Terminating the Employment Relationship

1. G ENERAL I NCENTIVES

a. Compliance with ADEA and FEHA The ADEA is a federal law that prohibits employers from discharging or refusing to hire any individual, or otherwise discriminate against any individual with respect to his or her compensation, terms, conditions or privileges of employment, because of the individual’s status as a person over age 40. 287 However, the ADEA contains a “safe harbor” provision, which provides that it is not unlawful for an employer to observe the terms of a bona fide employee benefit plan that is a voluntary early retirement incentive plan consistent with the relevant purpose or purposes of the ADEA. 288 Moreover, it is not unlawful for an employer to maintain an employee pension benefit plan that provides for the attainment of a minimum age as a condition of eligibility for normal or early retirement benefits. A plan is considered “bona fide” if its terms, including cessation of contributions or accruals in the case of retirement income plans, have been accurately described in writing to all employees and if it actually provides the benefits in accordance with the terms of the plan. 289 In order to fall under the ADEA’s safe harbor provision for voluntary early retirement incentives, the incentive must not arbitrarily decrease the amount of the incentive or terminate the incentive based solely on the employee’s age unless a statutory exemption applies, and the acceptance of that incentive must be truly “knowing and voluntary.” 290 The FEHA makes it unlawful for employers to, among other things, discriminate against an employee in compensation or in terms, conditions or privileges of employment based on the employee’s protected status, including being over the age of 40. 291 FEHA does not contain statutory parameters for employee benefit plans or voluntary early retirement incentives like the ADEA, nor has the Fair Employment and Housing Commission released any guidance on the issue. Very few cases have been brought under FEHA relating to the offering of an early retirement incentive. Thus, no published court decision has expressly stated that compliance with ADEA with regards to an early retirement incentive does or does not equate to compliance with FEHA. At least one published case was brought under a theory that an early retirement incentive program had a disparate impact on employees over the age of 40 in violation of FEHA, as well as the ADEA. The court entertained the theory, but ultimately found that statistically, there was insufficient evidence to show the early retirement incentive had a disparate impact on persons over the age of 40. 292 Employers should ensure that early retirement incentives are in compliance with the ADEA. If the incentive and the early retirement incentive agreement between the employer and employee are in compliance with the ADEA, it is likely, though not certain, that the early retirement incentive and agreement will be in compliance with FEHA.

Terminating the Employment Relationship ©2019 (s) Liebert Cassidy Whitmore 82