EEOC Clarifies When Partnerships May Be Liable Under the ADEA

The Age Discrimination in Employment Act (ADEA) protects employees and job applicants, 40 years and older, from discrimination on the basis of age in hiring, promotion, discharge, compensation, or terms, conditions or privileges of employment.

Further, the ADEA does not permit involuntary retirement predicated on age except where age is a bona fide occupational requirement (e.g., an airline pilot) or the involuntarily retired employee is a bona fide executive, aged 65 or older, who receives an annual retirement benefit of not less than $44,000. See, 29 U.S.C. §§623(f), 631(c).

It is often assumed that the ADEA does not apply to age discrimination claims brought by partners who are not common law employees. The Equal Employment Opportunity Commission (EEOC) recently addressed this issue in a letter to an undisclosed recipient who sought guidance on mandatory retirement as imposed by an accounting firm.

Citing existing U.S. Supreme Court and federal court precedents, the EEOC stated that the following six factors should be used to determine if a partner would be classified as an employee for purposes of determining application of the ADEA:

• Whether the organization can hire or fire the individual or set the rules and regulations of the individual’s work;
• Whether and, if so, to what extent the organization supervises the individual’s work;
• Whether the individual reports to someone higher in the organization;
• Whether and, if so, to what extent the individual is able to influence the organization;
• Whether the parties intended that the individual be an employee, as expressed in written agreements or contracts; and
• Whether the individual shares in the profits, losses, and liabilities of the organization.

The EEOC letter stressed that this is a factual determination that should be guided by existing law rather than by expansion of the law’s scope through administrative fiat.

While the letter does not serve as an official EEOC precedent on this issue, it is clear that partnerships may be exposed to ADEA liability. Therefore, we encourage partnerships with mandatory retirement to carefully review their retirement policies.

If you have any questions about the EEOC letter on the ADEA or would like to discuss the legal issues involved, please contact me, Gary Young, or the Scarinci Hollenbeck attorney with whom you work.