Laying off those who qualify for pension first?

[xoomer]

Texas

The city is planning on laying off a number of employees in the near future and the rumor is that they will first give the boot to the employees who are currently eligible for their pensions. Until a couple of weeks ago the city ordinance was that the "last in was the first out" but the city counsel changed the ordinance apparently to be able to get rid of the employees with the most seniority.

Just wondering if the city can layoff employees in this manner without consequences or if this would have any realistic basis for winning a lawsuit against the city--especially since the city would mainly be laying off the older employees.

TIA

BruceWhat is the name of your state (only U.S. law)?

 

[Beth3]

If indeed the city lays-off or terminates employees based on their eligibilty to receive pension benefits, that's not illegal. Were I the HR Director for the city though, I'd be checking with my labor counsel to see what can of worms that might open for potential claims of age discrimination. If this comes to pass, such a claim is by no means a slam-dunk however.

Before you get too up in arms though, at this point what you've heard is just rumor which may be completely off-base.

 

[commentator]

These older, long term employees are probably also the highest paid on the job, too, so there is certainly an advantage in laying them off.

While the city may be thinking that it would be "kinder" to lay off those who have a pension to go to and start living on, it is actually a bad thing for them because those older workers will certainly be much less employable in the job market than your younger shorter-term employees. Not supposed to be that way, but it certainly is.

Like so many people today, they may not be financially prepared to draw their pension only, may have been planning to work till they died. Incidentally,retirement pensions affect unemployment insurance in every case. So this is another reason they might be excited about getting rid of the older workers. Which is a reason that there are pretty strict guidelines about doing this in EEOC regulations.

I'm seeing something that could actually get into age discrimination pretty quickly. But I'm also seeing something that most smart and well counseled employers won't go for. And as Beth pointed out, this is a rumor, and there are a lot of rumors talked around by employees in RIF situations that never come to pass.

 

[Beth3]

Plus "pension plans" are frequently not fully funded or even funded at all. That means the employer carries the amount "due" as a liability on their balance sheet; it doesn't mean the money is actually in the bank or with an investment advisor. Laying off those with their 20 years (or whatever) of service could actually result in the city having to come up with a whole lot of cash in a hurry!

Unlike 401(k) and other defined contribution plans - where the money actually exists in full somewhere - that's not necessarily the case with pension/defined benefit retirement plans.

 

[xoomer]

DROP accounts

In this case a lot of the people still working for the city past retirement age have DROP accounts which have accumulated quite a bit of money. If the city does indeed layoff these people they have to cut a check for the amounts in these DROP accounts in a fairly short period of time--which could be a real financial burden for the city.

Well, we shall see in about 5 weeks if the rumor is true or not; and if it is, decide at that time whether to pursue any legal action or not.

Thanks for the responses...

Bruce

 

[OHRoadwarrior]

Please note...

They can chose to layoff by classification, targeting job functions performed by higher paid workers. This will usually pass muster of EEOC I understand.

 

[Nikki Green]

Were I the HR Director for the city though, I'd be checking with my labor counsel to see what can of worms that might open for potential claims of age discrimination. .

How interesting!

There is a similar issue with the City of New York, but the reverse, where layoffs of City teachers are based on lack-of-seniority, rather than merit, i.e. lay-off teachers with less time on the job, who are most likely to be in their 20s and early 30s.

The New York Senate now passed a bill to reform LIFO, it has to pass New York Assembly.

Senate Passes Bil to Reform "Last In, First Out" | New York State Senate

 

[xoomer]

Follow-up

Well, yesterday was the big day and a lot of long-time employees got the ax. They did it in such a way that certain job classifications were eliminated so as not to look like they were targeting a specific group of employees but many old timers were fired.

In one instance an employee who had been there about 25 years was told that he could stay on but would be transferred to another department, or even perhaps to another of the 3 airports in the system. However, he was given the opportunity to stay in his current position if he signed a letter of resignation stating he would retire at the end of the year. (Can they do that legally?)

The whole thing was really a fiasco since the airport system isn't losing money and any cutbacks won't help the city of Houston's budget problems since the airport is an "enterprise" system that is basically a separate entity from the city. However, the new director has a vision of funding the refurbishing of the airport, at least partially, from the money saved from firing over 100 employees, about 6% of the total number.

It was a real shame to see people who had given so many years to the airport escorted out like they were criminals. I hope the facelift to the airport is worth the misery it will surely cause to so many people.