Working World

A new owner has bought the business that I have managed for many years. We have many older workers (mostly in their 40s and 50s), who have been with us for a long time and are good, loyal employees. The new owners want to cut benefits costs and hire workers who will put in very long hours for lower pay. They have instructed me to terminate most of our older workers to save costs. Is that age discrimination?

In a word: yes. In 1997, a California Court of Appeal ruled that a company was not liable for age discrimination when it closed a facility and transferred all employees in the corporate finance department, except the two higher-paid, over-40-year-old employees. The court ruled that an employer may choose employees with lower salaries, even though this may result in choosing younger employees. In the court’s opinion, this preference for those with lower salaries did not constitute age discrimination under the Fair Employment and Housing Act (FEHA), even though the preference disproportionally affected older workers.

The California legislature overruled this case by amending the Fair Employment and Housing Act, California Government Code 12940. That act now provides that “the use of salary as the basis for differentiating between employees when terminating employment may be found to constitute age discrimination if use of that criterion adversely impacts older workers as a group.” The legislature also declared its intent that its statutes prohibiting age discrimination be interpreted “broadly and vigorously” to protect older workers as a group, “since they face unique obstacles in the later phases of their careers” (California Government Code 12941).

To terminate employees over 40 years of age because they earn higher salaries than younger employees, or because their heath insurance premiums are more costly for the employer, may thus constitute age discrimination under the FEHA.

As a practical matter, you might try to finesse the situation by pointing out to your employer that it puts itself at risk of expensive and time-consuming litigation if it terminates the older workers as proposed. It is also illegal for your employer to retaliate against you if you protest the illegal termination of the older employees.

Amy Semmel is an attorney with the firm of Donfeld, Kelley & Rollman. Her practice emphasizes employment, trade secret and business tort law. The information discussed here is a general explanation of the law, and is not intended to serve as legal advice. Readers requiring legal advice regarding a specific situation should consult an employment attorney.