As employment attorneys, we often struggle with language to be used in termination letters and separation agreements when an employee who is being terminated is over forty (40) years old. The reason for this is that the Age Discrimination in Employment Act (“ADEA”) prohibits discrimination in hiring and continued employment based upon age. Often times, we counsel our clients to avoid the very mention of age or anything that could be construed as age based. A recent Seventh Circuit Court of Appeals decision suggests that we need not be as concerned about the mention of age or factors related to age (such as Medicare eligibility) where age is a component, but not the deciding factor in an employment decision.
In Carson et al. and Paulsin v. Lake County, Indiana, the court addressed an interesting factual situation related to providing supplemental insurance benefits to employees who had taken early retirement incentive (“ERI”) options, gone on Medicare for primary health insurance and then been re-hired as part-time employees and given the County’s Aetna supplemental health insurance coverage. The reason for offering these incentives was the impact of the “Great Recession.”
By 2013, when the ERI was offered, the County’s general fund was in the red, and its self-insurance fund for health care costs had been wiped out. The ERI, it was initially thought, would help to reduce the County’s labor and insurance costs. Unfortunately for the County, what seemed like a good idea initially turned out to be anything but. The problem was that providing supplemental health insurance benefits to the employees who had been rehired as part-time employees was going to mean that the Aetna supplemental plan would no longer qualify for special exemptions under federal law. This was going to mean that Lake County’s health insurance costs would increase exponentially, something that the County was in no position to absorb financially. The County was faced with either losing the Aetna supplemental plan altogether or absorbing the new higher costs.
Ultimately, the County opted to terminate all of the rehired retirees who were covered by Medicare and the County’s Aetna supplemental policy. This solved the County’s problem, and it was able to keep the Aetna supplemental insurance for its other employees. In the termination letters that it sent to the rehired retirees who were now being terminated, the County told the employees that they were being terminated because they met four criteria: (1) they had retired from County service and were later rehired part-time; (2) they were age 65 or older; (3) they were receiving Medicare as their primary insurance; and (4) they were enrolled in the Aetna supplemental health insurance plan. The employees were terminated and several brought suit for age discrimination under the ADEA. The plaintiffs believed that they had direct evidence of discrimination based upon the specific reference to their age in their termination letters. The court said, no so fast.
Among other factors, the court noted that a much larger group than the one that was terminated, all of whom were age 65 or older but who were not enrolled in the Aetna supplement health insurance plan were retained by the County. The court ultimately held that, with regard to the age discrimination claims, age was a “…necessary but insufficient factor…” in the decision to terminate the affected employees. Ultimately, under the ADEA age must actually motivate an employer’s decision to take an adverse employment action. The court held that in this case, the evidence did not support that conclusion. What actually motivated the employer in the instant case was cost savings, and nothing else. Age just happened to be a factor that contributed to the cost issues (being 65 or older and on both Medicare and the County’s Aetna plan), but not the actual motivating factor behind the decision to terminate the employees’ employment.
So the next time you are considering downsizing or outsourcing to cut costs and/or discussing continuing insurance until an employee reaches Medicare eligibility as part of a separation agreement, do not fear allegations of age discrimination. This Seventh Circuit opinion makes it clear that even where age is a factor (like it was in this case) in an adverse employment decision, as long as it isn’t the motivating factor in the decision, a finding of age discrimination will likely not result. Despite this encouraging decision, you should always consult with legal counsel when making decisions regarding employees who could allege age discrimination. A quick review of the facts is always preferable when litigation could result from an employment decision.
