The Age Discrimination in Employment Act (ADEA) prohibits employers from discriminating against or discharging any individual because of such person’s age. There is, however, a narrow exemption to this prohibition for bona fide executives and high policymaking positions if certain requirements are met. Specifically, an employer can compulsorily require an employee to retire if the employee is at least 65 years old, is employed in a bona fide executive or a high policymaking position for the two-year period immediately preceding retirement, and is compensated with an immediate and nonforfeitable annual retirement benefit from a pension, profit sharing, savings, or deferred compensation plan or combination of those plans of the employer equaling in the aggregate at least $44,000.
The majority of the litigation regarding this exemption focuses on whether the employee was a bona fide executive or occupied a high policymaking position. The law is clear that this exemption is to be narrowly applied and that each requirement above must be clearly and unmistakably met.
When making the internal determination about a potential bona fide executive, the employee must:
- Manage the organization or a department or subdivision of the organization;
- Direct the work of at least two other employees;
- Have authority to hire or dismiss other employees or his/her suggestions as to personnel decisions are given particular weight;
- Customarily and regularly exercise discretionary powers; and
- Devote no more than 20 percent of his/her work time to activities unrelated to those described in requirements 1 through 4 above; this requirement does not apply if the individual is in sole charge of an independent establishment or a physically separated branch establishment, or if s/he owns at least a 20-percent interest in the enterprise by which s/he is employed.
The term “high policymaking position” refers to certain top-level employees who are not bona fide executives, but who nonetheless play a significant role in developing and implementing corporate policy.
If an employer wishes to implement a mandatory retirement policy under this exemption, it is incredibly important to work closely with inhouse and/or outside counsel. There is little interpretative case law on the exemption, and the statutory guidance makes clear that this should be utilized only in the narrowest of circumstances.