Older Worker’s Layoff Upheld on Economic Basis
A state Court of Appeal has ruled that California employers can give younger workers preference over their older counterparts if the moves are economically justified.
The ruling--in the case of an Orange County man denied a transfer in favor of younger, lower-paid co-workers--means that employers may be on safer ground legally when they order layoffs or pay cuts that take a greater toll on older employees.
The unanimous decision, written by California Appellate Justice David G. Sills in Santa Ana, notes that employers cannot lay off older workers based on the belief that they are harder to train in new technologies or are likely to be less productive than younger workers.
But it held that employers can lay off their most highly paid workers even if most of them happen to be over 40--the age in California at which employees are protected from age discrimination--so long as the reason is economic.
James J. Guziak, the Orange attorney who filed the suit, noted that the ruling “has tremendous policy ramifications,” but added that he is unsure whether to appeal.
“I’m very concerned that employers will see this decision as an invitation to go out and replace a substantial number of older workers,” he said.
It is unclear whether the ruling will have an immediate impact in most California workplaces. Federal courts have generally decided age suits along similar lines since 1993, when the U.S. Supreme Court issued an influential ruling in a pension rights case.
Although some California courts have followed the federal precedents, the issue has remained cloudier in the state. Advocates for workers now worry that the new ruling will hurt experienced, higher-paid employees.
“A lot of older workers already get laid off. I can’t help but believe that this decision is going to make it worse,” said Brad Seligman, a Berkeley workers rights lawyer.
Guziak said that in the next few weeks he will probably ask the same panel that issued the ruling last Friday to reconsider it.
If the request is rejected, he said, he could then ask the state Supreme Court to review the case or order that the opinion not be published--which would mean it could not be cited as precedent in other cases.
The ruling comes at a time when older workers, because of the national economic boom and the recovery in California, are by some accounts faring better than they have in years in the job market. Still, age discrimination claims remain widespread in the state.
Last year, the California Department of Fair Employment and Housing said it received 3,297 claims of age discrimination in the workplace, behind only sexual harassment and race discrimination.
Sills wrote that age discrimination statutes were “never intended to apply to something so basic to the running of any enterprise as its costs of doing business.”
But that’s contrary to popular understanding of age discrimination issues, said Sarah Rios, a human relations issues consultant with the Employers Group, a Los Angeles-based organization representing employers throughout the state.
Most employers, she said, believe that the law tends to protect older workers in any circumstance. “I’ve always advised [employers] that if the record shows that a great proportion of the employees affected by an action are older employees, then they can probably sue.”
Employers “still have to pay attention to the number of people over 40 being affected” by their actions, said Susan Kemp, a Sacramento labor attorney and consultant to the California Chamber of Commerce.
She cautioned employers not to change their policies until the appeals process is ended. In the meantime, she said, the ruling “underscores the need for employers to document very well that it is economics, not age, that is driving their decisions.”
Seligman, the Berkeley workers rights lawyer, argued that the decision could be influential because it casts aside a legal theory commonly applied in many kinds of employment discrimination cases.
Known as “disparate impact,” the theory focuses on whether older workers, minorities or any other classes of employees protected under civil rights laws are hurt disproportionately by an employer’s action. If so, the legal burden in the discrimination case shifts to the employer. As a result, the employer can be required to prove that the personnel move was done out of business necessity or related to job performance.
But the new ruling, Seligman said, means employers could defend themselves against age discrimination claims simply by showing that the layoffs saved them money.
When employers consider what workers to lay off in the future, “they, frankly, will be much less concerned about the age discriminatory impact of their conduct,” he said.
Los Angeles management lawyer Richard Simmons generally agreed, but said he would continue to advise employers to offer older workers a chance to keep their jobs at reduced pay rather than automatically lay them off because of their relatively high salaries.
But another prominent lawyer who represents workers, Encino attorney Joseph Posner, downplayed the practical impact of the ruling. He argued that California employers already commonly lay off older workers to cut payroll costs.
To have a strong age discrimination case, Posner said, workers’ lawyers typically have needed additional evidence, such as ageist remarks made by managers, memos singling out older workers or a longtime pattern of laying off older workers.
And even if the new ruling is upheld, he argued, such evidence will still hold sway in court. “When employers say to someone, ‘George, you’re too old,’ it’s still going to be a good case,” Posner asserted.
The ruling is part of an opinion upholding an Orange County Superior Court verdict that favored the employer in a 1993 age discrimination suit by former Ford Aerospace accountant Michael J. Marks.
Marks, a divorced father, worked for the Ford unit in Michigan and was able to frequently visit his children in Chicago because of the relatively short distance. He was transferred, despite his objections, to Newport Beach when Ford Aerospace relocated in 1988, and asked the company to transfer him back to Michigan when it sold the operation to Loral Corp. in 1990.
Instead, he said, Ford transferred the younger, lower-paid employees in his department and left him in Newport Beach with the unit acquired by Loral.
Marks, who filed his suit in 1993, was laid off by Loral in 1992 when it eliminated its corporate financial office in Newport Beach. The accountant, now 54, still lives in Orange County. He declined through his attorney to comment.
The suit--filed against Loral, as Ford Aerospace’s successor--argued that the 1990 decision to transfer only lower-paid financial office employees to Michigan was an overt act of discrimination because the higher-paid workers, like himself, were older workers. While couched as economic decisions, he argued, such actions are discriminatory because they have a disparate impact on older workers who typically are paid more.
Marks appealed the Superior Court jury case on nine separate grounds, but it was his argument that the trial judge’s jury instructions were flawed that set the stage for the Court of Appeal ruling.
The trial judge told jurors that an employer “is entitled to choose employees with lower salaries, even though this may result in choosing younger employees. If the choice is based on salary, there is no age discrimination.”
In upholding the trial court, Sills wrote that of all the grounds for appeal cited by Marks, only one--the ageism issue--”has some real substance to it.” Nearly a third of Sills’ 42-page opinion is devoted to that single issue.
Taking care to spell out that his ruling is not intended to shield employers who use economic reasons to mask what truly is age discrimination, Sills said the jury instruction in the Marks case was correct under both federal and state law.
“Employers may indeed prefer workers with lower salaries to workers with higher ones, even if the preference falls disproportionately on older, generally higher paid workers,” Sills ruled. “Decision-making by cost--reliance on relative prices if you will--goes to the very core of a market economy” like that of the United States, he said.
