Under the U.S. Supreme Court’s 1993 Hazen Paper decision, employers that select employees for layoff using the date of vesting of their pensions based on years of service are not discriminating on the basis of age, even if most of those employees about to vest are older workers. Last week, the Eighth Circuit Court of Appeals distinguished Hazen Paper, concluding that a company that allegedly terminated an older worker to remove her from the medical insurance plan might have committed age discrimination.

In Tramp v. Assoc. Underwriters, Inc., the plaintiff alleged that the company’s insurance carrier informed it that it could reduce its health care premiums by eliminating older, sicker workers from the payroll. She sued for age discrimination after being fired following this correspondence. The district court dismissed the claim, citing Hazen Paper. The lower court said that health care costs can be analyzed separately from age, and that measures taken to reduce such costs do not necessarily correlate with age.

The Eighth Circuit disagreed, remanding the case for trial. The court distinguished Hazen Paper, noting that in that case, the vesting of pensions was based on years of service, and there was no evidence that the employer was using this factor as a proxy for age. In the present matter, the insurance carrier’s correspondence directly stated that age was a factor in lowering health care insurance premiums. Therefore, a jury can determine whether the purported reasons for the plaintiff’s termination were a pretext for age discrimination.

The Eighth Circuit affirmed dismissal of the plaintiff’s ADA claim, but given the right factual circumstances, an employee with a disability could claim that the intent to lower premium expenses by eliminating sick employees also violated the ADA. Although some employers are desperate to devise ways to lower medical insurance costs, singling out protected classes of employees for removal from the workforce will likely result in significant discrimination claims.