Employers May Discriminate in Favor of Their Most Senior Employees

May 3, 2004

The US Supreme Court recently addressed to what extent an employer may discriminate against its younger workers in favor of its most senior employees. At issue was a collective bargaining agreement which eliminated health care benefits for subsequent retirees who were not, at the time of the contract's execution date, at least 50 years of age. Several employees sued the company claiming that the contract discriminated against workers between 40 and 49 years of age in violation of the Age Discrimination in Employment Act ("ADEA"), which prohibits employers from discriminating against employees 40 years of age or older regarding their terms or conditions of employment.

The Court, in a sweeping opinion, sided with the employer, holding that the ADEA does not protect younger workers from employment decisions that favor older workers. The Court based its decision on an exhaustive analysis of the ADEA's legislative history, concluding that nothing in the Act is intended to stop an employer from favoring an older employee over a younger one, even if both employees are in the 40 protected age group.

This decision has positive, sweeping ramifications for employers regarding separation packages and retirement plans because employers are now free to provided greater benefits to older workers in order to entice them to accept early retirement offers. Additionally, employers faced with the option of reducing retiree health care costs may provide more expansive benefits for their most senior workers than they do for their younger ones.

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