Terminating the Employment Relationship

based solely on the employee’s age unless a statutory exemption applies, and the acceptance of that incentive must be truly “knowing and voluntary.” 298

The FEHA makes it unlawful for employers to, among other things, discriminate against an employee in compensation or in terms, conditions or privileges of employment based on the employee’s protected status, including being over the age of 40. 299 FEHA does not contain statutory parameters for employee benefit plans or voluntary early retirement incentives like the ADEA, nor has the Fair Employment and Housing Commission released any guidance on the issue. Very few cases have been brought under FEHA relating to the offering of an early retirement incentive. Thus, no published court decision has expressly stated that compliance with ADEA with regards to an early retirement incentive does or does not equate to compliance with FEHA. At least one published case was brought under a theory that an early retirement incentive program had a disparate impact on employees over the age of 40 in violation of FEHA, as well as the ADEA. The court entertained the theory, but ultimately found that statistically, there was insufficient evidence to show the early retirement incentive had a disparate impact on persons over the age of 40. 300 Employers should ensure that early retirement incentives are in compliance with the ADEA. If the incentive and the early retirement incentive agreement between the employer and employee are in compliance with the ADEA, it is likely, though not certain, that the early retirement incentive and agreement will be in compliance with FEHA. 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 y ears 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. 301

Jankovitz v. Des Moines Indep. Community Sch. Dist. 302 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

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