannot meet either one of these exceptions to the ADEA, you
should not impose a retirement age on your employees. Of course, you
can take action based on any performance problems as long as you
treat
your older employees consistently under your policies and
procedures.
So, for example, if you have a progressive disciplinary policy, you
should
use it to address older employee performance problems. (Download
free
Disciplinary Procedure model policy.)
Normally, you would alert the employee
to the specific problem, give
an opportunity to improve, warn
of the
consequences of failing to improve, and then follow up with
any
appropriate disciplinary action. Just make sure you are not treating
your
older employees more harshly than younger employees with similar
performance problems, or you could face ADEA claims. |
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Subscribers to the
Personnel Policy Manual (print/online) and HR Policy Answers on
CD can find more information on the ADEA and mandatory retirement in
Retirement, Chapter 212, notes 12 and 14.
Not a subscriber? If you would like to order one of our policy
chapters,
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