When companies choose to eliminate high salary — and often senior level — positions through layoffs to raise the bottom line, they open themselves up to potential age discrimination lawsuits.
Farmers Insurance, based in Woodland Hills, California, finds itself dealing with this exact situation. Last week, 18 former Farmers Insurance agents filed lawsuits against the company, alleging wrongful termination based on age discrimination. Luis Sahagun, director of external communications for Farmers Insurance, declined to comment on the lawsuits.
“Age discrimination is a very common problem in the workplace, and it’s almost always about money,” says Gary Gwilliam, an Oakland, Calif.-based attorney representing all of the plaintiffs in the Farmers Insurance case.
While his defense centers on age discrimination, Gwilliam says Farmers Insurance mislabeled his clients as “independent contractors” instead of “employees.” California state law treats these employment classifications differently. Gwilliam’s clients are only eligible for potential compensation if the court rules they are employees, not independent contractors.
“I’m confident my clients will be treated as employees because they were only allowed to work for this company,” Gwilliam says. “Independent contractors are allowed to work with multiple clients.”
Gwilliam says his clients all have one thing in common — over 30 years of experience working with Farmers Insurance. He alleges all 18 agents were terminated to save the company money because agents receive commission rates based on their years of service. Labor attorneys say it’s a tricky argument; age is a federally protected status against employment discrimination, but the practice of laying off highly paid workers is not illegal.
“On the federal side, the American Disabilities Act recognizes that because of corporate seniority systems where salary increases are often correlated with age, there are certain instances where companies can make decisions that have an impact on older workers,” says Parisis Filippatos, partner at Phillips & Associates, a New York labor law firm.
There is one caveat to the ADA clause — employers have to prove age had nothing to do with their decision to fire an employee, Filippatos said. Thanks to the Older Workers Benefit Protection Act, passed by Congress in 1990, a company letting go of two or more employees is required to disclose the names of everyone laid off.
“You can target a group of employees that are highly salaried — that’s legal,” Filippatos says. “But you have to have an explanation for it other than age, like meeting a budgetary target, for example.”
Filippatos says companies need to exercise due diligence before making termination decisions if they want to avoid potential lawsuits.
“Whenever there’s a reduction of the workforce, HR has to do an analysis to make sure the company is not disproportionately targeting older workers so they don’t open themselves up to complaints,” Filippatos says.
Termination decisions aren’t the only sources of workplace age discrimination lawsuits. Derogatory comments about a person’s age and how it influences their ability to perform a job could merit a legal complaint, Filippatos says.
“Companies should engage in sensitivity training to make their workforce aware they shouldn’t make comments like ‘you can’t teach old dog new tricks,’ or ‘I bet they used typewriters in your day,’” he says. “Anything about them not being good at technology because of their age also counts as discrimination.”
Age limits for job positions aren’t usually considered a form of age discrimination because the roles require specific physical abilities, which is especially common in transport industries and other industries that require heavy lifting, Filippatos says.
