Hiring Retirees: Don’t Bargain Your Way into an Age Discrimination Claim

There are many benefits, and some complications, to hiring retirees as teachers. One complication is recognizing and avoiding arrangements that constitute age discrimination. Michigan’s ELCRA and the federal Age Discrimination in Employment Act (ADEA) prohibit discrimination against employees because of age in hiring, firing, promotion, layoff, compensation, benefits, job assignment, and training. Under the ADEA, an employee must be 40 years of age or older to be in the protected category. The ELCRA does not impose an age floor, meaning that an employee of any age experiences discrimination if an adverse decision is made based on the employee’s age.

Age discrimination may occur when a policy treats employees differently based on age or when a facially neutral policy has the effect of harming older employees more than younger employees. For example, if a policy or practice that applies only to returning retirees is less favorable than the policy or practice that applies to all other employees, there may be age discrimination because returning retirees are over 40 years old and these individuals fall within the ADEA’s protected age category.

Many school employees work under a collective bargaining agreement (CBA) and topics such as compensation, benefits, and job assignments are bargained. As a bargaining unit representative, labor organizations are also prohibited from discriminating against members because of age. Therefore, both sides of the bargaining table should collaborate to ensure that a CBA does not provide employees with unequal terms and conditions of employment based on age.

The Equal Employment Opportunity Commission (EEOC), the federal agency that enforces the ADEA, provides guidance on determining whether benefits such as insurance and retirement are equal between younger and older employees. According to the EEOC, benefits are equal if similarly situated employees, regardless of age:

• have the same payment options (e.g., all employees take pension benefits in either a lump sum or annuity);
• receive the same types of benefits; and
• receive the same amount of benefits (e.g., all employees receive a life insurance benefit of three times their annual salary).

In November 2023, the EEOC prevailed in an age discrimination lawsuit the agency filed against an Illinois school district for applying a provision in a CBA that limited the compensation of teachers aged 45 and older. Illinois required school districts to cover the increased pension cost attributable to salary increases if a teacher’s average salary used to calculate retire­ment benefit included a year with a salary increase greater than 6%. The district and union negotiated a CBA that limited salary increases to no more than 6% per year for teachers who were within ten years of retirement eligibility, without regard to a teacher’s intent or plan to retire.

Older teachers who earned additional postgraduate credits or who had extra duty positions received smaller salary increases than younger teachers with the same accomplishments or duties because the younger teachers were not subject to the 6% cap. The lawsuit was filed when a 52-year-old teacher completed post-graduate classes that entitled him to a salary increase greater than 6%, but the district adhered to the contract provision and capped the increase.

A federal court held that the CBA’s 6% salary increase cap was discriminatory because teachers aged 45 and over were given smaller raises or less pay solely because of their age. The district was required to pay back wages to this teacher and others who had experienced similar losses.

In 2024, the EEOC received 383 age discrimination complaints. The Michigan Department of Civil Rights, the state agency that enforces the ELCRA, received 2,428 age discrimination complaints the same year.

The ADEA is a complicated statute, and several other state and federal laws also address age discrimination. To avoid potential liability, school officials should consider consulting with their Thrun labor attorney before entering into an agreement that treats employees differently based on age.