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Age Discrimination Rising on the Street

Avital Louria Hahn

Never shy to fire older workers in the first place, investment banks are becoming even bolder in laying them off, according to attorneys who represent Wall Street employees in age discrimination cases. In December 2004, one European bank let go 80% of its employees over age 50 and 30% of those over age 45 at two U.S. locations, according to an attorney who is advising several of the fired workers on a potential legal action. He declined to name the bank.

Proving age discrimination isn't easy. Employers dodge age discrimination lawsuits by arguing that it is not age they target but the highly paid workers, who happen to be older.

Still, experts say the European bank that fired 80% of its 50-plus population could be sued under what's called the "disparate impact" argument. Instead of having to prove that employers deliberately targeted older workers, some federal courts have ruled that age discrimination exists when seemingly neutral actions by an employer have disproportionately harmed older workers.

Regardless of the protections of the law, attorneys believe the Street is continuing to fire more older workers. "From my experience, the industry seems to be targeting more experienced employees, which seems to suggest that there is a discriminatory overtone," said Robert Benowitz, a compensation specialist and partner with Rick Steiner Fell & Benowitz LLP. Under the disparate impact theory, letting go of eight employees over age 50 out of a total of 10 "is certainly not a random distribution," said Tom Osborne, a senior attorney at the American Association of Retired Persons. "You don't have to be a statistician to see a pattern. It could be the beginning of a disparate impact lawsuit."

But this legal avenue is in danger. In a case involving older police officers in Mississippi, the U.S. Supreme Court is expected to rule in coming days or weeks whether disparate impact can be used in federal age-related cases. Should it rule that "disparate impact" cannot be used in age discrimination lawsuits, employers could become even bolder in targeting older workers. For investment banks, a lower threat of lawsuits could mean not only continued bold cuts but also smaller severance packages, say compensation attorneys.

"The Supreme Court case is very important. It will decide whether the disparate theory of liability applies to age discrimination cases," said Benowitz. "If the ruling is against disparate impact, you will have to find the smoking gun to prove that the employer intended to discriminate, which is much harder and potentially more costly."

Even if the court upholds the right to use disparate impact lawsuits in age discrimination cases, most of the bankers fired in December by the European bank will not end up suing, said compensation attorneys. In exchange for giving employees severance pay, banks demand that employees forfeit all future claims against the bank. Older workers, knowing they will likely not be able to find a comparably paying job, will usually take the package, they say. Moreover, those waivers aren't binding, as the U.S. Supreme Court has ruled against them.

Regardless of the outcome, the AARP's Osborne pointed out that employees can still sue under disparate impact if their state law allows it. However, Michael O'Brien, a trial attorney with the Equal Employment Opportunity Commission, said that states often look to federal law for guidance on state law.

Some argue that whatever the latest U.S. high court ruling, it will likely have no impact on the size of severance packages. Kevin Leblang, chairman of the employment law department at Kramer Levin Naftalis & Frankel LLP, who often represents the banks, said that a potential age discrimination claim is only one of the claims released when an employee signs a waiver and release. "When a company gets a release, it applies not only to potential age discrimination claims, but also to all potential claims an employee could bring including discrimination claims based on gender, race, color, national origin, religion, disability and sexual orientation and any other criteria prohibited by law." He said, "I don't really think that would affect the calculation of the amount companies would offer in exchange for a release." In addition, he said, banks' motivation for providing severance pay includes "an element of wanting to give people a chance to get back on their feet, an element of equity."

Should there be alarming statistics, the bank will investigate regardless of the decision, Leblang added.

Ironically, the statistics on how many employees are let go in certain age groups come directly from the banks doing the layoffs. The Older Workers Benefit Protection Act, an amendment to the Age Discrimination in Employment Act, protects employees over age 40 and says that employers must provide the laid-off employees with a form that lists how many were let go, in what positions, in what locations, and at what ages. It also states how many employees a company has in each age group at any given location. The form also says how many were let go altogether. For example, the European bank let go 24 investment bankers in December. Of those, 16 were over 40. Out of the 16 employees, 8 were over 50.

Another provision in the act says that an older employee should get additional consideration for being let go, and certainly not less, said the EEOC's O'Brien. "If the person is entitled to a $200,000 bonus, the employer cannot reduce it. If everybody got a $200,000 bonus in his unit, and the person let go has to sign a waiver for it, then that would not be additional consideration. You have to give the guy $200,000 plus," he said.

Shortchanged on the way out

On Wall Street, severance packages are typically fairly large, often a year or more worth of compensation, as well as other perks that could include health and other types of insurance, depending on seniority, the employer's generosity and whether an employment contract exists. Nevertheless, the packages typically make workers feel shortchanged, lawyers say. A banker laid off in December will only collect a fourth or a third of the bonus to be paid in January, they note. That is a big chunk of change as investment bankers' bonuses can make up as much as 90% of their pay.

That's another hitch. In employment contracts, banks describe compensation as discretionary. But attorneys say that when hiring a banker, they never use the word "discretionary" in describing the bonus. Robert Clemente, an attorney with Liddle & Robinson L.L.P., said that he often represents fired bankers in NASD cases claiming the entire bonus from the bank. Usually, he said, they succeed in collecting it.

"We have been very successful in showing that these bonuses aren't really discretionary payments but deferred compensation," he said. When they hire bankers, "the lawyers and HR write it up as discretionary, but the people who negotiate say, I guarantee it,'" Clemente said. "When they decide they don't want you, they say it was discretionary."

In addition, as part of the severance package bank employees also sign away any claim to all unvested equity awards, so many workers miss out on what could be a large payout. Benowitz said that he has been able to salvage employees' unvested stock as well as, at times, increase the overall value of the package by negotiating with the banks.

"The severance letter that the bank asks the employee to execute cites that the employee voluntarily resigned from his position," said Benowitz. "Such a voluntary resignation is deemed an automatic forfeiture of any unvested award. What we would then negotiate is that the voluntary resignation cited in the severance agreement will not be construed as a forfeiture of unvested awards under any plans under which our client has been granted awards."

And finally, even if they sign away all claims, they can still bring their case to the EEOC, said attorney Osborne. "We don't see it unless they come to us, " he said.

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