Corporate Reorganizations, Job Layoffs, and Age Discrimination: Has Smith V. City of Jackson Substantially Expanded the Rights of Older Workers under the ADEA?

By Alaka, Aida M. | Albany Law Review, Winter 2006 | Go to article overview

Corporate Reorganizations, Job Layoffs, and Age Discrimination: Has Smith V. City of Jackson Substantially Expanded the Rights of Older Workers under the ADEA?


Alaka, Aida M., Albany Law Review


I. INTRODUCTION

The American workforce is aging. The Department of Labor's Bureau of Labor Statistics (BLS) forecasts a 10 percent overall increase in the civilian labor force between 2004 and 2014. (1) During the same period, however, the BLS predicts that the number of workers age fifty-five and older will increase by 49.1 percent-almost five times the overall growth rate. (2) The BLS estimates that by 2012, workers under the age of forty will comprise only 46.8 percent of the civilian labor force. (3)

These trends reflect the aging "baby-boom" generation--those individuals who were born between 1946 and 1964, all of whom are now over forty years old. (4) Of late, much has been made of the potential impact baby-boom generation workers may have once they leave the workforce. In anticipation of large numbers of baby-boomers retiring, and out of concern for concomitant under-funded payout obligations, for example, President George W. Bush unsuccessfully made "reforming" Social Security a key item on his second-term agenda. (5) Others have noted that private pension plans will also be affected, (6) and indeed the Pension Benefit Guaranty Corporation reports that "[c]ompanies with underfunded pension plans reported a record shortfall of $353.7 billion in their latest filings" with the agency. (7) This number represents a 27 percent increase in the funding shortfall reported one year earlier. (8)

Whether or when to retire is obviously not always a function of personal choice, however. A recent national survey of close to 3,100 individuals showed that job loss or health issues caused four out of ten retired workers to leave their jobs earlier than they had intended. (9) The survey also showed that although 45 percent of the employed respondents intended to continue working after age sixty-five, only 13 percent of the retirees had actually done so. (10) Of the early retirees, 44 percent cited job loss as the reason they had left the work force. (11)

Corporate bankruptcy, company mergers or reorganizations, and relocation of work, often resulting in permanent worksite closures, can all result in involuntary retirement. (12) Whatever the reason, when older workers are terminated during these events, statistics indicate that they are likely to remain unemployed for a longer period than younger workers. (13) For example, while workers aged fifty-five or older comprised 16.9 percent of those filing initial claims for unemployment benefits due to layoffs in 2004, 19.7 percent exhausted unemployment insurance benefits. (14) Not only are older workers who are laid off more likely than younger workers to remain unemployed, but they are more likely to be re-employed on a part-time basis. (15)

Although the labor participation rate for older workers is trending upwards, they can be disproportionately affected when employers conduct layoffs to cut costs, eliminate duplicative jobs, or streamline operations simply because they are paid the most or because of employer concerns regarding pension liability. (16) One question that has long troubled older workers is whether employers discriminate when they lay off workers for economic reasons such as higher salaries or potential pension liability. Because salary and pension eligibility are often correlated with age, layoff plans using such factors to determine which workers to cut often affect older workers in greater numbers. (17) Until recently, the question of whether older workers have any protection against these actions has been met with considerable controversy. In particular, courts and commentators have disagreed regarding whether layoff selection criteria may properly be based on economic factors highly correlated with age. (18)

In March 2005, the Supreme Court resolved an issue that had confounded the lower federal courts for years. In a case rising from the Fifth Circuit, Smith v. City of Jackson, (19) the Court held that a disparate-impact theory of recovery is available to workers suing their employers under the Age Discrimination in Employment Act of 1967 (ADEA). …

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