When an employer feels the need to cut costs, the first thing it often targets is wages and salaries, because that is often the biggest expense it has. To reduce wage costs it naturally will look at reducing the size of its workforce. And when it does that, it will often focus on the people with larger salaries. In this way the employer feels it can save the most money with the fewest number of terminations – get the most “bang for its buck” so to speak.
The problem is that the people with the biggest salaries are also often among the oldest employees. People who have been at a company the longest tend – due to their tenure, and the accumulation of annual salary increases – to be the most highly compensated.
So when a company engages in a reduction in force, and focuses on higher salaried employees for termination, older workers are often hit harder than younger employees. Is this illegal? Is this age discrimination?
Technically no. Targeting someone because of his or her salary – if that is the reason he or she was targeted – is not age discrimination, even though the EFFECT of this cost-conscious motivation is to hurt older workers more than younger workers
Age discrimination is an intentional act, not an accidental or negligent one. It occurs as a result of stereotypical, biased attitudes about older people – such as that they aren’t as energetic or creative, that they are slowing down, that they can’t adapt to change, etc. It is these attitudes that the age discrimination laws were designed to address.
Having said that, employers should always be concerned about applying any reduction in force in an evenhanded manner. Any reduction that disproportionately affects a particular demographic group is going to be subject to scrutiny by the courts, and create a greater risk of litigation.