Pressuring Employees To Retire Is A Cost-Control Method That Needs To Be Retired

(Published January 5, 2009)

Reprinted from PERSONNEL LEGAL ALERT, a widely read employment law newsletter that keeps HR executives up-to-date on the latest court cases, legal trends, government regulations, and federal legislation that affect the policies you write and procedures you administer.  Click here to get more information, or sign up for a risk-free subscription. 

The Baby Boomers are supposed to be retiring in droves, but they're not.  Some are delaying retirement because they need the health benefits.  Some want to pump more funds into their retirement accounts.  Others simply want to work. 

This is bad news for employers that need to cut costs and were counting on employees to retire.  The solution isn't to pressure the employees into retiring.  Think twice "before subtly or overtly pushing senior employees towards retirement in order to save money, or for any other illegal purpose based on age," said the Equal Employment Opportunity Commission (EEOC) in an age discrimination case in which a county in New York was accused of transferring four police officers to less desirable precincts and replacing them with younger officers.  The county settled the claims for $450,000.  (EEOC v. Nassau County, NY, E.D.NY, No. 07 CV 3980, 2008)

Questions Can't Be Coercive

You have every right to ask employees about their retirement plans.  What you can't do is pressure or force them to expedite their plans.  When it comes to making retirement inquiries, employ these best practices:

• Ask only if you have a legitimate need to know, such as succession planning.  Preface the inquiry by explaining your reason for asking.
• Limit asking about an employee's retirement plans to only once or twice a year.  Frequent questioning could be seen as undue pressure or harassment.
• Never press for a reason behind an employee’s decision not to retire.  Your understanding of, or agreement with, the decision is not needed; badgering the employee for a reason sends the message that it is.
• Offer retirement planning assistance.  If employees understand that you want to help, they may be more inclined to voluntarily discuss their plans.
• Don't subject employees to negative job consequences if they disclose they don't plan to retire (or retire soon).  Firing an employee because of their lack of retirement plans; denying them a promotion or training opportunity; or assigning them an undesirable location or duties in an effort to motivate them to retire will leave your company open to a discrimination charge.

Of course, the same holds true if the employee does indicate a plan to retire in the near future.  Taking an adverse employment action based on this information will also likely violate the Age Discrimination in Employment Act (ADEA).  Think twice before denying a promotion or training opportunity to an employee merely because they wish to retire soon — they may want to retire, but may not be able to financially.  Besides, promoting a younger employee instead does not lower the risk of the employee leaving in the near future.

Play Up The Benefits Of Voluntary Retirement Programs

If you learn that an employee is toying with the idea of retiring, and the company is contemplating ways to save money, present the employee with the cold, hard facts.  Inform them of the financial hardships the company is currently experiencing, and that layoffs are likely if not enough workers leave voluntarily.  Highlight the benefits of retiring, such as a generous severance or benefits package. 

There is nothing coercive about offering a retirement incentive, either.  Voluntary retirement programs, as they're often called, usually offer all employees of a certain age — usually an age younger than that required to earn mandatory retirement benefits — a retirement package above and beyond other guaranteed retirement benefits. 

Always run the specifics of any voluntary retirement program by legal counsel, and provide employees with adequate information about the program, including who is eligible to participate, what additional benefits are being offered, and the time frame within which the decision to accept must be made.

Once the information is communicated to staff members, leave it at that.  Never bully employees into retiring or indicate that they have to choose between retirement and involuntary layoff.  Again, the decision to accept a retirement incentive must be made without coercion.  

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