VIEWPOINTS : THE END OF MANDATORY RETIREMENT : Ban Sounds Good, but It Will Hurt Employees, Firms
Recent action by Congress barring employers from implementing a mandatory retirement policy is like many initiatives from Washington--superficially appealing but ultimately harmful to both employers and employees.
In its rush to adjourn, Congress this fall passed an amendment to the Age Discrimination in Employment Act to ban mandatory retirement policies.
As of Jan. 1, 1987, employers no longer will have the option of requiring workers to retire at age 70. Employers will be able to dismiss workers only “for cause,” meaning that there will be no distinction between a 75-year-old and a 25-year-old for employment purposes. (An exception is made for highly paid policy-makers.)
On the surface, the change sounds great and seems to represent basic fairness. But is it really fair and is it sound public policy?
The new law could make life more difficult for older employees whose abilities have diminished. It will inhibit employers from grooming replacements for older workers, and mean less room at the top for talented younger employees.
The new law, by creating uncertainty about who will stay on beyond age 70, also will interfere with the ability of employers to plan their pension costs.
Retirement at age 70 is both reasonable and fair. Most workers retire voluntarily long before turning 70, and the trend is toward a lower average retirement age. The average retirement age is 63 and has been falling for 25 years.
Furthermore, in 1978 Congress raised the age cap for mandatory retirement to 70 from 65--which was a reasonable accommodation to the societal shift toward better health and longer life expectancy.
Current law allows older employees a dignified retirement on a specified date. There are no warnings or negative evaluations; there are no declarations that an older worker can no longer do the job--even when the truth is that he or she can’t.
Employers don’t like to tell senior workers that their abilities have diminished, and employees don’t like to hear it. So now, on retirement day there is usually an appropriate farewell party and a hearty “thank you.”
Under the new law, older workers will be subjected to more rigorous performance evaluations, and the dismissal of many older workers may well be accelerated.
Consider what might happen to the 68-year-old worker who is still reasonably competent but not quite as sharp and energetic as he or she once was.
Employers now sometimes “carry” such a worker in anticipation of certain retirement at 70. If the retirement date is no longer certain--and the employer has to show just cause whenever the older employee is dismissed--virtually no incentive exists to retain the 68-year-old employee whose skills have declined.
Faced with the prospect of carrying a 68-year-old employee whose skills have diminished for an additional 15 years, instead of an additional two or three years, an employer may have no choice but dismissal.
Lifting the retirement age thus may shorten the careers of many older workers--achieving exactly the opposite of what was intended by proponents of the new legislation.
Implicit in mandatory retirement is the understanding that companies will keep employees on the job even if less expensive, equally competent younger people come along.
In return, employees agree to move on without a hassle when they reach retirement age. Older employees can plan for a dignified retirement, and employers can groom replacements. That is not such a bad deal.
While proponents claim that 196,000 jobs will be preserved for older workers, they fail to acknowledge the cost. Jobs may be retained by workers aged 70 and older but with a reduction in job opportunities for younger workers, many of whom are starting out their careers and may have a more critical need for employment.
Moreover, lifting the age 70 retirement cap and implicitly encouraging for-cause dismissals will greatly expand the number of potential plaintiffs making age-discrimination claims in our courts.
In an already overly litigious society, employers will face more litigation, bigger legal fees and greater liabilities.
Already, equal-employment claims have shifted somewhat from race- and sex-discrimination to age-discrimination. Since 1971, the number of age-discrimination lawsuits brought against employers has risen 100%.
Fundamental to the problem is the Age Discrimination in Employment Act itself, which includes two provisions unique among our equal-employment laws: liquidated damages (double back-pay) and jury trials.
The result is that our courts are being used for more and longer litigation that is less likely to be meritorious, less likely to be settled and more likely to be appealed. The prospect of double back-pay discourages out-of-court settlements.
There is no justification for providing double damages for ADEA verdicts when they are unavailable in other employment-discrimination cases.
Similarly, there is no justification for jury trials under ADEA when the civil rights laws (Title VII) have been enforced effectively for more than 20 years without jury-trial litigation.
The ADEA is now a vehicle for large, and often undeserved, recoveries by plaintiffs.
With the prospect of large damage awards and the tendency of juries to sympathize with plaintiffs, enforcement has become inequitable to employers.
The next Congress should make ADEA consistent with all other equal-employment laws by eliminating the liquidated-damage and jury-trial provisions.
Congress’ recent action prohibiting mandatory retirement policies not only ignores these enforcement problems; it exacerbates them. Employers will be hurt by this legislation. Ironically, so will employees.
Mark A. de Bernardo, manager of labor law for the U.S. Chamber of Commerce, contributed to this piece.