Mandatory Retirement – Can You Toss the Old Guy Out?
A common trope of a 1930’s film is the callous boss handing a wizened older Wallace Barry looking man a gold watch and showing him the door as a young up-and-comer sits himself down at his desk. Is mandatory retirement legal in 2021?
With a few exceptions, the answer is no. For those employers covered by the Federal Age Discrimination in Employment Act (ADEA), it is unlawful to discriminate against employees who are 40 or more years of age. A mandatory retirement age is a form of discrimination since it is tantamount to an involuntary termination. That is the case even where the employer has a retirement policy to which the employee agrees when hired.
The ADEA has two exceptions:
A. The first exception allows a mandatory retirement age if the employer can show that age is a “bona fide occupational qualification;” (BFOQ). Generally, to establish a BFOQ, the employer must demonstrate an objective safety issue such as police or fire fighter work.
B. The second exception applies to workers in a “bona fide executive or high policymaking position”. This does not generally apply to every executive or vice president, but only those who have overall authority over the enterprise or a portion such as those occupying “c-suite” positions or who lead divisions of a larger company. Furthermore, the executive or policy maker must have been in such a position for at least two years before retirement and must be entitled to receive a pension or similar retirement benefit of at least $44,000 per year post-retirement.
The issue of mandatory retirement becomes more complex when the older worker is an equity partner and not technically an employee. This often arises in the context of law, accounting, and consulting firms. The ADEA only protects employees and not partners, who are the owners of the enterprise. In 2003, the U.S. Supreme Court created a six-part test for determining whether a shareholder of a medical practice was an employee or an owner. Some federal courts have extended the protection of the ADEA to partners particularly where the partnership is large and the partner has minimal authority and autonomy. Those courts found little to distinguish the ordinary partner in a large partnership from the ordinary employee.
While an employer may not enforce a mandatory retirement policy or use age as a criteria for termination, subject to the limited exceptions described above, the courts cut some slack regarding asking an older employee about plans for retirement. Whether such an inquiry is lawful will depend on how and why the question is asked. If asked so that the employer can engage in succession planning, the question is likely lawful. However, if it is posed as a not-so-subtle suggestion that the employer wants to employee to leave because he is older, it might be regarded as evidence of age bias.
