The Age Discrimination in Employment Act of 1967 (“ADEA”) protects people age 40 or older from employment discrimination based upon age. The ADEA protects both job applicants and employees from discrimination with regard to any term, condition, or privilege of employment, including hiring, firing, promotion, layoff, compensation, benefits, job assignments and training.

On July 6, 2007, the Equal Employment Opportunity Commission (“EEOC”) issued guidance interpreting the ADEA to allow employers to favor older individuals over younger individuals. The new rule explains that the ADEA prohibits only employment discrimination based upon old age and, therefore, permits employers to favor relatively older employees and/or applicants over younger employees and/or applicants. Previously, the EEOC maintained that the ADEA prohibited discrimination against individuals based upon age, even if the employer’s decision benefited older workers at the expense of younger employees also in the protected class.

The EEOC’s change in policy was adopted to comply with the United States Supreme Court’s decision in General Dynamics Land Systems, Inc. v. Cline, 540 U.S. 581 (2004). That case involved a collective bargaining agreement between a company and a union that eliminated the company’s obligation to provide health benefits to subsequently retired employees except with respect to then-current employees who were at least 50 years old. Employees who were at least 40 years old (and thus protected by the ADEA), but not yet 50 years old, sued the company, alleging that the retiree health insurance benefits programs unfairly permitted discrimination against younger workers in violation of the ADEA. The Supreme Court held that the ADEA was not designed to safeguard younger employees, even if those employees were over the age of 40, from being treated less preferentially than older employees. In effect, the ADEA now permits “reverse age discrimination,” allowing employers to favor older employees over younger employees.

Significance for Employers

In light of General Dynamics Land Systems and the EEOC’s new rule, employers can advertise positions in a manner that expresses a preference for older applicants by using language like “over age 60,” “retirees” or “supplement your pension” without running afoul of the ADEA. Further, it is now clear that the ADEA does not prohibit employers from altering their employee benefit plans to favor older retirees over younger retirees; employers can now design their health, severance and early retirement packages to favor their oldest employees without violating the ADEA.

It is critical for employers to recognize that the General Dynamics Land Systems and the EEOC’s rule change only affect federal law. Because many employee benefit plans are governed by the Employee Retirement Income Security Act of 1974 (“ERISA”) and ERISA generally preempts state and city laws with respect to benefit plans, challenges to the favoring of older employers with respect to such benefit plans should be successfully thwarted. However, with respect to (i) benefit plans, programs or arrangements not governed by ERISA, and (ii) challenged actions outside of the benefits area, state and local anti-discrimination laws may offer younger employees greater protection than the ADEA.