Forced retirement is technically illegal, but there are exceptions

Forced retirement is technically prohibited in the United States under the Age Discrimination in Employment Act (ADEA) of 1967, but the reality is far less clear-cut.

The Act protects most workers older than 40 from discrimination based on age in hiring, promotion, compensation, employment terms, conditions, privileges, and termination, but leaves room for certain exceptions—and work-arounds.

The ADEA makes an explicit exception for what it calls “bona fide occupational qualifications,” allowing age limits on specific jobs for safety reasons, like bus drivers, pilots, police officers, and firefighters.

“The other exemption would be if it’s a bona fide executive or high policy-making position,” says Andrew Zelman, a partner and labor and employment attorney at the Berger Singerman law firm in Miami.

Zelman says high-level executives can legally be subjected to mandatory retirement ages, though there’s been a recent trend of large public companies waiving their right to force out older executives. Companies like Target, Disney, and Boeing have all made exceptions to their mandatory retirement ages for their current CEOs.

“Where [termination] is based on tenure, based on experience, and it’s defined—and everybody signs on—that would also fall outside of an ADEA claim for ageism,” Zelman says, noting that certain roles can be offered as a three-year term, for example, without violating the law.

Other exceptions

The act also applies only to companies that employ more than 20 people, though most states have protections that apply to smaller organizations. The ADEA also doesn’t apply to those with an equity stake in the company, like partners, since they are not technically compensated as a typical employee.

Finally, the ADEA doesn’t apply to companies that terminate older employees for reasons other than age, like salary, or as part of a wider restructuring or layoff.

“If it’s motivated by money and it’s a financial reason, then that’s okay,” Zelman says. “The work-around there would be, ‘We’ve got a rising star here who will do the same job at half the price.’”

At the same time, if a company demonstrates a pattern of terminating older workers, or any other protected class of workers for that matter, it could find itself in some legal jeopardy.

Most Americans retire earlier than planned

Forced retirement may technically be illegal in most instances, but Americans typically enter retirement sooner than expected for a variety of reasons.

According to the Employee Benefit and Research Institute (EBRI), 72% of Americans expect to retire at age 65 or older, yet 70% actually end up retiring before they’re 65.

“When we ask retirees when they actually retired, they say 62; when we ask workers when they expect to retire, they say 65,” says Craig Copeland, director of wealth benefits research for the EBRI. “When we asked them why they retired earlier than planned, about 69% cited some reason out of their control, like a health problem or a change at the company. But then we had a similar number who said they could afford to retire early or had a benefits package that allowed them to.”

Copeland says that the proportion of Americans who left the workforce earlier than planned for reasons outside of their control has remained steady since at least the early 1990s, but the number of retirees has skyrocketed.

Why employees exit the workforce

That means that there are more individual workers who believe they were prematurely forced out of the workforce now than in generations prior. That is especially true in the wake of the pandemic and during more turbulent economic periods.

“Every time we have a downturn in the economy, like the pandemic, that’s the slowest group to recover,” he says. “It’s not a totally new concept, but the issue is that with the baby boomers, there are just so many more older people now than there were 20, 30 years ago.”

Given the challenges of reentering the workforce at an advanced age, and the high proportion of Americans who leave the workforce for reasons beyond their own control, Copeland says sometimes knowing when your career will end is better than being left guessing.

“If you know the age you have to retire, you can plan accordingly,” he says. “But if you’re 60 and you think you can work until 65 and then the place shuts down, that’s a completely different situation.”

Most older workers are bought out

Employers have exceptions and work-arounds to the ADEA that could allow them to force out older workers before they’re ready to retire, but in practice most take a more amicable approach.

“Based on my experience, [forced retirement cases] are rare,” says Kristyne Kennedy, an Orlando-based labor and employment lawyer for Cole, Scott & Kissane. “I haven’t run into one that I would call forced retirement, but I’ve had some discrimination cases where an employer let someone go because they’re making too much money, and there’s an argument [around age-based discrimination].”

Kennedy explains that the ADEA and other provisions that protect older workers from discrimination—and by extension, forced retirement—inspire most employers to come to a mutual agreement with their older workers that allows them to retire earlier than planned.

“A lot of times employers are smart enough to have discussions with employees in that situation, and offer an attractive severance,” she says. “That happens often, where the employer will offer a severance that they can’t refuse.”