InsideCounsel » September 2007
Layoff Liabilities
Aging workforce sparks growth in ADEA class actions.
When Guidant Corp. decided to lay off more than 700 of its 8,700 employees in 2004, the company no doubt thought it was insulated against potential age discrimination complaints by a severance package that required employees to sign a release of claims.
It didn't turn out that way. In July 2007 the 8th Circuit declined to hear an appeal by Guidant (now Boston Scientific Corp.) of a Minnesota district court decision that invalidated the releases, allowing an age discrimination claim by 59 former Guidant employees to proceed.
The case brought into focus important issues for employers as the collision of two major forces in corporate America—an aging workforce and a wave of restructurings—propels a growing number of age discrimination class actions.
Plaintiffs formerly used the Age Discrimination in Employment Act (ADEA) primarily in individual cases alleging failure to hire or discriminatory disciplinary action—cases that were difficult for them to prove. They're now filing more class actions following Reductions in Force (RIFs), using statistical evidence to demonstrate a disproportionate impact on workers over age 40. And what used to be an employer's best preventative strategy—tying severance benefits to release of claims—is under attack by the plaintiffs' bar.
"These age suits are becoming more prevalent and more difficult to defend," says Andrew Prescott, partner in Nixon Peabody. "Given the demographic factors of an aging workforce, the potential for a problem of age discrimination arising in a RIF is very likely."
Uphill Climb
Defense attorneys who try RIF-related age discrimination cases start with an uphill climb because juries sympathize with the plaintiffs. They also recognize that older workers will have a tough time finding new jobs.
"Jurors can identify with the plaintiffs because everyone knows what it means to be old—they see themselves or their father or their grandfather," says Jane McFetridge, partner in Fisher & Phillips.
Plaintiffs have another edge because demographics work in their favor. Because the median age of the U.S. workforce is over 40, RIFs usually include large numbers of age-protected workers. And because RIFs are driven by the need to cut costs, well-compensated people—usually older workers—often are targeted for layoff.
The ADEA provides an exception if employers can show an employment action was based on "reasonable factors other than age." The problem is that defense attorneys often have a tough time explaining RIF decisions to juries.
