How Do Age Discrimination Laws Affect Older Workers?

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How Do Age Discrimination Laws Affect Older Workers?
By Joanna N. Lahey

Introduction
The federal Age Discrimination in Employment Act (ADEA) prohibits age-based discrimination against older workers through hiring, firing, layoffs, compensation
and other conditions of employment. The law covers most workers age 40 and older in firms with 20 or more employees. The question is whether the ADEA and similar state laws have helped or hurt older workers. On the one hand, the legislation may have prevented companies from unfairly dismissing older workers. On the other hand, the fear of lawsuits may have dissuaded employers from hiring older workers. If so, the law would benefit “insiders” who already have jobs but harm “outsiders” seeking employment.
This brief discusses the history, mechanics,
and impact of age protection laws in the United States. It summarizes previous research and presents new findings using data from the Current Population Survey.

History of the ADEA
Explicit age discrimination in the workplace was relatively
common until recent decades. For example, in the first half of the 20th century, job advertisements often specified the age of prospective applicants, and firms frequently set formal age limits for hiring or promotion. In addition, less than 30 years ago, mandatory
retirement was a fact for most professions.
Concern over the economic and social costs of broad-based age discrimination gradually led to legislative
action. By 1960, several states had adopted age discrimination laws. In 1965, a U.S. Department of Labor report assessing the need for federal legislation concluded that age limits upon new hires hurt the rights and opportunities of older workers.1 The report argued that age discrimination was based on stereotypes
unsupported by fact, that arbitrary removal of older workers was generally unfounded, and that performance of older workers was at least as good as that of younger workers. In addition to the negative impact on older workers, the report concluded that

age discrimination hurt the economy by keeping productive
workers from producing. Similar arguments are still heard today.
In the wake of the Labor Department report, the federal government enacted the Age Discrimination in Employment Act (ADEA) in 1967. The ADEA prohibited age-based discrimination against most people aged 40-65 in firms with 20 or more workers.2 It passed with little controversy — only four House members and seven Senators voted against it.3 In 1978, Congress extended the protected age group to 40-70 and eliminated mandatory retirement for most federal employees. In 1979, the Labor Department gave administrative responsibility for enforcing the ADEA to the U.S. Equal Employment Opportunity Commission (EEOC), which increased resources for enforcement.4 The ADEA was also strengthened in the 1978 amendment by a provision allowing
those bringing
lawsuits based on age the right to a jury trial. Juries are more likely than judges to find for the plaintiff than for the defense in these cases.5 Finally, in 1986, Congress amended the ADEA to eliminate the upper limit on the protected age range, effectively ending mandatory retirement for all.6
Influence of Case Law on the ADEA
Case law has affected the interpretation of the ADEA by addressing two major points of contention: 1) whether or not disparate impact cases should be allowed;
and 2) who bears the burden of proof. Disparate
impact and disparate treatment cases involve whether a policy impacts a protected group differently than the unprotected group. A common example in the gender literature would be a height requirement
that has a disparate impact on women, who are shorter than men on average. For age, these questions
usually involve decisions based on seniority or wages, for example, firing those who have the highest salaries or who have been with the firm the longest. Burden of proof cases generally revolve around the question of whether the plaintiff has to prove that a policy was intentionally discriminatory, or whether the defendant has to prove that the policy had a bona fide business rationale.

In the 1971 case of Griggs vs. Duke Power Co., the Supreme Court decided that intelligence tests that had a negative disparate impact on African-Americans
could not be used for employment purposes unless the company could show that the tests were directly related to the specific jobs at hand. Thus the burden of proof was shifted to the employer in cases of disparate impact. In 1976, Mastie vs. Great Lakes Steel Corp. specifically allowed employers to look at wages and benefits in firing decisions as long as decisions
are made on an individual basis and not across the board. However, in 1987, Metz v. Transit Mix, Inc. determined that replacing an employee based on cost of employment could violate the intent of the ADEA. In 1993, the courts shifted again and Hazen Paper Co v. Biggins found that although making firing decisions
based on age stereotypes was not allowed, making firing
decisions based on seniority was. Most recently, the Supreme Court has determined in Smith v. City of Jackson that older workers can sue in federal court over claims of disparate impact.
ADEA Procedure
The procedure for filing a claim under the ADEA differs between states with and without their own age discrimination laws. Because the EEOC has a large backlog of cases, it rarely prosecutes claims itself. Instead, if a state has its own age discrimination statute, which today includes most states, then the ADEA requires the claimant to file with the state Fair Employment Practices (FEP) office within 300 days. In states without statutes, the claimant must file with the EEOC within 180 days. The EEOC can either dismiss the claim, at which point the claimant may pursue a civil action in court, or the EEOC can seek to settle or mediate. If the settlement or mediation is unsuccessful, the EEOC can then sue, or if it chooses not to sue, the claimant may sue.7 Over 95 percent of employment discrimination cases are brought by private attorneys, not the EEOC.8
Awards are limited to “make whole” status and lawyers’ fees, that is, the award returns the plaintiff to where he would have been had he not been the subject
of discrimination. These awards include hiring, reinstatement or promotion, back pay and restoration of benefits, and lawyers’ fees. Unlike race cases covered by the Civil Rights Act, additional damages are not awarded except in cases involving willful violation of law, and these are limited to twice the amount of actual damages.9
Who Uses the ADEA?
The majority of people who sue under the ADEA are white, male, middle managers or professionals over the age of 50, a point at which employers may perceive workers as less attractive than their younger counterparts.10 At the beginning of EEOC enforcement,
14 percent of claimants were women. By 2002, this number had risen to 35 percent.11 Women may not be as likely to sue under the ADEA because historically
they have had lower wages than men so they do not stand to gain as much from an ADEA lawsuit.
Employment termination
in the form of wrongful discharge and involuntary retirement,
not differential
hiring, is the basis for most suits. For example, 31 percent of cases brought under the ADEA before 1981 involved
involuntary retirement.12 Laid-off older workers
may use these laws as a sort of insurance against labor market fluctuations. One study found that employment discrimination cases filed during recessions
are more likely to settle after firing and are less likely to be won by plaintiffs than those filed when the economy is strong.13 Alternatively, when economic times are good, people encounter less discrimination and seek remedies outside the legal system.
Employers win most age discrimination cases fought in court. It is likely that when the plaintiff has a strong case the company will choose to settle out of court. Government-initiated cases also have succeeded more often than individual cases.14 Again, this difference could be because the government only chooses to initiate lawsuits where the outcome is likely to be in favor of the plaintiff.

Contact Information
Center for Retirement Research
Boston College
258 Hammond Street
Chestnut Hill, MA 02467-3808
Phone: (617) 552-1762
Fax: (617) 552-0191
E-mail: crr@bc.edu
Website: www.bc.edu/crr