Terminating the Employment Relationship

b. No Arbitrary Decrease in Incentive Based on Age The type of early retirement incentive offer must not arbitrarily decrease or terminate based on the employee’s age. For example, consider a plan that may provide an employee retiring between the ages of 50 to 54, with a minimum of five years of service, a retirement bonus of 50% of the employee’s current annual salary. The plan provides a retirement bonus for employees aged 55 to 59 of 30% of the employee’s current annual salary; 15% of the employee’s current annual salary for those employees between the age of 60 to 64; and no retirement bonus for employees aged 65 and older. In this example, the drop-off in value of the retirement bonus and the ultimate termination of benefits is based solely on age. This type of incentive arbitrarily discriminates against employees because it is simply based on the employee’s age. Accordingly, this type of plan would most likely violate the ADEA. On the other hand, consider, instead, a plan that offers an early retirement incentive to all employees who are at least 50 years of age, with five years of service, 5% of the employee’s last annual salary and 5% more for each additional year of service. The retirement incentive caps at 100% of the employee’s last annual salary at 24 years of service. This type of plan would not likely violate the ADEA because there is no arbitrary decrease in benefits based solely on age. 293

Jankovitz v. Des Moines Indep. Community Sch. Dist. 294 A school district provided a retirement incentive plan that provided eligible teachers with a lump sum payment based upon the number of unused sick leave days accumulated as of the date of retirement until the age of 65. Employees over the age of 65 were not eligible for any retirement incentive. The court held that the cessation or denial of benefits under the district’s plan was based solely on age and thus, inconsistent with the purposes of the ADEA. Solon v. Gary Community School Corp. 295 A school offered early retirement incentives to teachers aged 58 to 61. Eligible teachers who elected to retire early received monthly payments until they turned 62. Teachers who retired on their 58th birthday received the maximum 48 months of benefits available under the plan. Teachers who retired later received the same monthly payments but fewer of them, as the payments gradually terminated at age 62. The court held that this type of plan was discriminatory in violation of the ADEA.

c. The Retirement Incentive Must Be Truly Voluntary If an early retirement incentive is not “voluntary,” it does not fall under the safe harbor provision of the ADEA. Courts apply a “totality of the circumstances” test, considering factors such as the length of time the employee has to consider the early retirement incentive. For example, giving employees one day to accept or reject an early retirement incentive may deem the incentive not voluntary. In contrast, incentives that are offered during a window period of 45 days are generally deemed voluntary. As is discussed below, the length of time is also important as to whether a valid ADEA waiver and release is made by the employee accepting the retirement incentive. Other factors to consider include whether management pressured or coerced employees into accepting the incentive. For example, employees were told if they do not accept

Terminating the Employment Relationship ©2019 (s) Liebert Cassidy Whitmore 83