HR Question: Implementing a Mandatory Retirement Age

Q: Can we implement a mandatory retirement age? If so, can we make a case-by-case exception to that?

A: Unless your business handles public safety concerns, we would encourage you to very carefully consider implementing mandatory retirement age policies, and certainly NOT to do it on a case-by-case basis.

The reason is that on a federal level, company wide mandatory retirement age policies violate the Age Discrimination in Employment Act (ADEA), except in limited circumstances. The ADEA, which applies to organizations with 20 or more employees, protects employees age 40 and older from discrimination based on their age. Prior to 1986 the age discrimination law did not protect employees over the age of 70 in the workplace, but due to the 1986 amendment to the Act, this age cap was removed. As a result, all employees over 40 years old generally are covered by the ADEA. Since this change, companies are no longer able to enforce a mandatory retirement age for all employees.

There is one exception under the ADEA (outside of bona fide reasons for retirement, such as public safety officers, etc). That exception is company executives in a bona fide executive or higher policy-making position. For example, federal law does allow mandatory retirement for a company CEO at age 65 or older under two conditions:
 
  • If the employee has worked in this bona fide executive position for at least two years prior to the retirement date.
  • If the individual is immediately awarded annual retirement benefits valued at $44,000 or more.


If the reason you are asking the question is because you are concerned with how you deal with the growing number of older workers and the potential for declining performance in old age, the government expects us not to assume that all employees of a certain age are unable to perform their jobs or will be less productive for the organization.

But if an older worker is not performing at the level of expectation, this is a performance issue that should be addressed in accordance with your company's policies and practices as a performance issue, not an age issue. (And this should be done on a case-by-case basis).

Allow the employee the opportunity to improve through training and coaching; do not assume the older employee will not or cannot learn and adapt to change.

The way many employers are helping their older workers while making room for their younger employees is through the use of voluntary retirement programs. These programs offer all employees of a certain age within the organization a retirement package above and beyond other guaranteed retirement benefits. Voluntary retirement packages do not violate the ADEA because they provide an option (not a mandate) for the older worker to receive more (not fewer) benefits upon retirement than someone retiring or leaving the company at a younger age.

We would encourage you to work with your legal counsel to discuss other relevant regulations and requirements of voluntary retirement programs.

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