As part of any strategic plan, a company essentially asks itself the go-to interview question: Where do you see yourself in five years? Ten years? Inherent in that question is the question of who will be serving in leadership five years or 10 years from now. Succession planning necessitates talking to current key employees about their retirement plans. Planning how you will approach these conversations can help you avoid claims of age bias. Remember, there is no mandatory retirement age (with very few exceptions).
Many employees are working longer than they might have expected to at the beginning of their career. There has been a steady increase in retirement age; in 2017, a Gallup poll found that nearly 40 percent of Americans expect to retire after 65.
Age Cannot Be a Factor in Any Employment Decision
The Age Discrimination in Employment Act (ADEA) protects employees who are 40 or older from age discrimination and applies to companies with 20 or more employees. This means that a covered employer cannot consider an employee’s age in making any decision about his or her employment. For example, in identifying employees who will be laid off, it would be improper for a company to select those who are closer to retirement age. Layoff decisions must also be analyzed carefully to confirm there is no disparate impact (i.e. unintentional discrimination) on older workers.
Discussions about Retirement Planning Should Not Reference Age
Courts have recognized that employers have a legitimate business interest in knowing their employees’ plans for the future, but discussions about succession planning should be age-neutral. Obviously, a conversation that starts, “You’re getting on up there, how much longer you think you want to do this?” is more likely to be perceived as pressuring the employee to retire, or even harassing the employee, than one that approaches the issue without reference to age. Similarly, a company that initiates succession planning discussions with all employees whenever they reach a certain age may have a hard time defending a claim of age bias.
When you initiate discussions about retirement plans or succession planning, avoid any reference to age (or proxies for age such as “baby boomers” or “your generation”). The statement “the time for you to retire has come” was found to support an inference of age discrimination in one case. The better practice is to approach the discussion in terms of the employee’s career plans and goals and to try to have such discussions with all employees — or at least all employees in similar positions — regardless of age.
Do Not Pressure Employees to Retire
Some courts have found that repeatedly asking an employee about retirement or encouraging them to retire may be evidence of age discrimination. If you approach an employee about her retirement plans and she indicates that she has no plans to retire, accept the answer and move on.
On a related note, steering an employee towards retirement as a way to avoid addressing performance concerns can be fraught with peril. If the employee resists retirement and is ultimately discharged for performance, you can expect her to cite the comments urging her to retire as evidence that the real reason for termination was age. Instead, if there are performance concerns with an older worker, address those concerns directly and the same way you would any other employee. Don’t fall into the trap of pushing retirement in order to avoid tough conversations about performance.
Severance Packages and Valid Waivers of Age Claims
Companies may offer a severance package in conjunction with an employee’s retirement or early retirement, though such conversations must be handled carefully for the reasons discussed above. Unless company policy provides otherwise, severance packages should generally require the employee to provide a full release of all claims or potential claims in exchange for the severance payments. If an employee signs a valid release of claims in conjunction with a severance package, he has waived his right to later claim that the company forced him to retire or otherwise discriminated against him because of age.
Keep in mind that in order to obtain an enforceable release of claims under the ADEA you have to follow the requirements of the Older Workers Benefits Protection Act. That act generally requires, among other things, that the employee be given 21 days to consider the release and seven days to revoke the release after signing. And if a layoff or exit incentive affects more than one employee, you must give employees 40 years of age and older at least 45 days to review the release agreement, identify the “decisional units,” and disclose in the release agreement the job positions and ages of the employees in each of the decisional units.
There is no question that succession planning often has emotional and “political” aspects, but it’s important to be mindful of the potential legal ramifications as well. With a little thought and planning, companies can have the conversations necessary to grow their business and plan for the future without running afoul of the prohibition against age discrimination.