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Work Force Changes and Age Discrimination: EducatingBusiness Leaders in the 1990s and Beyond. A ProjectTo Produce an Educational Package on AgeDiscrimination in Employment for Business Leaders.American Bar Association, Washington, DC. Commissionon Legal Problems of the Elderly.Administration on Aging (DHHS), Washington, D.C.31 Mar 9290AT049565p.

Commission on Legal Problems of the Elderly, AmericanBar Association, 1800 M Street, N.W., Washington, DC20036 (employer's guide and videotape).Reports Descriptive (141) Guides Non-ClassroomUse (055)

MF01/PC03 Plus Postage.Adult Education; *Age Discrimination; *BusinessResponsibility; l'Compliance (Legal); ContinuingEducation; *Employer Attitudes; Employer EmployeeRelationship; Equal Opportunities (Jobs); *FederalLegislation; Instructional Materials; *MaterialDevelopment; Middle Aged Adults; Older Adults;Program Development; Retirement; Social Bias;Videotape Recordings

IDENTIFIERS *Age Discrimination in Employment Act 1962; OlderWorkers Benefit Protection Act 1990

ABSTRACT

The purposes of the project that developed thiseducation package for business were as follows: (1) enhance employerknowledge and understanding of the Age Discrimination in EmploymentAct (ADEA), especially in its application to corporate downsizing andthe use of early retirement incentives; (2) discourage employerpractices that violate the act and abridge the rights of olderworkers; and (3) influence employer attitudes and perceptions aboutthe elderly in a way that will expand meaningful employmentopportunities for older workers and critical resources for employers.With the help of an expert advisory group, the project developed abroadcast quality, 25-minute educational videotape and a 38-pagewritten employers' guide that informs employers of their obligationsunder the ADEA. The guide included in this packet is organized infive parts that cover the following topics: (1) aging workers in aleaner and meaner economy; (2) older worker myths and realities; (3)

Age Discrimination in Employment Act in brief; (4) analysis--theOlder Workers Benefit Protection Act; and (5) 10 guidelines foremployers considering downsizing. Contains references and resources.(KC)

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Reproductions supplied by EDRS are the best that can be madefrom the original document.

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PROJECT BRIEFS:

WORK FORCE CHANGES AND AGE DISCRIMINATION:

EDUCATING BUSINESS LEADERS IN THE 1990's AND BEYOND

A Project to Produce an Educational Packageon Age Discrimination in Employment

For Business Leaders

Grant Number: 90AT0495MARCH 31, 1992

Grantee:ABA Commission on Legal Problems of the Elderly

through theFund for Justice and Education

American Bar Association750 N. Lake Shore Drive

Chicago, IL 60611312-988-5400

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PROJECT ABSTRACT

WORK FORCE CHANGES AND AGE DISCRIMINATION:EDUCATING BUSINESS LEADERS IN THE 1990's AND BEYOND(Project Term: October 1, 1990 - December 31, 1991)A Project funded by the U.S. Administration on Aging

U.S. Department of Health and Human ServicesGrant Number: 90AT0495

Grantee: Commission on Legal Problems of the Elderly,American Bar Association, through theFund for Justice and Education, 750 NorthLake Shore Dr., Chicago, Illinois 60611.

Project Director: Nancy M. Coleman.Principal Investigator: Charles P. Sabatino, J.D.,

ABA Commission on Legal Problems of theElderly, 1800 M Street, N.W., Washington,n.c. 20036. (202) 331-2297.

The goals of this project were to develop an educationpackage for business to (1) enhance employer knowledge andunderstanding of the Age Discrimination in Employment Act,especially in its application to corporate "downsizing" andthe use of early retirement incentives, (2) discourageemployer practices that violate the Act and abridge therights of older workers, and (3) positively influenceemployer attitudes and perceptions about the elderly in away that will expand meaningful employment opportunities forolder workers and critical resources for employers.

With the help of an expert advisory group, the projectdeveloped a broadcast quality, 25 minute educationalvideotape entitled Downsizing in an Aging Work Force: theLaw, the Limits, and the Lessons and a 38-page written"employers guide" that informs employers of theirobligations under the Age Discrimination in Employment Act(ADEA), both generally and particularly in its practicalapplication to corporate "downsizing" and the use of earlyretirement incentives. The target audience is business andindustry leaders and senior through mid-level managers, aswell as lawyers who advise business. The "Older WorkersBenefit Protection Act," enacted in 1990, is a key focus ofthe material.

The video and guide are unique in offering an effective"business-oriented" perspective by recognizing the practicalbusiness environments in which legal mandates of the ADEAoperate -- environments that are shaped by far-reachingeconomic trends, fundamental changes in American management,and the growing reality of an aging work force. The videoenhances employer knowledge and attitudes about the elderlyand the law.

National dissemination of the video began during theproject term and will expand under the continuingsponsorship of the American Bar Association in cooperationwith business oryanizations.

3

EXECUTIVE SUMMARY

WORK FORCE CHANGES AND AGE DISCRIMINATION:EDUCATING BUSINESS LEADERS IN THE 1990's AND BEYOND

An EducFtional Package For Business Leaders Entitled:Downsizing in an Aging Work Force: the Law, the Limits, and

the Lessons

Produced By:

The American Bar Association'sCommission on Legal Problems of the Elderly

through theFund for Justice and Education

American Bar Association750 N. Lake Shore Drive

Chicago, IL 60611312-988-5400

Grant Number: 90AT0495MARCH 31, 1992

The goals of this project were to develop an educationpackage for business to (1) enhance employer knowledge andunderstanding of the Age Discrimination in Employment Act,especially in its application to corporate "downsizing" andthe use of early retirement incentives, (2) discourageemployer practices that violate the Act and abridge therights of older workers, and (3) positively influenceemployer attitudes and perceptions about the elderly in away that will expand meaningful employment opportunities forolder workers and critical resources for employers.

With the help of an expert advisory group, the projectdeveloped a broadcast quality, award-winning, 25 minuteeducational videotape entitled Downsizing in an Aging WorkForce: the Law, the Limits, and the Lessons and a 38-pagewritten "employers guide." Narrated by Harvard Law Schoollegal expert and public television personality ArthurMiller, the video uses dramatization, documentary techniqueand provocative discussion among experts to introduceaudiences to employer obligations under the AgeDiscrimination in Employment Act (ADEA), both generally andparticularly in its practical application to corporate"downsizing" and the use of early retirement incentives.The target audience is business and industry leaders andsenior through mid-level managers, as well as lawyers whoadvise business. The "Older Workers Benefit ProtectionAct," enacted in 1990, is a key focus of the material.

4

The 38-page written guide that accompanies the videoelaborates further upon the material and conGists of thefollowing sections:

Part 1 Introduction: Aging Workers in a Leaner and MeanerEconomy

Part 2. Older Worker Myths and Realitieso References and Resource Materials

Part 3. Age Discrimination in Employment Act- In BriefPart 4. Analysis: The Older Workers Benefit Protection ActPart 5. Ten Guidelines for Employers Considering

Downsizing

The video and guide are unique in offering an effective"business-oriented" persp'.ctive by recognizing the practicalbusiness environments in which legal mandates of the ADEAoperate -- environments that are shaped by far-reachingeconomic trends, fundamental changes in American management,and the growing reality of an aging work force. The videoenhances employer knowledge and attitudes about the elderlyand the law.

The primary significance of this project is that isprovides business with the right product at the right time.

It is the right product becausa it provides business withthe an educational and consciousness-raising tool producedfrom a practical business perspective, offering legalguidance on age-neutral employer practices and incorporatingenlightened gerontological perspectives showing the positivepotential of older persons. Winning a 1992 National Media"Owl" Award confirms its high quality. It is produced atthe right time because as we enter the 1990's, business mustadapt to significant new legal requirements in tougheconomic times.

America's work force is aging. In 1986, persons age 40and above composed' 37.8 percent of the work force. By theyear 2010, people age 40 and older are expected to make upclose to half of the work force. Protecting the rights ofolder workers has been a policy goal of the Congress formany years. In 1967, the Congress passed the AgeDiscrimination in Employment Act (ADEA), which protects theemployment rights of workers age 40 and ovar.

The pressure to lay off employees and reduce corporateemployment rolls has been particularly intense during recentyears because of changing economic conditions. Productioncutbacks, plant closings, corporate mergers, restructurings,and technological change have prompted a growing number ofU.S. businesses to reduce their work forces or "downsize."Experts who once considered downsizing a temporary economicphenomenon are now predicting that downsizing and itsattendant discriminatorl problems are here to stay.

Exec. Summary -page 25

While it used to be that only rank and file employeeswere laid off, layoffs now also are common among managerialand executive staff. Although in most cases thesereductions in force, or "RIFs" are legal, they can have adevastating impact on older workers, While these cutbacksare often essential, it is incumbent on employers tounderstand the Age Discrimination in Employment Act and howto plan and implement staff restructuring so it isage-neutral.

One of the most common method of accomplishing workforce reductions has been the use of early retirementincentive programs, which can easily run afoul of the ADEA,both in letter and in spirit. Interestingly, until thepassage of the Older Worker Benefits Protection Act in 1990,the ADEA actually exempted emplcyee benefit plans from thebroad proscription against discrimination in the terms,conditions, and privileges of employment. Since theeffective date of the new Act, employers have been facedwith a whole new set of complicated rules andresponsibilities governing layoffs and early retirement:

The danger of discriminatory employer actions based onage has been steadily fueled by ageist stereotypes thatpersist among employers. Commission research prior to thisproject confirmed that few, if any resources, were availableto business to counter these negative perceptions andprovide understandable legal guidance on age-neutralemployer practices. The educational package is intended tofill this void quite effectively well beyond the projectterm because of the American Bar Association's long-termcommitment to law and aging educational efforts.

National dissemination of the video began during theproject term and will expand under the continuingsponsorship of the American Bar Association in cooperationwith business organizations. The basic arrangement fordistribution through collaborating business organizationsentails our supplying these organizations with a sufficientquantity of the tapes and guides at no cost to them.

Initially, a total of 700 copies of the video and 2000copies of the written guide have been produced. Inexchange, the collaborating business organizations mustagree to advertise and market the materials through theirregular distribution channels (e.g. catalogs, newsletters).For any copies they sell, the Commission will receive areturn of one-quarter of the sales price in order to ensurethat we can make additional copies when supplies aredeleted. The price for the materials can be set by eachorganization to fit their usual pricing schedule. However,we suggest $60 as a guide. In addition, the Worker EquityDepartment of the American Association of Retired Persons


6

has requested permission to use it as part of its new

national employer training program.


Policy/Program Implications Paper


An American Bar Association Educational Package For BusinessLeaders Entitled Downsizing in an Aging Work Force: the

Law, the Limits, and the Lessons

America's work force is aging, and protecting therights of older workers has been a policy goal of theCongress for many years. In 1967, the Congress passed theAge Discrimination in Employment Act (ADEA), amending itseveral times since its inception.

The pressure to lay off employees and reduce corporateemployment rolls has been particularly intense during recentyears because of changing economic conditions. Productioncutbacks, plant closings, corporate mergers, restructurings,and technological change have prompted a growing number ofU.S. businesses to reduce their work forces or "downsize."Experts who once considered downsizing a temporary economicphenomenon are now confirming that downsizing and itsattendant discriminatory problems are here to stay.

While it used to be that only rank and file employeeswere laid off, layoffs now also are common among managerialand executive staff. Although in most cases thesereductions in force, or "RIFs" are legal, they can have adevastating impact on older workers. While these cutbacksare often essential, it is incumbent on employers tounderstand the Age Discrimination in Employment Act and howto plan and implement staff restructuring so it isage-neutral.

One of the most common method of accomplishing workforce reductions has been the use of early retirementincentive programs, which can easily run afoul of the ADEA,both in letter and in spirit. Interestingly, until thepassage of the Older Worker Benefits Protection Act in 1990,the ADEA actually exempted employee benefit plans from thebroad proscription against discrimination in the terms,conditions, and privileges of employment. Since theeffective date of the new Act, employers have been facedwith a whole new set of complicated rules andresponsibilities governing layoffs and early retirement.

The danger of discriminatory employer actions based onage has been steadily fueled by ageist stereotypes thatpersist among employers. The primary significance of thisproject is that is provides business with the right productat the right time. It is an effective product because itprovides business with the an educational andconsciousness-raising tool produced from a practicalbusiness perspective, offering legal guidance on age-neutralemployer practices and incorporating enlightenedgerontological perspectives showing the positive potentialof older persons. And, it has come at the right timebecause right now businesses must adapt to significant newlegal requirements in tough economic times.

Dissemination and Utilization Paper


An American Bar Association Educational Package For BusinessLeaders Entitled: Downsizing in an Aging Work Force: the

Law. the Limits. and the Lessons

A two-pronged dissemination approach was initiatedduring the project term and is currently being implementedby the ABA Commission. First, the Commission will itselfpublicize and distribute the video and guide, utilizing theextensive ABA communications-network to advertise itsavailability to the legal and aging communities. Forexample, announcements of the availability of the packageare planned for upcoming issues of the Commission'squarterly newsletter BIFOCAL and bi-monthly "Bar CommitteeBulletin," as well as in the ABA Journal, the ABA's primarypublication going to nearly 350,000 lawyers. In addition,the Worker Equity Department of the American Association ofRetired Persons has also offered to publicize the materialsin their publication for employers "Working Age."

Second, distribution agreements are presently beingnegotiated with several business organizations, since theyare in the most effective position for reaching businessleaders and managers directly. Tentative positive responseswere received during the project term from the NationalAlliance of Business, the National Retail Federation, theAmerican Management Association, the National Association ofManufacturers, and the Society for Human ResourceManagement. Final commitments and procedures forcollaborating will culminate after the project term as partof the Commission's ongoing product disseminationactivities.

In March 1992, the project received a welcome boost toour distribution efforts and publicity, because the projectwas notified of winning a National Media "Owl" Award in theannual competition sponsored by the Retirement ResearchFoundation. Considerable favorable publicity accompaniesthese awards.

The basic arrangement for distribution throughcollaborating business organizations entails our supplyingthese organizations with a sufficient quantity of the tapesand guides at no cost to them. Initially, a total of 700copies of the video and 2000 copies of the written guidehave been produced. In exchange, the collaborating businessorganizations must agree to advertise and market thematerials through their regular distribution channels (e.g.catalogs, newsletters). For any copies they sell, theCommission will receive a return of one-quarter of the sales

9

Dissemination/UtilizationPage 2.

price in order to ensure that we can make additional copieswhen supplies are deleted. The price for the materials can beset by each organization to fit their usual pricing schedule.However, we suggest $60 as a guide.

For programs funded under the Older Americans Act whoorder from the Commission, we offer a 50% reduction in theprice. The Massachusetts Executive Office of Elder Affairsused the video for purposes of training advocates andemployment counselors and found it very effective. A copy oftheir letter in this regard is attached to the final report.

Although a copy of the employer's guide (similarly titledDownsizing in an Aging Work Force: the Law, the Limits, andthe Lessons) accompanies each order for the video, it may alsobe ordered in any quantities separately from the video, sincethe written materials both supplement the video and stanaalone as an educational resource on the Age Discrimination inEmployment Act.:

I U

FINAL REPORT:

WORK FORCE CHANGES AND AGE DISCRIMINATION:

EDUCATING BUSINESS LEADERS IN THE 19901s AND BEYOND

A Project to Produce an Educational Packageon Age Discrimination in Employment

For Business Leaders

MARCH 31, 1992

Project Term: October 1, 1990 - December 31, 1991

Grantee:ABA Commission on Legal

Problems of the Elderlythrough theFund for Justice andEducation

American Bar Association750 N. Lake Shore DriveChicago, IL 60611Tel. 312-988-5400

Project Director:Nancy M. Coleman

Principal Investigator:Charles Sabatino, J.D.

Commission on Legal Problemsof the Elderly

American Bar Association1800 M Street, N.W.Washington, D.C. 20036Tel. 202-331-2297

This project was supported, in part, by a grant, Number90AT0495, from the Administration on Aging, Department ofHealth and Human Services, Washington, D.C. 20201. Granteesundertaking projects under government sponsorship areencouraged to express freely their findings and conclusions.Points of view or opinions do not, therefore, necessarilyrepresent official Administration on Aging policy.

TABLE OF CONTENTS

A. INTRODUCTION

B. METHODOLOGY

C. RESULTS 6

DISCUSSION AND IMPLICATIONS 6

E. SUMMARY 7

Page

1

2

D.

BIBLIOGRAPHY 9

APPENDICES 11

12

A. INTRODUCTION

The goals of this project were to develop anddisseminate an educational package for business, consistingof a videotape and an employer's guide, to: (1) enhanceemployer knowledge and understanding of the AgeDiscrimination in Employment Act, especially in itsapplication to corporate "downsizing" and the use of earlyretirement incentives, (2) discourage employer practices thatviolate the Act and abridge the rights of older workers, and(3) positively influence employer attitudes and perceptionsabout the elderly in a way that will expand meaningfulemployment opportunities for older workers and criticalresources for employers.

Direct and tangible benefits to older people wereexpected in two respects. First, employer knowledge andunderstanding of the Age Discrimination in Employment Actwould be significantly enhanced, thereby discouragingemployer practices that violate the Act and abridge therights of older workers. Second, because the videotape andwritten materials illuminate the congruency between the lawand the unique potential that an aging work force offers tobusiness, employer attitudes and perceptions about theelderly would be positively influenced in a way thatultimately expands meaningful employment opportunities forolder workers.

B. METHODOLOGY

The project plan for the first four months called forextensive production research and planning. Accordingly, thefirst step accomplished during the first quarter of theproject was the subcontracting with a video producer. Thecontractor selected was Ms. Traer Sunley of Video in theCapitol, Washington, D.C.

The principal investigator and video subcontractor, withthe additional support of a law student, completed most ofthe background research needed for the production planning.Much of the non-legal research focused on assessing businesspractices, trends, and the business literature. The legalresearch focused heavily on the Older Workers BenefitProtection Act (P.L. 101-433), enacted in October 1990. ThisAct amended the Age Discrimination in Employment Act (ADEA),significantly changed the treatment of employee benefitsunder the ADEA, and set particular rules for severancebenefits, early retirement incentive programs, and employeewaivers of rights under the ADEA.

Concurrent with the "paper" research, the principalinvestigator and subcontractor developed an informal advisory

group of experts and interested parties to guide the project.

Because it became apparent that it was not feasible to bring

these individuals together in one place for a formal advisory

group meeting, the principal investigator and subcontractor

met with each of them separately to discuss the project and

to solicit their views and recommendations. Most of them

were involved on a periodic basis to provide input and

suggestions and to comment on scripts and production plans.

The individuals and organizations comprising the informal

advisory group were:

o Paul Boymel, Esq., Office of Legal Counsel, U.S.Equal Employment Opportunity Commission

O James Brudney, Chief Counsel and Staff Director,Labor Subcommittee. U.S. Senate Committee on Labor

and Human Resourceso Ron Cooper, Steptoe & Johnson, Washington, D.C.

(employer representative).o Mark S. Dichter, Esq., Morgan, Lewis & Backius,

Philadelphia, PA (has represented the U.S. Chamberof Commerce, Association of Private Pension andWelfare Plans, National Association ofManufacturers, and the ERISA Industry Counsel).

o Peter Eide, Manager of Labor Relations Committee,U.S. Chamber of Commerce

o Ray Faye, Esq., Bell, Boyd & Lloyd, Washington,D.C.

o Robert Fitzpatrick, Esq., private attorney andVice-President for Governmental Affairs, NationalEmployment Lawyers Association

o Eric Greenburg, American Management Association

o Virginia Lord, Right Associates (an international"outplacement" firm)

o Ed Lyon, Society of Human Resources Management

o Christopher Mackaronis, Esq., Bell, Boyd & Lloyd,

Washington, D.C.o John Martin, General counsel, and Paul Coffey,

Director of Personnel, Ford Motor Companyo Douglas S. McDowell, Esq., McGuiness & Williams,

Washington, D.C. (employer representative and

counsel to the Equal Employment advisory Council).

o Cathy Ventrell-Monsees, Esq., Worker EquityDepartment, American Association of Retired Persons

o Ken Morse, supervisory trial attorney, U.S. EqualEmployment Opportunity Commission

o Robert M. Tomasko, Consultant, Arthur D. Little,Inc., author of Downsizing: Reshaping theCorporation for the Future.

O John Vine, Esq., Covington & Burling, Washington,D.C. (employer representative).

The above experts were an invaluable resource in helpingthe project staff to shape the final product in a way thatwould successfully target business leaders. Their expertise

4-2-

and advice were a key force during the project. Severalpermutations of content, approach, characterization, andstyle were considered and discussed with panel experts. Bythe end of the first project quarter, the video producer andprincipal investigator developed a first draft of a script.

The second project quarter was devoted primarily toscript and casting efforts. The first draft of the script,produced during the project's first quarter, had gone throughdetailed review and redrafting by the staff and by theindividuals in the project's advisory group.

Casting and the identification of experts to include inthe video was a time-consuming task during the second projectquarter. As narrator and host for the video, we obtained theservices of the widely-acclaimed Harvard Law Professor ArthurMiller, who has hosted the award winning PBS forumdiscussions, Our Constitution: That Delicate Balance andManaging our Miracles (on health care technology and ethics).Staff have spent considerable time identifying and reviewingnumerous possible expert for the panel. The goal is toachieve a lively, balanced, and insightful combination ofpersonalities for this key portion of the video. Thepossibilities have been substantially narrowed down and finaldecisions will be made in May, 1991 (3rd project quarter).

Possible shooting dates have also been considered duringthis period. The key limiting variable for shooting dates isthe availability of Professor Miller, who because of hiscelebrity status, seems to be constantly traveling. However,it is hopeful that a date will be confirmed for the month ofMay.

During the third project quarter, the project completedproduction of the videotape, entitled Downsizing in an AgingWork Force: The Law, the Limits, and the Lessons. The majorportion of the video was taped at the "Flight 3" studio inBaltimore on May 6, 1991. The key participants in the videoare Harvard Law School professor Arthur Miller, who acts ashost and facilitator of a discussion of the Older WorkerBenefit Protection Act with the following experts:

o Mark S. Dichter, Esq., Morgan, Lewis & Backius,Philadelphia, PA (has represented the U.S. Chamberof Commerce, Association of Private Pension andWelfare Plans, National Association ofManufacturers, and the ERISA Industry Counsel).

o Christopher Mackaronis, Esq., Bell, Boyd & Lloyd,Washington, D.C. (experienced plaintiff's attorney)

o Paul Coffee, Esq., Assistant General Counsel forPersonnel, Ford Motor Company

o Cheryl Fells, Esq., management consultant for themanagement consulting firm Tower Perrins.

-3-

.!5

o Helen Dennis, gerontologist, University of Souther

California.

Final editing of the footage took place in June 1991.

Story Line of the Video: After an introductorydramatization of a deposition of a corporate defendant, Mr.Miller provides an overview of key characteristics of today's

aging work force and the economic realities causingbusinesses to downsize. He then takes viewers through the

key elements of the Older Worker Benefit Protection Act (with

the help of extensive graphics), followed by a livelydiscussion with five experts responding to vignettes andquestions offered by Professor Miller and intended to explorethe implications of the Act and issues that businesses need

to consider.

During the fourth project quarter, the project focused

on two activities: establishing a distribution process forthe video and drafting the booklet to accompany the video.

The underlying distribution goal of the project was torecruit the assistance of a major business association totake the lead in distribution of the video. Since the ABACommission is not in the "inner circle" of the businesscommunity, we sought a credible collaborator to provide the

optimum linkage. During the quarter, discussions were held

with the U.S. Chamber of Commerce with the aim of utilizingthe Chamber as the distribution agent. The Chamber has anextensive catalog of materials and an existing system foradvertising, stocking, and distributing materials.

The Chamber was alternatively very interested and thennon-responsive to the ABA's offer for a period of several

months. By the fifth project quarter, the decision was made

to move on to establishing a distribution plan withalternative associations.

The second major task of the fourth project quarter wasthe drafting of the written guide to accompany the video.Publication of a final version was put on hold in hopes that

a distribution agreement could be firmly established with at

least one major business association. The delay inestablishing a business association collaborator necessitateda request for a no-cost extension of the project for a fifthquarter, October through November 1991.

During the fifth and final project quarter, the projectcompleted the written employer's guide that accompanies thevideo and established the groundwork for an ongoingdistribution process.

The written guide (same title as video: Downsizing in anAgina Work force: the Law, the Limits, and the Lessons) was

-4 -1 r

completed, and 2000 copies were published. At this time 700dubs of the video were also produced in 1/2-inch VHS format.The video was previously submitted. The written guide'scontents include:

Part 1 Introduction: Aging Workers in a Leaner and MeanerEconomy

Part 2. Older Worker Myths and Realitieso References and Resource Materials

Part 3. Age Discrimination in Employment Act- In BriefPart 4. Analysis: The Older Workers Benefit Protection ActPart 5. Ten Guidelines for Employers Considering Downsizing

Distribution efforts during this quarter focused onnegotiating collaborative arrangements with several businessorganizations. Tentative positive responses were receivedfrom the National Alliance of Business, the National RetailFederation, the American Management Association, the NationalAssociation of Manufacturers, and the Society for HumanResource Management. A negative response was received fromthe American Management Association which not considerdistributing materials produced by other organizations.Final commitments and procedures for collaborating with oneor more of these organizations will culminate after theproject term as part of the Commission's ongoing productdissemination activities.

The proposed arrangement for distribution throughcollaborating business organizations calls for supplyingthese organizations with a sufficient quantity of the tapesand guides at no cost to them. In exchange, thecollaborating business organizations must agree to advertiseand market the materials through their regular distributionchannels (e.g. catalogs, newsletterc). For any copies theysell, the Commission will receive a return of one-quarter ofthe sales price in order to ensure that we can makeadditional copies when supplies are deleted. The price forthe materials can be set by each organization to fit theirusual pricing schedule. However, the price set by theCommission for copies ordered directly from us is $60 for thevideo and written guide. For programs funded under the OlderAmericans Act who order from the Commission, a 50% reductionin the price is offered.

The Commission itself also began distributing the videoand guide, utilizing the extensive ABA communications networkto advertise its availability to the legal and agingcommunities. For example, announcements of the availabilityof the package are planned for upcoming issues of theCommission's quarterly newsletter BIFOCAL and bi-monthly "BarCommittee Bulletin," as well as in the ABA Journal, the ABA'sprimary publication going to nearly 350,000 lawyers.

-5-

17

The employer's guide may also be ordered in any quantityseparately from the video, since the written materials bothsupplement the video and stand alone as an educationalresource on the Age Discrimination in Employment Act.

C. RESULTS

The primary measurable result of the project has beenthe production of the 25-minute videotape and 38 pageemployer's guide, both entitled Downsizing in an Aging Workforce: the Law, the Limits, and the Lessons. Seven hundredcopies of the video and 2000 copies of the written guide were

produced.

Because announcements of the availability of thematerials have been released only in last few weeks precedingthis final report, cumulative data on usage and response are

not available. However, it is most noteworthy that in March1992, the project was notified of winning a National Media"Owl" Award in the annual competition for media programs.onaging sponsored by the Retirement Research Foundation.Considerable favorable publicity accompanies these awards.

other favorable events include the use of the video bythe Massachusetts Executive Office of Elder Affairs. It usedthe video for purposes of training advocates and employmentcounselors and found it very effective. A copy of theirletter in this regard is attached to the final report.

As of the time of this writing, the American Associationof Retired Persons is negotiating with the Commission to usethe video as part of a new series of training materials foremployers being developed by their Worker Equity Department.They also plan to publicize the materials in theirpublication for employers "Working Age."

D. DISCUSSION AND IMPLICATIONS

The primary significance of this project is that isprovides business with the right product at the right time.It is the right product because it provides business with thean educational and consciousness-raising tool produced from apractical business perspective, offering legal guidance onage-neutral employer practices and incorporating enlightenedgerontological perspectives showing the positive potential of

older persons. Winning a 1992 National Media "Owl" Awardconfirms its high quality. It is produced at the right timebecause as we enter the 1990's, business must adapt tosignificant new legal requirements in tough economic times.

America's work force is aging. In 1986, persons age 40and above composed 37.8 percent of the work force. By the

8 -6-

year 2010, people age 40 and older are expected to make upclose to half of the work force. Protecting the rights ofolder workers has been a policy goal of the Congress for manyyears. In 1967, the Congress passed the Age Discriminationin Employment Act (ADEA), which protects the employmentrights of workers age 40 and over.

The pressure to lay off employees and reduce corporateemployment rolls has been particularly intense during recentyears because of changing economic conditions. Productioncutbacks, plant closings, corporate mergers, restructurings,and technological change have prompted a growing number ofU.S. businesses to reduce their work forces or "downsize."Experts who once considered downsizing a temporary economicphenomenon are now predicting that downsizing and itsattendant discriminatory problems are here to stay.

While it used to be that only rank and file employeeswere laid off, layoffs now also are common among managerialand executive staff. Although in most cases these reductionsin force, or "RIFs" are legal, they can have a devastatingimpact on older workers. While these cutbacks are oftenessential, it is incumbent on employers to understand the AgeDiscrimination in Employment Act and how to plan andimplement staff restructuring so it is age-neutral.

One of the most common method of accomplishing workforce reductions has been the use of early retirementincentive programs, which can easily run afoul of the ADEA,both in letter and in spirit. Interestingly, until thepassage of the Older Worker Benefits Protection Act in 1990,the ADEA actually exempted employee benefit plans from thebroad proscription against discrimination in the terms,conditions, and plivileges of employment. Since theeffective date of the new Act, employers have been faced witha whole new set of complicated rules and responsibilitiesgoverning layoffs and early retirement.

The danger of discriminatory employer actions based onage has been steadily fueled by ageist stereotypes thatpersist among employers. Commission research prior to thisproject confirmed that few, if any resources, were availableto business to counter these negative perceptions and provideunderstandable legal guidance on age-neutral employerpractices. The educational package should fill this voidquite effectively well beyond the project term, especiallybecause of the American Bar Association's long-termcommitment to law and aging educational efforts.

E. SUMMARY

With the help of an expert advisory group, the projectsuccessfully developed an award-winning, 25 minute

-7-

1 9

educational videotape entitled Downsizing in an Aqina WorkForce: the Law, the Limits, and the Lessons and a 38-pagewritten "employers guide" that informs employers of theirobligations under the Age Discrimination in Employment Act

(ADEA), both generally and particularly in its practicalapplication to corporate "downsizing" and the use of early

retirement incentives. The target audience is business and

industry leaders and senior through mid-level managers, aswell as lawyers who advise business. The "Older WorkersBenefit Protection Act," enacted in 1990, is a key focus of

the material.

The video and guide are unique in offering an effective"business-oriented" perspective by recognizing the practicalbusiness environments in which legal mandates of the ADEA

operate -- environments that are shaped by far-reachingeconomic trends, fundamental changes in American management,and the growing reality of an aging work force. The video

enhances employer knowledge and attitudes about the elderly

and the law.

National dissemination of the video began during theproject term and wil) continue and expand under thecontinuing sponsorship of the American Bar Association incooperation with business organizations. In addition, theWorker Equity Department of the American Association ofRetired Persons has requested permission to use it as part of

its new national employer training program.

The significance of this project is that it providesbusiness with the an educational and consciousness-raisingtool produced from a practical business perspective, offeringlegal guidance on age-neutral employer practices andincorporating enlightened gerontological perspectives showingthe positive potential of older persons. Winning a 1992

National Media "Owl" Award confirms its high quality. It'stimeliness is underscored by the fact that as we enter the1990's, business must adapt to significant new legalrequirements in tough economic times.

BIBLIOGRAPHY

The following bibliography is reproduced in theemployer's guide of the same title as the project video,Downsizing in an Aging Work Force: the Law, the Limits, andthe Lessons.

o AARP, 1991. "America's Aging Workforce." IssueBrief, No. 3 (March 1991). Washington, DC: AmericanAssociation of Retired Persons.

o AARP, 1990. The Aging Work Force -- Older EmployeesInstructional Resources for Instructors of HigherEducation. Washington, DC: American Association ofRetired Persons.

o AARP, 1989. Business and Older Workers: CurrentPerceptions and New Directions for the 1990s. (Asurvey conducted by The Daniel Yankelovich Group,Inc.) Washington, DC: American Association ofRetired Persons.

o AARP, 1988. America's Changing Work Force:Statistics in Brief. Washington, DC: AmericanAssociation of Retired Persons.

o AARP, 1988. Using the Experience of A Lifetime.Washington, DC: American Association of RetiredPersons.

o AARP has several other useful publications besidesthose listed above, in addition to an informationservice known as the "National Older WorkersInformation Service" or NOWIS. Contact:

American Association of Retired PersonsWorker Equity Department601 E Street, NWWashington, DC 20049

o Consolidated Consulting Group, 1988. EmployerHealth Insurance Costs for Older Workers.Washington, DC: American Association of RetiredPersons.

o Dennis, Helen, 1988. Fourteen Steps in Managing anAging Work Force. Lexington, MA: Lexington Books,D.C. Heath and Company.

o Employee Benefit Research Institute, 1990. "Trendsand Issues in Early Retirement." EBRI Issue Brief.No. 103 (June 1990). Washington, DC.

o National Alliance of Business, 1985. Invest inExperience: New Directions for An Aging Workforce.An Analysis of Issues and Options for Business.Washington, DC.

o National Association of State Units on Aging &Washington Business Group on Health, 1989.Public/Private Partnerships in Aging: A Compendium.

Washington, DC.

o National Foundation for Occupational andEnvironmental Health Research, 1990. A New Look atCorporate Costs for Early Retirement: Retainingvs. Retiring Older Workers. Washington, DC.

o Nye, David, 1988. "Writing Off Older Assets."Across the Board. September 1988, 25(9):44-52.

o Palmore, Erdman, 1988. The Facts on Aging Quiz.Vol. 21, Springer Series on Adulthood and Aging.New York: Springer Publishing Co.

o Ramirez, Anthony, 1989. "Making Better Use of OlderWorkers." Fortune. 119(3):179-180+ (January 30,

1989).

o Rhodes, Susan, 1983. "Age Related Differences in

Work Attitudes and Behavicr: A Review andConceptual Analysis." Psychological Bulletin.26:44-52.

o Retirement Advisors Insights. Monthly periodical byHearst Business Communications, Inc., New York, NY.

o Right Associates, 1990. Severance: The CorporateResponse. A comprehensive survey of severancepractices in the UnitAd States. Philadelphia, PA.

o Tomasko, Robert M., 1990. Downsizing: Reshaping theCorporation for the Future. Washington, DC:American Management Association.

o U.S. Congress, Office of Technology Assessment,1987. Losing a Million Minds: Confronting theTragedy of Alzheimer's Disease and Other Dementias.OTA-BA-323. Washington, DC: U.S. GovernmentPrinting Office (April 1987).

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APPENDICES

Appendix 1: Letter from Joel M. Semuels, Assistant GeneralCounsel, Massachusetts Executive Office ofElder Affairs, dated November 13, 1991.

Appendix 2: Videotape entitled, Downsizing in an AgingWork Force: the Law, the Limits, and theLessons. Ten copies of the video accompanythis final report.

Appendix 3: Employer's Guide entitled, Downsizing in anAging Work Force: the Law, the Limits, and theLessons. Ten copies of the written guideaccompany this final report.

93

k.

WILLIAM F. WELD30VERNOR

ARGEO PAUL CELLUCCIEUTENANT GOVERNOR

PRANKLIN P OLLIVIERRESECRETARY

4

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4ectteiive 9ftCe oit &de" 4./lAt%Xel

Aceet. iirn. ,gada.

November 13, 1991

Charles Sabatino, Esq.American Bar AssociationCommission on the Legal Problems of the Elderly1800 M Street, N.W.Washington D.C. 20036

Dear Charlie:

Thank you for forwarding to me a "Preview Copy" of thevideotape on the "Older Worker's Benefit Protection Act."

It has been in great demand since the day we received it.I have shown it to several groups of advocates. In addition,our Age Discrimination in Employment Counseling Program is usingit to train its trainers.

Thank you again for this valuable resource.

jms/jsabatape91

9 4

Sin rely,

/-e-e!'fr/

Jlel M. SemuelsAssistant General Counsel

BEST COPY AVAILABLE

ZT!ATI t

PIHriilt.c 1 r Iiii117(',0,v-

/IAI; (';':1! PP (1'.1t.m,. ;I:, I

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1/4 !II, c, Olt I, .r!

f11.11.1,,11

Downsizing in an Aging Work ForceThe Law,

The Limits,and the Lessons

By

The Commission on Legal Problems of the ElderlyAmerican Bar Association

1800 M Street, NWWashington, DC 20036

(202) 331-2297

These materials provide guidance for understanding employerobligations under the Age Discrimination in Employment Act (ADEA)in the context of today's changing economy. The amendments to theADEA know as the Older Worker Benefit Protection Act of 1990 aregiven special attention, for they spell out terms and conditions thatmust be met in voluntary and involuntary reductions in force. Othersections address key issues, facts, and misperceptions about age in awork force that is growing older.

A 25-minute video of the same titleis available for use in conjunction with this booklet

as a complete training tool for employersand others.

These materials are made available and distributedthrough business organizations for the business community.

Copyright 1992 American Bar Association

26

..About the Commission on Legal Problems of the Elderly

In 1978, the American Bar Association established theCommission on Legal Problems of the Elderly to examinelaw-related concerns of the elderly. The Commission hasexplored legal and policy issues relating to age discrimination,the availability of legal assistance, long-term care, home care,guardianship and its alternatives, surrogate decision-making,housing, Social Security, and other benefit programs.

...About the Division for Public Services

The American Bar Association's Public Services Divisionprovides management oversight to the Commission andpromotes the public welfare by applying the knowledge andexperience of the legal profession to concerns facing all sectorsof the general public. The division pursues this ABA goalthrough programs which address the rights of specialpopulations and substantive issues of national importance suchas housing and the environment.

...Our Support

This project was supported, in part, by a grant (Number90AT0495) from the Administration on Aging, U.S.Department of Health and Human Services, to the AmericanBar Association's Commission on Legal Problems of theElderly, through the ABA Fund for Justice and Education.Grantees undertaking projects under government sponsorshipare encouraged to express freely their findings and conclusions.Points of view or opinions do not, therefore, necessarilyrepresent official Administration on Aging policy. Thispublication has not been approved by the House of Delegatesor the Board of Governors of the American Bar Associationand does not represent the policy of the Association.

27

TABLE OF CONTENTSPage

Part 1. Introduction: Aging Workersin a Leaner and Meaner Economy 1

Part 2. Older Worker Myths and Realities 7

References and Resource Materials 13

Part 3. Age Discrimination in Employment ActIn Brief 17

Part 4. Analysis: The Older Workers BenefitProtection Act 21

Part 5. Ten Guidelines for EmployersConsidering Downsizing 37

28

PART 1

Introduction:Aging Workers M ALeaner and MeanerEconomy

It is no longer a surprise toanyone that America's work force isaging. In 1986, persons age 40 andabove composed 37.8 percent of thework force. By the year 2010,people age 40 and older are expectedto make up close to half of the workforce.' While most people over 40do not consider themselves old,many report having experienced age

discrimination on the job or while looking for work. At age55, the consequences of unemployment because of agediscrimination can be devastating. Although theunemployment rate for older workers is about half that ofyounger workers, once they lose their jobs persons age 55 to 64suffer the longest duration of unen,,,loyment of any group inthe country, endure greater earnings loss in subsequent jobsthan do younger workers, and are more likely to give uplooking for another job altogether.2

Conflicting Trends

Optimistically, some analysts suggest that slow growth inthe labor supply over the coming decade may place pressure onbusiness to keep older workers employed longer. Indeed,between 1986 and the year 2000, the adult population underage 45 will grow by only 2 percent4 while the age 45 and overpopulation will grow by 30 percen0

29

Yet, despite these demographics, the average age ofretirement continues to fall.4 This is believed in part to reflectthe positive choice of many older workers who have greatereconomic freedom than ever before. However, the reality canbe quite different for many others. A 1990 report of theCommonwealth Fund, based on a Louis Harris survey of 3,509people in the crucial 50 to 64 age period, revealed asurprisingly large number of older persons who stated that theywanted to return to work.5

According to Commonwealth Fund Senior Vice PresidentThomas Moloney, "Of older persons who are out of the workforce, half are satisfied, a quarter can't work because of theirhealth or family situations, and the other quarter are veryunhappy about the situatior they're in. That quarter representsabout two million people...."6

The Law

Protecting the rights of older workers has been a policygoal of the Congress for many years. In 1967, the Congresspassed the Age Discrimination in Employment Act (ADEA),whickprotects the employment rights of workers age 40 andover. The Equal Employment Opportunity Commission(EEOC) is charged with enforcement of the Act. The numberof charges filed under the ADEA supports the observation thatage bias is widespread in the work force. The number of agebias suits filed with the EEOC doubled between 1980 and1983, reaching an all time high of over 18,000 charges. Sincethen the number has fluctuated between 14,000 and 17,000charges annually.8

Downsizing

The pressure to lay off employees and reduce corporateemployment rolls has been particularly intense during recentyears because of changing economic conditions. Productioncutbacks, plant closings, corporate mergers, restructurings. andtechnological change have prompted a growing number of U.S.Businesses to reduce their work forces or "downsize." Severalsurveys confirm this trend.9 Experts who once considereddownsizing a temporary economic phenomenon are now

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predicting that downsizing and its potential discriminatoryproblems are here to stay. Eric Greenburg, editor of theAmerican Management Association's research reports,commented, "Downsizing has become an ongoing corporateactivity without regard to a company's economicperformance-Just as many companies do it to get moreproductivity as for an economic downturn." Greenburg'sresearch indicates that a company that has downsized before issix times more likely to do so again as the process becomesone of constant refinement.10

While it used to be that only rank and file employees werelaid off -- either temporarily or permanently -- layoffs nowalso are common among managerial and executive staff.Although in most cases these reductions in force, or "RIFs" arelegal, they can have a devastating impact on older workers.Nearly one million workers over the age of 55 lost their jobsbecause of plant closings or employment cutbacks between1981 and 1985. One-half of these workers were displacedfrom jobs they had held for 15 years or more. Less than halfwere reemployed.11 While these cutbacks are often essential,it is incumbent on employers to understand the AgeDiscrimination in Employment Act and how to plan andimplement staff restructuring so it is age-neutral.

One of the most common methods of accomplishing workforce reductions has been the use of early retirement incentiveprograms. In 1986, a Hewitt Associates survey found thatabout one-third of more than 500 corporations surveyed hadused exit incentive programs in the previous five years. Largercompanies (4000 or more employees) lead the pack with a 55percent rate.14 The U.S. General Accounting Office estimatesthat 80 percent of the Fortune 100 companies sponsored an exitincentive program at least once during 1979 through 1988.13

The 1986 Hewitt Associates survey also found that innearly three-fourths of the cases, voluntary separation planstook the form of "early retirement windows" -- specifiedperiods in which affected employees must decide whether toretire with some form of improved pension benefit or continueworking.14 Examples of enhanced pension benefits offered in"window" programs include:

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31

o Early retirement incentive plans -- Monthly benefitsare increased by diminishing or eliminating theactuarial factor that is normally used to reducebenefits of workers who have not yet reached thepension plan's normal retirement age.

o Retirement supplements -- A fixed cash amount isadded to monthly pension benefits and may bediscontinued after workers become eligible forsocial security benefits at age 62.

o Age and service credits -- Workers receiveadditional credits to their age and years of service.This permits younger workers to meet the pensionprovisions for eligibility and increases the amountof benefits they would have otherwise received.15

Early retirement programs can easily run afoul of theADEA, both in letter and in spirit. This is especially true sincethe enactment of amendments to the ADEA referred to as theOlder Workers Benefit Protection Act of 1990. Theseamendments set new, and in some cases, complex requirementsthat employers must meet when they offer their employeesbenefits such as early retirement incentives or severance pay.A detailed description of these amendments is provided inSection 4 of this booklet.

Attitudes and Realities

In spite of legal remedies for age discrimination, thepotential for discrimination in the business world of the futurecontinues to be fueled by ageist stereotypes held consciously orunconsciously by many employers. A 1989 survey of 400companies conducted for the American Association of RetiredPersons (AARP) by the Daniel Yankelovich Group, indicatesthat employer attitudes toward older workers have actuallydeteriorated since a similar study was conducted five yearsearlier. According to the survey, the number of seniormanagers who voiced a "commitment" to older workers (overage 50) dropped from 33 percent to 25 percent. Companieswith 1000 or more employees displayed the least positive

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attitudes toward older workers.16

The realities of an aging population, coupled with "leanerand meaner" corporate strategies and the persistence of agestereotyping, have together motivated the production of thisbooklet and the video that accompanies it. It is hoped thatthese materials will effectively educate senior and middle levelbusiness managers about their obligations under the ADEA,enhance their appreciation of the value of older workers, andstimulate corporate thinking about innovative ways to betterutilize older workers.

1

2

3

4

5

6

Notes to Part I

Bureau of National Affairs, Older Americans in the Workforce:Challenges and Solutions (Washington, D.C.: BNA, 1987).

U.S. Senate Special Committee on Aging, Aging America: Trendsand Projections. An information paper. 101st Congress, 2d Session,Rept. 101-249, Vol. 2. (Washington, D.C.: U.S. Government PrintingOffice, 1989).

American Assoc:ation of Retired Persons, The Aging Work Force -Older Employees Instructional Resources for Instructors of HigherEducation, (Washington, DC., 1990).

See S. Rix, "America's Aging Workforce," Issue Brief, No.3,(Washington, DC: American Association of Retired Persons, March1991).

Louis Harris and Associates, Inc. "Over 50, Ready and Able to Work,"A survey conducted for the Commonwealth Fund. Fieldwork done:March - September. (New York: Commonwealth Fund, 1989).

Lewin, Tamar. "Too Much Retirement Time? A Move is Afoot toChange It." The New York Times (April 22, 1990, p. 1).

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8

9

10

11

12

13

14

15

16

Age Discrimination in Employment Act, 29 U.S.C. Section 621 etseq.

Testimony of Evan J. Kemp, Jr., Chairman, Equal EmploymentOpportunity Commission, before the Select Committee on Aging, U.S.House of P.cpreentatives (September 24, 1991).

For example, an American Management Association (AMA) survey inJuly 1987 of 1,134 respondents found that 45 percent of thecompanies responding had undergone significant reductions in forcebetween January 1986 and June 1987. A later AMA survey in 1989showed that in the preceding year, 39 percent of 1,084 companies andnonprofit organizations surveyed by the AMA reduced their workforces, cutting an average of 162 employees.

Skrzycki, Cindy. "The Drive to Downsize; Trimming is a CorporateFact of Life -- But There Are Hazards." The Washington Post (August20, 1989, p.H1).

National Senior Citizens Law Center, "Untender Mercies: Layoff andthe Older Worker." 22 Clearinghouse Review 1104 (February 1989).

Hewitt Associates, Plan Design and Experience in Early RetirementWindows and in Other Voluntary Separation Plans (Lincolnshire, IL:Hewitt Associates, 1986).

U.S. General Accounting Office, Age Discrimination: Use ofWaivers by Large Companies Offering Exit Incentives to Employees.GAO/HRD 89-87 (April 1989).

See Hewitt Associates, note 10 supra.

U.S. General Accounting Office, Age Discrimination: Use ofAge-Specific Provisions in Company Exit Programs.GAO/HRD-90-87BR (February 1990).

American Association of Retired Persons, Business and OlderWorkers: Current Perceptions and New Directions for the 1990's.(Washington, D.0 December 1989).

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. ,;i1tt

Older WorkerMyths and Realities

PART 2

As with all myths, a small grain of truth sustains a wholefield of misperception. In the case of older workers, five basicmyths, or age stereotypes, commonly affect the workplace.

Myth One:

Older Workers Perform More PoorlyThan Younger Workers.

The grain of truth that sustains this myth is the fact that,across the population as a whole, certain physical functions doshow some decline in old age. These functions include the fivesenses, physical strength, lung capacity, and reaction time.However, average changes measured under laboratoryconditions are normally far below levels that would materiallyaffect on-the-job performance. Most studies under actualworking conditions show that older workers perform as wellas, if not better than, their younger counterparts on mostmeasures, unless the job requires great physical strength orspit-second response time.

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As to mental functioning, studies of healthy elderly haveconsistently failed to find any significant loss of memory ororientation. Significant declines in mental capacity do notoccur in the general population until much later thancommonly assumed. The Office of Technology Assessment(U.S. Congress, 1987) discovered severe dementia in only 1percent of the age 65 to 74 population. It is only after age 85that the proportion jumps significantly.

On the positive side, some characteristics tend to improvewith age and more than compensate for any physical declines.For example, the greater experience of older employeesgenerally results in fewer errors, and high marks for superiorjudgment, practical knowledge, and ability to handle crises.

Of special note is the fact that individual variability inthese functions also increases with age. As a result, researchershave insisted that age itself is an increasingly poor predictor ofindividual ability. Rhodes (1983) reviewed twenty-fiveempirical studies and concluded that age seldom accounts formore than 10 percent of the variance in job performance.Where significant decline occurs, the cause is more likely to bea specific illness or injury, or a company culture that fosters"easing off' by older workers.

Myth Two:

Older Workers Are Less ReliableAnd Less Motivated

Than Younger Workers.

Measuring reliability and motivation in terms ofattendance, consistency in performance, and turnover, olderworkers score better than younger workers on all counts.

Several studies confirm that older workers have betterattendance records and fewer avoidable absences. Forexample, a study by the Polaroid Company found that 18percent of Polaroid's age 65-plus employees had perfectattendance records, versus 10 percent for the total workforce.

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3 6

s,

In general, workers age 55 and older take less time off than anyother age group (Nye, 1988).

Consistency of performance is demonstrated by accidentrates. Older workers have significantly fewer accidents thanyounger workers. Persons age 55 and older constitute 13.6percent of the labor force, yet account for only 9.7 percent ofwork place injuries (Palmore, 1988). Workers aged 20 to 24have the highest injury rate. Rates then drop off with age,falling most significantly for the over-65 population (Nye,1988).

Finally, older workers have low turnover. AARP datashow that workers age 20 to 30 stay with a company anaverage of only 3.4 years; those aged 50 to 60 have an averagelength of service of 15 years (Nye, 1988).

Myth Three:

Older Workers Are Less AdaptableTo New Technology Than Younger Workers

Surveys in 1985 and 1989 by AARP found that employerscommonly rate employees agt 50 and older low in the abilityto cope with new technology (AARP, 1989). The findingsdemonstrate the pervasiveness of two perceptions: one, thatolder workers are not interested in learning new things; andtwo, they do not learn as fast or as well as younger persons.Both perceptions again illustrate a grain of truth in a field ofmisperception.

The grain of truth is that speed of learning does showsome decline, but this is in part accounted for by differences inlearning style between older and younger workers (Palmore,1988). Older workers are more likely to respond morepositively to teaching that is more self-directed, less formal,and which takes advantage of their experience and knowledge.Countless corporate examples leave little doubt that olderworkers are as least as willing as younger workers to be trained

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37

< Ale

A.

in new technologies and are equally as capable of learningeven the most sophisticated technologies. (Nye, 1988)

The misperceptions have been partly attributed to workculture that clings to a notion of career development asone-directional in nature and in which older workers areexpected to "opt out" when they cease moving up in thehierarchy. The culture creates a self-fulfilling prophecy. Andoften, both employers and older workers acquiesce to thisview.

Myth Four:

Older Workers Cost MoreThan Younger Workers.

Cost concerns about older workers usually focus ono insurance costs,o pension costs, ando salary costs in general.

According to a 1988 study of several national data sourcesconducted by Consolidated Consulting Group (1988), healthinsurance cost differences, whether measured by insurancepremiums or by claim costs, do not differ significantly betweenolder and younger workers and are not large enough to be animportant factor in hiring decisions. Only 1 to 2 percent ofemployers' annual premium increases were due to the aging ofworkers. Indeed, some factors such as declines in family sizefor older workers tend to lower employer costs. The studyfound that the highest-expense single worker group (age 60-64)cost less than the lowest-expense family group (under age 25).Turning to claim costs among age groups, the study found avariation of less than 2 percent.

Rising health insurance costs for retirees has proven to bea far greater problem for employers than benefits for activeworkers. Indeed, maintaining older workers longer in activeemployment may actually aid cost containment for retireehealth and pension benefits.

- 38-10-

Pension costs are more easily controlled by plan designthan are health benefits. They are not necessarily moreexpensive for older workers. For example, many employersare moving in the direction of providing defined contributionplans, which are more age-neutral, rather than providingdefined benefit plans, under which workers close to retirementage may be more costly to employers.

With respect to salary costs, workers age 50 and overtraditionally commanded the highest salaries. However, the1989 Yankelovich survey, sponsored by AARP, found that thisdistinction now goes to the 35 to 49 year-old group. Thechange is caused, in part, by management cost-containmentstrategies of the late 1980's which have emphasized earlyretirement to reduce the size of the work force (AARP, 1989).

Myth 5:

Early Retirement Incentives ProvideA Cost-Effective Way for Companies

To Downsize Their Work Forces.

The realistic response to this statement is that it is bothtrue and false. While downsizing has become a recurringprocess for many businesses trying to trim costs and staycompetitive, it can also have serious negative consequences ifit is done without an effective, long-term planning perspective.Mere headcount reduction strategies often produce a loss ofvaluable skills and experience, weaken morale, squashinnovation, and require considerable time and expense fortraining new staff. Robert Tomasko (1990), author of the bookDownsizing, offers a planning perspective that emphasizes amulti-level reshaping of company resources and functions. Heobserves, "Redesigning a company requires more of thementality of an architect than that of a surgeon."

Some recent studies have challenged the conventionalassumption that early retirement incentive programs are acost-effective strategy. A 1990 analysis of data from Fortune100 companies concluded that heavy pension and retiree healthcare costs made it 33.5% costlier to retire workers age 55 andolder than to lay off those from 40 to 54 (National Foundation

for Occupational and Environmental Health Research, 1990).Focusing on training cost, many companies have found it farmore cost-effective to retrain older workers than to hire freshgraduates (Nye, 1988).

Referencesand

Selected Resource Materials

o AARP, 1991. "America's Aging Workforce." IssueBrief, No. 3 (March 1991). Washington, DC:American Association of Retired Persons.

o AARP, 1990. The Aging Work Force -- OlderEmployees Instructional Resources for Instructorsof Higher Education. Washington, DC: AmericanAssociation of Retired Persons.

o AARP, 1989. Business and Older Workers: CurrentPerceptions and New Directions for the 1990s. (Asurvey conducted by The Daniel Yankelovich Group,Inc.) Washington, DC: American Association ofRetired Persons.

o AARP, 1988. America's Changing Work Force:Statistics in Brief. Washington, DC: AmericanAssociation of Retired Persons.

o AARP, 1988. Using the Experience of A Lifetime.Washington, DC: American Association of TetiredPersons.

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41

I.

o AARP has several other useful publications besidesthose listed above, in addition to an informationservice known as the "National Older WorkersInformation Service" or NOWIS. Contact:

American Association of Retired PersonsWorker Equity Department601 E Street, NWWashington, DC 20049

o Consolidated Consulting Group, 1988. EmployerHealth Insurance Costs for Older Workers.Washington, DC: American Association of RetiredPersons.

o Dennis, Helen, 1988. Fourteen Steps in Managingan Aging Work Force. Lexington, MA: LexingtonBooks, D.C. Heath and Company.

o Employee Benefit Research Institute, 1990. "Trendsand Issues in Early Retirement." EBRI Issue Brief.No. 103 (June 1990). Washington, DC.

o National Alliance of Business, 1985. Invest inExperience: New Directions for An AgingWorkforce. An Analysis of Issues and Options forBusiness. Washington, DC.

o National Association of State Units on Aging &Washington Business Group on Health, 1989.PublicIPrivate Partnerships in Aging: ACompendium. Washington, DC.

o National Foundation for Occupational andEnvironmental Health Research, 1990. A New Lookat Corporate Costs for Early Retirement: Retainingvs. Retiring Older Workers. Washington, DC.

o Nye, David, 1988. "Writing Off Older Assets."Across the Board. September 1988, 25(9):44-52.

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42

o Palmore, Erdman, 1988. The Facts on Aging Quiz.Vol 21, Springer Series on Adulthood and Aging.New York: Springer Publishing Co.

Ramirez, Anthony, 1989. "Making Better Use ofOlder Workers." Fortune, 119(3):179480+ (January30, 1989).

o Rhodes, Susan, 1983. "Age Related Differences inWork Attitudes and Behavior: A Review andConceptual Analysis." Psychological Bulletin,26:44-52.

()

o Retirement Advisors Insights. Monthly periodical byHearst Business Communications, Inc., New York,NY.

o Right Associates, 1990. Severance: The CorporateResponse. A comprehensive survey of severencepractices in the United States. Philadelphia, PA.

o Tomasko, Robert M., 1990. Downsizing: Reshapingthe Corporation for the Future. Washington, DC:American Management Association.

o U.S. Congress, Office of Technology Assessment,1987. Losing a Million Minds: Confronting theTragedy of Alzheimer's Disease and OtherDementias. OTA-BA-323. Washington, DC: U.S.Government Printing Office (April 1987).

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43

PART 3

Age Discriminationin Employment Act- In Brief -

ORIGIN Enacted in 1967, the ADEA is found at 29U.S. Code Section 621 and following. It isenforced at the federal level by the EqualEmployment Opportunity Commission. TheAct states three purposes:

o To promote employment of older personsbased on ability rather than age.

o To prohibit arbitrary age discrimination inemployment.

o To help employers and workers find waysof solving problems arising from theimpact of age on employment.

WHO MUSTCOMPLY? Private employers with 20 or more employees.

All state, federal, and local governmentemployers.

Employment agencies of any size.

Labor organizations with 25 or moremembers.

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WHO ISPROTECTED?

Most employees age 40 and older, includingU.S. citizens working for U.S. employers inforeign countries. Previously, the Act'sprotection stopped at age 70, but the age capwas removed in 1987.

The Act does not protect elected officials, thepersonal staffs of elected officials, appointeeson a policymaking level, and those appointees'immediate legal advisors.

WHAT DOESTHE ACTPROHIBIT?

Discrimination against workers age 40 andolder with respect to hiring, discharge,promotion, demotion, training opportunities,working hours, compensation, benefits, or anyother aspect of employment. (See the nextchapter for a detailed discussion of ADEArules regarding benefits.)

Use of age preferences in notices oradvertisements for employment.

Retaliation against employees for complainingabout age discrimination or for helpinggovernment investigations of alleged agediscrimination.

Labor organizations and employment agenciesmay not discriminate on the basis of age inmembership activities and referrals.

EXCEPTIONSTO THESEPROHIBITIONS

Certain employer practices are lawful eventhough they may adversely affect olderworkers. These exceptions can be used asdefenses against a charge of agediscrimination:

1. An employer may use age as a bona fideoccupational qualification (BFOQ) whereit is necessary to the normal operation ofthe particular business and alternativestandards are not available.

2. Differences in treatment are based on"reasonable factors other than age" thatare justified by business necessity.

3. A discharge or other discipline is justifiedby "good cause", for example, tardiness orpoor performance.

4. An employer may observe the terms of abona fide seniority system.

5. An employer may observe the terms of abona fide employee benefit plan if certainconditions are met. These conditions arediscussed in the following chapter on theADEA amendments known as the OlderWorker Benefit Protection Act.

6. An employer may retire certain executivesor high policymaking employees at age 65if specific conditions are met.

7. Tenured faculty may be retired at age 70(but this exemption expires December 31,1993).

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46

8. Public safety officers may be subject tomaximum hiring or mandatory retirementunder state or local law (but this exceptionalso expires December 31, 1993).

HOW IS THEACT ENFORCED?

An individual who feels he or she has beendiscriminated against must file a charge withthe Equal Employment OpportunityCommission (EEOC) within 180 days of thediscriminatory action or notice of thediscriminatory action (whichever occurs first).The time limit is 300 days if the state has anage discrimination law and enforcementagency.

The EEOC operates a toll free HOTLINE thatconnects the caller to a local enforcementoffice in the calling area.

EEOC HOTLINE: 1-800-669-4000

The EEOC or state agency may attempt toconciliate, or investigate, and has the power tofile a civil action on behalf of aggrievedemployees.

After 60 days from the filing of a charge (butwithin two years of the discriminatory action),the individual has the right to file a civil suitagainst the employer.

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Analysis:

PART 4

414

THE OLDER WORKERSBENEFIT PROTECTION ACT

OF 1990By Ronald S. Cooper1

On October 16, 1990, PresidentBush signed into law the "OlderWorkers Benefit Protection Act",Pub. L. No. 101-433, 104 Stat. 978(1990) (the "Act"), which amends theAge Discrimination in EmploymentAct of 1967 (the "ADEA"). The Actsubstantially increases employerexposure to liability under the ADEA

by overturning the Supreme Court's 1989 decision in PublicEmployees Retirement System of Ohio v. Betts, 109 S.Ct. 2854(1989) and limiting an employer's ability to rely on employeewaivers. The following is an outline of the primary features ofthe Act.

I. General Rule on Lawful Employment Practices

The ADEA prohibits discrimination in the terms andconditions of employment based on an employee's age. TheADEA, however, contained an exception in Section 4(f)(2)which permitted the employer to observe the terms of a bonafide employee benefit plan - such as a retirement, life or

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disability plan - as long as the plan was not a "subterfuge" toevade the purposes of the ADEA. In Betts, the Supreme Courtheld that to demonstrate that a plan was a subterfuge, theplaintiff was required to prove that the employer actuallyintended for the plan to discriminate in a "non-fringe benefit"aspect of the employment relationship. The Act overturns theBetts decision and, with the significant exceptions discussedbelow, limits any differences in benefits based on age to thosedifferences that can be justified by age-based cost differences.

The Act specifically incorporates 29 C.F.R. '625.10, theEEOC guideline on equal cost that was invalidated by Betts.2However, The Act specifically excepts from the equal coststandard certain types of voluntary early retirement incentiveplans. In addition, the Act permits, in limited circumstances,the integration of severance benefits with pension benefits andthe integration of disability benefits with pension benefits.

II. Early Retirement Incentive Programs

The Act has a significant impact on the legality of earlyretirement incentive programs that have been widely used byemployers facing force reduction needs. While earlier versionsof the bill raised serious questions regarding their continuedviability, the Act, as passed, affirms the validity of theseprograms in appropriate situations. Indeed, the Statement ofManagers3 recognized their popularity with workers, stating:

We recognize that employees may welcome theopportunity to participate in such programs, and wedo not intend to deprive employees of suchopportunities or to deny employers the flexibility tooffer such programs rather than resorting toinvoluntary layoffs.136 Cong. Rec. S13596.

There generally have been two types of lawsuits in thevoluntary early retirement program area. First, older workerswho were ineligible for a program based on their age broughtsuit because they wanted to participate and claimed that theeligibility provisions of the plan unlawfully excluded them.

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.4

Second, workers who were included in the program, andelected to retire, brought suit alleging that they were in factcoerced into retiring because of their age. As discussed below,the Act will affect both types of lawsuits.

A. Challenges to Plan Design

I. Prima Facie Case

An early retirement incentive program that contains noupper4 age restriction, either expressly or as a result of theplan's normal retirement age, does not create a prima faciecase of age discrimination under Section 4(a) of the ADEA.The Statement of Mangers makes clear that the affirmativedefenses in the Act do not come into play "unless a prima faciecase of age discrimination has been established under Section4(a)." 136 Cong. Rec. S '.13596. The Statement of Managersalso describes a number of types of lawful incentive plans thatdo not have upper age restrictions:

It is also clear that a wide variety of voluntary earlyretirement incentive plans would be lawful under theADEA. For example, early retirement incentives thatprovide a flat dollar amount (e.g., $20,000), servicebased benefits (e.g., $1,000 multiplied by the numberof years of service), or a percentage of salary to allemployees above a certain age were permissiblebefore the Betts decision and would remain lawfulunder this substitute. Similarly, early retirementincentives that provide flat dollar increases inpension benefits (e.g., $200 per month) or per:entageincreases (e.g., 20%), would continue to remainlawful. Finally, early retirement incentives thatimpute years of service and/or age would satisfy theADEA. For example, a plan that gives employeeswho have attained age 55 and who retire during aspecified window period credit for 5 additional yearsof service and/or age would be lawful.136 Cong. Rec. S13596.

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Presumably, programs of the type described above are lawfulunder the Act because no prima facie violation can be shownand would not need to meet the standards in either Section4(1)(1)(B) or Section 4(f)(2)(B)(ii) that are discussed below.

2. Early Retirement Subsidies andSocial Security Supplements

Section 4(1)(1)(B) of the Act expressly authorizes theprovision in a defined benefit plan of a subsidized earlyretirement benefit or social security supplement. Subsidizedearly retirement benefits are plans that eliminate on atemporary or permanent basis, all or part of the actuarialreduction that would otherwise occur for employees who retireearly. These plans are lawful even though the value of theinducement diminishes with age and is available to only thoseemployees who retire prior to normal retirement age. S. Rep.101-263 at 21 ("Committee Report").5 The Committee Reportaddressed an earlier version of the bill and should be usedcarefully in determining the meaning of the Act as passed.

Similarly, Section 4(1)(1)(B) of the Act expresslyauthorizes social security supplements, sometimes referred toas social security "bridge payments." Accordingly, a definedbenefit plan may provide for a fixed monthly payment to anearly retiree intended to substitute for social security benefitsthat will become available to the retiree either at age 62(eligibility for reduced social security benefits) or age 65(eligibility for unreduced social security benefits). Id. Again,these programs are lawful under Section 4(1)(1)(B) of the Actand the language in Section 4(f)(2)(B)(ii) that requires anadditional showing that a program is "consistent with therelevant purpose or purposes" does not apply. 136 Cong. Rec.513596.°

It should be recognized that Section 4(1)(1)(B) onlyauthorizes "subsidies" that offer an inducement to voluntaryearly retirement by eliminating or reducing the normalactuarial reduction otherwise provided in a plan. Earlyretirement programs that also offer additional service credit upto normal retirement age would not be exempted by 4(1)(1)(B).

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For example, a plan with a normal retirement age of 65 mightoffer to treat employees age 60 or above who elect to retireduring a "window" period as if they had already reached age 65in terms of both age and service credit. Because additionalservice credit offered under such a plan would be diminishedwith age and would be unavailable to any employee age 65 andabove, a prima facie case could be established. As a result, forsuch a plan to be lawful it would have to be justified underSection 4(f)(2)(B)(ii), which is discussed below.

3. Other Early Retirement Incentive Plans

As noted earlier, the Act adds to the ADEA a new Section4(f)(2)(B)(ii) which provides that an employer may observe theterms of "a bona fide employee benefit plan that is a voluntaryearly retirement incentive plan consistent with the relevantpurpose or purposes of this Act." As noted above, thisstandard does not apply to early retirement incentive plansunless a prima facie case of age discrimination has beenestablished under Section 4(a) of the ADEA. Nor does it applyto subsidized early retirement benefits or social securitysupplements subject to Section 4(1)(1)(B). However, all otherearly retirement incentive programs must satisfy Section4(f)(2)(B)(i i).

According to the Statement of Managers, the requirementthat an early retirement incentive plan be "consistent with therelevant purpose or purposes" (emphasis supplied) of the Actgenerally requires that the plan be consistent with the purposeof prohibiting arbitrary age discrimination in employment.However, such a plan need not be consistent with everypurpose of the ADEA (e.g., the promotion of employment ofolder persons on the basis of ability rather than age). See 136Cong. Rcc.. S13596.

The Statement of Managers provides, however, that awindow benefit plan which includes an upper age limit mayconflict with the purpose of prohibiting arbitrary agediscrimination. 136 Cong. Rec. S13596. The legislativehistory does not give specific examples of programs with upperage limits that are lawful or unlawful. This is an unsettled

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area, which the Committee Report indicated should be"decided on a case-by-case basis, taking account of all relevantfacts and circumstances."7 Committee Report at 28.

B. Challenges to Voluntariness

Section 4(f)(2) requires that early retirement plans bevoluntary. A retiree claiming discrimination in connectionwith his departure has the burden of proving that his retirementwas involuntary.8 The Statement of Managers provides:

The Managers wish to make clear that it is theplaintiff's burden under the ADEA to demonstratethat his or her retirement was involuntary. Such aclaim would be raised under section 4(a). Under theADEA, an employer does not have to prove that anearly retirement incentive plan is voluntary. Ofcourse, no employee benefit plan - including an earlyretirement incentive plan - may require or permit theinvoluntary retirement of any individual.

* * *

Because, by definition, early retirement incentiveplans are made available exclusively to olderworkers, relevant circumstances must be carefullyexamined to ensure that older workers make avoluntary decision. In order to determine whether avoluntary derision has been made, among the factorsthat may be relevant are (1) whether the employeehad sufficient time to consider his or her options; (2)whether accurate and complete information has beenprovided regarding the benefits available under theearly retirement incentive plan; and (3) whether therehave been threats, intimidation and/or coercion. Theemployee retains the burden of proof regarding theissue of involuntariness.136 Cong. Rec. S13596.

In addition to making clear that the employee retains theburden of proof on voluntariness, the Statement of Managersalso provides that the attractiveness of an early retirement

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incentive does not raise an issue of voluntariness. 136 Cong.Rec. S13596. In other words, an employee will not be able toestablish that his retirement was involuntary because theincentive was "too good" to pass up. Id.

III. Benefit Coordination and Integration

Several common employer practices involving benefitintegration are affected by the Act. For example, employeebenefit programs may integrate severance and pension benefitsby providing that an employee eligible for retirement will haveseverance benefits reduced or eliminated. Similarly, employeebenefit programs frequently offset pension benefits againstdisability benefits.

A. Severance Benefits

The Act generally prohibits the integration of severanceand pension benefits, except pursuant to Section 4(1)(2) withrespect to severance benefits that are triggered by a contingentevent unrelated to age (e.g., a plant shutdown). Followingsuch a contingent event, where an individual is eliaible for notless than an immediate and unreduced pension, the value ofany additional pension benefits made available solely as aresult of the contingent event may be deducted from severancepay. In addition, retiree health benefits which meet minimumstandards set forth in the Act9 may be deducted from anyseverance pay made available as a result of a contingent event.

B. Disability Benefits

The Act also restricts the integration of disability andpension benefits. Section 4(1)(3) authorizes an offset againstdisability benefits, but only for pension benefits (other thanthose attributable to employee contributions) that the employee(1) voluntarily elects to receive or (2) is entitled to receive atthe later of age 62 or the normal retirement age under the plan.With regard to this provision, Senator Jeffords stated:

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submitted by UNUM Corp., the nation's largestdisability insurer. UNUM's views were described inthe preamble to a 1979 amendment to the DOLinterpretive bulletin that preceded the current EEOCguideline and support reductions for disabilitybenefits in accordance with the following schedule:

Duration ofBenefits

Age at Disablement in years

61 or younger To age 6562 3 1/2 years63 364 2 1/265 266 1 3/467 1 1/268 1 1/469 1

44 Fed. Reg. 30648, 30655 (May 25, 1979).

Although the DOL did not verify the accuracy of the dataunderlying UNUM's position, it was the DOL's view that "thedata indicate how the duration of benefits could be reduced toavoid increases in costs." Id. Thus, there has long been anargument that the UNUM schedules are part of the EEOCequal cost safe harbor.

While it is not entirely clear whether disability benefitreductions pursuant to the UNUM schedule were incorporatedin the EEOC guideline, there is no doubt that the EEOCguideline, and its safe harbor, have been adopted by the Act.Section 4(f)(2)(B)(i) expressly refers to 29 C.F.R.§ 1625.10, without restriction, and the legislative historyprovides:

Mr. BENTSEN. My next question is regarding theequal benefit or equal cost standard which is codifiedby section 103 of your bill into section 4(f)(2)(B)(i)of the ADEA. As I understand section 4(f)(2)(B)(i),

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It is my understanding that agreement has beenreached that these two benefits can be integrated insuch a way that the employee receives combinedpayments at the level of the greater of either pensionor disability. Thus, the income stream to theemployee is not decreased, only the source of thefunds is shifted.136 Cong. Rec. S13606.

Thus, while disability benefits may be offset by pensionbenefits, the total amount received by the employee must beequal to the greater of the two benefits.1°

With regard to cost-based limitations on the periods ofeligibility for disability payments, Section 4(f)(2)(B)(i)expressly incorporates 29 C.F.R. § 1625.10, the EEOC's equalcost guideline. That guideline contains a safe harbor fordisability benefits, which provides:

An employer which provides long-term disabilitycoverage to all employees may avoid any increases inthe cost to it that such coverage for older employerswould entail by reducing the level of benefitsavailable to older employees. An employer may alsoavoid such cost increases by reducing the duration ofbenefits available to employees who become disabledat older ages, without reducing the level of benefits.In this connection, the Department would not assert aviolation where the level of benefits is not reducedand the duration of benefits is reduced in thefollowing manner:

(A) With respect to disabilities which occur atage 60 or less, benefits cease at age 65.

(B) With respect to disabilities which occurafter age 60, benefits cease 5 years after disablement.Cost data may be produced to support other patternsof reduction as well. 29 C.F.R. § 1625.10(f)(1)(ii).Among the "other patterns of reduction" referencedin the final sentence are those contained in comments

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it completely incorporates the definition,interpretation, and application of the equal benefit orequal cost rule contained in 29 C.F.R. section1625.10. Is that correct?

Mr. PRYOR. That is correct. In fact, section 4(1)(2) (B) (i) specifically incorporates all 29 C.F.R.section 1625.10.

136 Cong. Rec. S13609.11

IV. Retiree Health

The Committee Report raised a new and difficult issuewith regard to retiree medical benefits by suggesting that anemployer that provides retiree medical benefits cannot providebenefits (taking into account Medicare) that are higher forearly retirees than for older retirees. The Committee Reportprovides:

The Committee intends to approve the parallelpractice of integrating retiree health benefits withMedicare, which is already permitted under theregulation. See 29 C.F.R. 1625.10(e). Theavailability of Medicare benefits from the federalgovernment will not justify a reduction in employer-provided retiree health benefits if the result is that,taking the employer-provided and government-provided benefits together, an older retiree is entitledto a lesser benefit of any type (including coverage forfamily and/or dependents) than a similarly situatedyounger retiree.Committee Report at 21-22.

The legislative history of the Senate Substitute disavowsthis position. The Statement of Managers describes thecommon employer practice of sponsoring retiree medical plansthat provide medical coverage for retirees only until the retireebecomes eligible for Medicare, and notes that in many casesthe value of the medical benefits the retiree receives before

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becoming eligible for Medicare exceed the total value of theretiree's Medicare benefits and the medical benefits theemployer provides after the retiree attains Medicare eligibility.The Statement of Managers expressly provides that "[t]hesepractices are not prohibited by this substitute." 136 Cong. Rec.S13597.

The Statement of Managers also provides that "nothing inthis [Act] should be construed as authorizing a claim on behalfof a retiree on the basis that the actuarial value ofemployer-provided health benefits available to that retiree notyet eligible for Medicare is less than the actuarial value of thesame benefits available to a younger retiree." 136 Cong. Rec.S13597. Indeed, a colloquy suggests that retirees are generallyoutside the protection of ADEA:

Mr. BENTSEN. Is it the understanding of theSenator that the Age Discrimination in EmploymentAct does not apply to retirees?Mr. PRYOR. The distinguished Senator is correct.The ADEA applies only to employees and thoseindividuals seeking employment. However it doesapply to an individual whose retirement benefits arediscriminatorily structured prior to retirement.

136 Cong. Rec. S13609.

V. Effective Date

Title I (the provisions discussed above) of the Act applieson a prospective basis only, and establishes different effectivedates for collectively bargained and non-collectively bargainedplans. With respect to collectively bargained plans, where anemployee benefit is provided in accordance with a collectivebargaining agreement that (1) was in effect on October 16,1990, and (2) terminates after October 16, 1990, the Actapplies to such employee benefit upon the earlier of June 1,1992 or the date the collective bargaining agreementterminates. With respect to collective bargaining agreementsentered into after October 16, 1990, the Act applies to any

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employee benefits provided under such collective bargainingagreement on the date the agreement is entered into.

With respect to employee benefits that are not providedpursuant to a collective bargaining agreement, where a benefitis established or modified after October 16, 1990, the Actapplies to such employee benefit on the date such benefit isestablished or modified. With respect to employee benefitscurrently in existence, the Act becomes effective on April 14,1991 (180 days after the date of enactment). Consequently, itis possible for the same employer to have multiple effectivedates with respect to both collectively bargained andnon-collectively bargained employee benefits.

The Act has no effect on pending cases, even those thatwere pending at the time of the Betts decision. With respect tosuch ongoing litigation, Senator Jeffords stated:

It is my clear understanding that cases that werepending at the time of the Betts decision will not beaffected by the 7Iew law, even if they remain pendingon the date of enactment.136 Cong. Rec. S13606.

Thus, a number of companies currently engaged in ADEAlitigation concerning employee benefit issues will not havetheir cases affected by the changes made in the Act.

VI. Waivers

Title II of the Act drastically limits an employer's abilityto rely on employee waivers under the ADEA. The onlywaivers allowable under the Act are those that are deemed"knowing and voluntary," and the Act establishes an objectiveprocedure an employer must follow in order for a waiver to bedeemed knowing and voluntary. Further, the Act requiresemployers to provide extensive written notice when offering anearly retirement incentive program or other employmenttermination progrqm.

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The Act provides two alternative tests for determiningwhether a waiver is knowing and voluntary. Under the firsttest, a waiver pursuant to an agreement between the employerand employee must meet the following requirements:

o The waiver must be part of a written agreement,written in a manner calculated to be understood;

o The agreement must specifically refer to thewaiver of rights and claims under the ADEA;

o The employee may not waive rights or claimsthat arise after the date of the agreement;

o The agreement must provide that waived rightsor claims are exchanged for considerationreceived by the employee that is in addition toanything of value to which the employee isalready entitled;

o The employee must be advised in writing toconsult with an attorney before signing theagreement;

o The employee must be given a period of at least21 days within which to consider theagreement; and

o The employee must be permitted to revoke theagreement for a period of at least 7 daysfollowing the execution of the agreement.

In addition, where the waiver is requested in connectionwith an exit incentive or other employment terminationprogram offered to a group or class of employees:

o The employee must be given a period of 45days, rather than 21 days, during which toconsider the agreement; and

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o The employer must iniorm each employee inwriting as to

o The class, unit, or group of employeescovered by the program, any eligibilityfactors and any time limits applicable tothe program; and

o The job titles and ages of all employeeseligible or selected for the program andthe ages of all individuals in the same jobclassification or organizational unit whoare not eligible or selected.

The second test relates to waivers executed in connectionwith the settlement of an EEOC charge or court action. Underthe second test, a waiver must meet the requirements listedabove with the exception that, rather than the 21 or 45 dayperiod, the individual must be given a "reasonable period oftime" within which to consider the settlement agreement.Also, the individual is not entitled to the 7 day revocationperiod, nor is the special notice regarding window benefitsrequired.

Finally, the Act provides that in the event of any disputewith respect to whether the waiver was knowing or voluntary,the party asserting the validity of the waiver has the burden ofproving that each of the above-listed requirements was met.However, the Statement of Managers provides that theemployer's burden is limited to establishing that it followed theobjective steps required by the Act. On the ultimate issue ofwhether the waiver was "knowing and voluntary," theStatement of Managers provides that the Act is not intended todisturb existing law allocating burdens of proof andproduction. 136 Cong. Rec. S13597. As a result, this ultimateburden will ordinarily rest with the individual challenging thewaiver.

Effective Date - The provisions of Title II are effectiveupon enactment, and apply to any waiver that occurs afterOctober 16, 1990.

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SI

Notes to Part 4

Ronald S. Cooper is a Partner in the Washington, D.C. law firm ofSteptoe &Johnson. He was closely involved in the legislative processleading up to the passage of the Older Workers Benefit Protection

Act.

The legislative history approves the use of generally acceptedactuarial principles to determine cost. The Statement of Managers inthe Senate provides:

The substitute incorporates the equal benefit equal cost ruleinto section 4(f)(2). We note that in complying with thisprovision, the employer may base necessary cost data ongenerally accepted actuarial principles, such as actuarialextrapolation, smoothing and averaging, and on the use ofreasonable related data -- e.g., as to the effects of aging ondisability incidence and costs. In all circumstances, theemployer must base calculations on the best reasonablyavailable data.136 Cong. Rec. S13597 (daily ed. Sept. 24, 1990) (Citations tothe Congressional Record herein are to the daily edition.)

The Act was the product of a compromise in the Senate thatsignificantly modified the bill as previously reported by the SenateLabor and Human Resources Committee. The Statement of Manapershad the effect of revising the prior legislative history.

Section 4(1)(1) expressly authorizes the requirement of attaining aminimum age in order to qualify for an early retirement benefit.

The Committee Report addressed an earlier version of the bill andshould be used carefully in determining the meaning of the Act aspassed. See supra note 2.

However, Section 4(1)(1)(B) requires either type of benefit to bemade under a "defined benefit" plan in order to avoid any challenge.Thus, it is imperative that if comparable subsidized early retirementbenefits will be offered under a "top hat" plan, in order to avoid thediscrimination requirements under the Code, that such benefits beprovided under a defined benefit plan as defined in ERISA (35).

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7

8

9

10

11

J.

In the debate in the House, several proponents suggested thatemployers could not rely on cost data in meeting their obligation ofshowing that a plan was "consistent with the relevant purpose ofpurposes of the Act." See 136 Cong. Rec. H8618 (daily ed. Oct. 2,1990) (statement of Rep. Clay); Id. at H8623 (statement of Rep.Roybal); Id. at H8626 (statement of Rep. Hawkins). These statementsare not supported in the Senate history of the compromise, and wouldmake it virtually impossible ever to establish a Section 4(f)(2)(B)defense. Nevertheless, the showing that would meet this new standardremains unclear.

This shifting of the burden of proof is a victory for employers. In thebills as reported by Committee in both the Hous,; and Senate, theemployer would have born the burden of proving that each acceptancewas voluntary.

The standards applicable to retiree health benefits are set forth atSection 4(1)(2)(D). For retirees under age 65, the benefits must be atleast comparable to those provided under Medicare. For retirees age65 and older, the benefits must be at least comparable to a plan thatprovides benefits with one-fourth the value of those provided underMedicare.

In addition, the legislative history makes clear that the Act permits thecommon employer practice of providing Social Security disabilitysupplements under a pension plan, which are discontinued when thepensioner becomes eligible for Social Security disability benefits.136 Cong. Rec. S13601.

The broad statement that the Act "completely incorporates thedefinition, interpretation, and application" of the EEOC regulationsupports an argument that the UNUM schedule. as part of theregulation's preamble, also is incorporated. And this certainly was theview of UNUM Corp., which testified in support of the Act. 136Cong. Rec. S13605.

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6 3

1.

PART 5

Ten Guidelinesfor

Employers ConsideringDownsizing

Don't equate downsizing with mere head countreduction. Corporate consultant Robert Tomaskodescribes it as a carefully thought-out process of"reshaping the corporation for the future." There areno quick fixes.

2. In every decision related to downsizing, determinehow it may directly or indirectly affect olderworkers. Make sure the result of such decisions willbe age neutral before implementing them. Evenenlist the help of an advisory committee includingolder managers and workers, and retirees.

3. Make sure all levels of management are sensitized toageist stereotypes and behaviors and trained in thebasic requirements of the ADEA. Even anage-neutral company decision can becomediscriminatory in the hands of an untrained manager.

4. Avoid age caps in exit incentive programs.Minimum age requirements normally are not aproblem.

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5. Give employees plenty of time to consider an exitincentive offer and plenty of resources to evaluate theoffer, so that their decisions are knowing andvoluntary.

6. When a downsizing plan is announced and carriedout, communicate fully, objectively, and uniformlywith all workers. Consider preparing a script for theresponsible managers so that information and adviceis given properly and consistently.

7 Remember that severance and other benefits areprotected under the ADEA. Pension eligibilitygenerally cannot be used to offset severance benefits.(The Older Worker Benefit Protection Act allowsonly very narrowly defined offsets of severance bycertain health benefits and pension "shutdownsweetners.")

8. Performance ratings can be an effective, humanresource criteria for downsizing; but make sureperformance evaluations are...o age neutral in content,o age neutral in the way they are used,o effective, that is, they have "teeth."

9. Provide employees who are terminating, under eithervoluntary or involuntary exit programs, a full rangeof outplacement services, such as immediate andfollow-up counseling; lessons in job hunting, careerplanning, interview techniques, and resume writing;and office space, telephones, and secretarial help tofacilitate job searches.

10. Consider new and flexible ways to tap the potentialof older workers through retraining, part-timeemployment, job redesign, phased retirement, andother strategies.

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Documents

DOCUMENT RESUME ED 360 542 CE 064 325 TITLE Work Force … · 2014-05-05 · ED 360 542 TITLE. INSTITUTION. SPONS AGENCY PUB DATE CONTRACT NOTE AVAILABLE FROM. PUB TYPE. EDRS PRICE