Can You Require an Employee to Retire Instead of Firing Them?
Perhaps you’ve noticed that an older employee’s productivity has slumped. They’re struggling to acclimate to new technology. Their values clash with younger workers at the company.
As an HR manager contemplating how to retrain, redirect, and harmonize the situation, perhaps the thought crosses your mind: “It would be nice if they would just retire….” And if the circumstances have advanced to the point where you’re considering an involuntary termination, you may even wonder if you can offer them a choice: be fired or retire.
But can you do that? Can you give an employee the choice to be terminated or retire?
Be Fired or Retire: Is It Legal?
I don’t blame you for considering this idea. In a way – perhaps a Darwinian way – it’s practical. After all, their career is winding down. Why not make more space for younger, more ambitious, potentially more capable workers?
However, let me be straight with you from the get-go: Doing this is illegal. It could lead to a lawsuit based on age discrimination. And, honestly, you’re losing the benefits experienced workers bring.
Let’s jump back to the legality of this scenario. Specifically, it is illegal because of the Age Discrimination in Employment Act of 1967, or the ADEA. The ADEA affords protections for older workers, encouraging workplaces of mixed generations and ages.
It was passed in reaction to once-common discriminatory practices, like barring workers from applying if they were over the ripe old age of 45 – according to a U.S. Department of Labor report from 1964 – and forcing employees to retire once they reached a certain age.
At the same time, the pains of an organization with multigenerational staff members are real. Especially as the age gap widens, you may have difficulty integrating different teams, skill sets, and attitudes.
Think of how a Zoomer employee, who grew up with screens, might grit their teeth as a Boomer employee struggles to navigate Zoom. Or the awkward conversations might arise around varying levels of socially liberal and conservative viewpoints at the water cooler.
For this reason, you may wonder if there is a legal way to encourage older employees to retire when, perhaps, the benefits of their experience no longer outweigh the cost of their out-of-touchness. Actually, yes. You may be surprised to learn that, done in a nondiscriminatory way, incentivizing early retirement is legal.
ERIP
Early Retirement Incentive Plans (ERIPs) were an exemption to the ADEA introduced in 1990 with the passage of the Older Workers’ Benefit Protection Act (OWBPA). That’s a lot of acronyms, but the gist is that this exemption was added to address the above struggle with aging employees in the workplace. Sometimes things are fine, but sometimes it would help a company culturally and financially for some older workers to move on. This is allowed under the condition that ERIPs still further the purpose of the ADEA.
These plans must meet three major criteria:
- They are purely voluntary
- The employee has a reasonable amount of time to consider the plan before agreeing to it or declining it
- The policy does not use age as an eligibility factor, either via age limit or age window.
- They do not result in arbitrary age discrimination
We’ll go through some nuances of ERIPs below.
Can You Address Age At All in Your ERIP?
As mentioned above, you can acknowledge age in some ways, but you cannot make age the sole factor in an ERIP. An obvious violation would be lessening employee retirement benefits as their retirement age increases ( i.e. “You get fewer benefits if you retire at age 65 than if you retire at age 62.”).
That policy doesn’t propose an incentive – rather, it’s punitive toward employees who stay at the company past a certain age, which qualifies as age-based discrimination.
You can stipulate conditional elements of the ERIP based on when an employee started and their age when they leave. This addresses the duration of time at the company, not how old or young an employee may be.
The ADEA deems it reasonable to alter employees’ retirement benefits based on their tenure at the company. After all, their time at another company is not in your jurisdiction.
Controls – and Lack of Control
Since ERIPs are broad, company-wide offerings rather than targeted propositions to specific employees (which could feel pressured and involuntary), you’ll want to use some foresight in your policy limitations. We’re only human, and you might find yourself hoping that certain employees will take the ERIP and others won’t. However, whichever employees opt for an ERIP – you must accept that they’re leaving. You don’t have control there.
However, you can implement a cap on how many employees of a particular experience level or skillset can retire at once. Otherwise, a department could suddenly lose all its skilled, experienced workers! This would understandably jeopardize operations. Legally, you’ll see a reference to this as “employees who serve critical functions.” You have some control in this area.
What If an Older Employee Is Doing a Bad Job?
You may worry that the involuntary termination of an older employee could look like age-based discrimination, and you’re right to be concerned! This is where documentation is your friend.
Like any other kind of involuntary termination, you need to make detailed records of how the employee has not fulfilled their work obligations, how they’ve been notified of areas to improve, how they have failed to change, and, in some circumstances, unacceptable or even egregious misconduct.
It may be a lengthier process than you’d like, especially if an employee brings negativity to the workspace. Still, it’s better to be fair – and to ward off lawsuits – with a thorough approach to termination. Remember, firing someone changes their life permanently. Moreover, sometimes there are success stories in which a person receives feedback and changes. You never know.
Bottom Line: Organize Your ERIPs with Intention
Like most HR policies, it’s best to reflect on what you’d like your early retirement incentives to encompass before you need them. The most well-crafted policies show compassionate consideration for your older employees and workplace.
Be intentional and thoughtful in organizing your ERIP, and allow plenty of time for planning before you intend to start using it. One way to make sure you craft an ERIP that connects all of those pesky legal t’s and i’s is to work with a lawyer specializing in this type of work.
Interested in learning more? Get in touch with Treaty Oak Legal today!
