Age Discrimination & U.S. Law: What Japanese Firms Need to Know

April 18, 2007


Michael McKenna, Senior Consultant, Japan Intercultural Consulting
William Milani, Member of the Firm, Epstein Becker & Green, P.C.
Debra Raskin, Partner, Vladeck, Waldman, Elias & Englehard, P.C.

Michael Levine, Member of the Firm, Epstein Becker & Green, P.C.

A panel of distinguished specialists in law and culture spoke about age discrimination under U.S. law and the steps that Japanese companies with U.S. operations must take to comply with American legal norms on age in the workplace.

Panelist Michael McKenna of Japan Intercultural Consulting spoke about attitudes towards age in Japan. "Public attitudes of respect for the aged are very strong," he said, "not surprising in one sense, since Japan is the heir of a Confucian tradition that emphasizes respect for the elders"; but "at the same time, private attitudes are much more ambiguous."

"Beyond Confucianism, there are a whole lot of very well known systems and usages that emphasize age or seniority," Mr. McKenna noted. The Japanese language uses different forms depending on whether the speaker is younger than or older than the person spoken to. Sempai-kohai (upperclassman-underclassman) relationships in sports clubs and universities are important. Preferential seats on Japanese subway trains are called shiruba siito ("silver seats"), and a national Respect for the Aged Day is celebrated on the third Monday of September.

There's also a special celebration for one's 61st birthday, in which the traditional costume is modeled on a child's cap and vest, he continued. "So one is really returning to an infant-like state. Childhood in Japan is a very happy time, it's a time when you can do what you wish and say what you want, but when adults, mature adults, do what they wish and say what they want, it can be seen as being selfish, or willful, or bossy."

This ambiguity, this admixture of negative sentiments about age, is shown quite dramatically in the Japanese folk tale "Ubasuteyama," which in literal translation means "Throwing-Away-Grandma Mountain," said Mr. McKenna. In the story, "when the old ceased to be productive and became a burden to the village, they were taken to a mountain and left to die of exposure. In effect they were sacrificed for the good of the village or the family. This legend is not unique to Japan; it reoccurs in various parts of Asia; but it is often told in Japan" and was made into a film in Japan in 1954 and again in 1983.

"Tragically, several years ago, when suicides among the elderly increased dramatically in Japan, the themes of being a burden or not wishing to become a burden on one's family or not wishing to inconvenience" were reported prominently as a reason for the increase in suicides among the aged, he reflected.

"In employment as well, age can work both ways," Mr. McKenna observed. A recent study showed that 83 percent of mid-sized and small firms in Japan still have seniority-based wage systems and lifetime employment, though larger firms are moving away from this model. In these systems, compensation may plateau around age 50 and even shrink at age 55 through 60.

"Mandatory retirement age is seen as necessary to these systems, as the way that promotions can continue to be made is to retire the people who hold the most senior positions," and continues to be recognized as legal, "even though there are court cases and discussions about whether mandatory retirement ages are discriminatory or not," he pointed out.

"So what's the message in all this in terms of attitude?" Mr. McKenna asked. "To say it very simply, a Japanese manager, I believe, is well advised not to trust your first instincts in the area of age," and "to raise your hand, to talk to someone like my colleagues who will talk in a few minutes on what needs to be done here, to find some cross-cultural training that will sensitize you to what Americans expect, because some of the things that we have talked about here are quite different than what your American employees are expecting."

"In federal law in the United States it's illegal to discriminate against somebody because of his age, from age 40 and up," said Debra Raskin of Vladeck, Waldman, Elias & Englehard. In New York City and New York State, the threshold is age 18 and up. And in most contexts, American laws forbid mandatory retirement.

When an age bias case is brought in court, she said, "plaintiffs' lawyers, lawyers who represent employees like me, do very much want to get our case in front of a jury, because we believe that most people on a jury will be sympathetic on issues of age discrimination."

"Getting in front of a jury is sometimes a very tricky thing," she added. If a defendant's lawyers move for summary judgment and they're successful, it means that the judge will rule that there's not enough evidence of discrimination to get the case heard by a jury.

Among the evidence that Ms. Raskin will offer on behalf of an age-discrimination client are biased remarks, "and what is really surprising in the age discrimination context is how often supervisors, and I'm not just talking about Japanese supervisors, I'm talking about Americans, I'm talking about other foreign companies that we've sued, use words about age as a negative," she said.

There are many clichés about age in American society--"'he's been around too long, you can't teach an old dog new tricks, he's stuck in old ways, he's slowing down'--all of those kinds of comments that people say, really without even thinking about it, are things that we will use to try to prove that age was in the manager's brain when that manager made a decision about what happened to this employee."

Likewise relevant, she noted, are comments that express a preference for youth: "'oh, we have this great young candidate for the job.' Would anybody ever say 'oh, we have this great white candidate for a job'? It doesn't happen so much any more, fortunately, but people still say those kinds of things about age. 'We want new blood, young ideas, new ideas,' all of that kind of stuff." Or people ask questions about retirement--"when are you going to retire?" or "don't you want to spend more time with your grandchildren?"--these comments are particularly risky given the U.S. ban on mandatory retirement in most settings.

If there isn't direct evidence of age bias, proving discriminatory intent typically entails evidence "that the reason the employer has given for firing the older worker, or not giving the older worker a promotion, is false, is not true, at least in part; and we call that pretext," she continued.

"What kind of evidence would I look for in trying to show that the employer is trying to cover up age discrimination by making up some other reason?" she asked. First, compare how younger workers are treated: if an older worker is fired for doing something wrong, for instance not meeting sales targets, are younger workers whose sales fall short of targets also fired?

"We also look at statistics, sort of an overall picture of the workforce," Ms. Raskin explained. As an example, if only one-fourth of a company's workers are over 40 but there's a reduction in force and 80 percent of the laid-off workers are over 40, "then that becomes a big problem for the employer and another way of proving discrimination."

If the employer doesn't follow its own procedures--"if there's a written procedure for giving warnings, and having probation, and so on, but the older worker doesn't get those warnings, or doesn't get performance evaluations that suggest how to improve--that may also be evidence of discrimination."

"Many of the employees who come into our office don't necessarily come to us because they believe or know that they've been the victims of discrimination. They come because they think they've been treated unfairly," Ms. Raskin concluded. "If you are unfair to an employee, if you fire them in a way that's humiliating, making them pack up their stuff and just go out the door, it's perfectly legal in American law; but I will tell you that nothing drives someone to a lawyer faster than that."

"So I would urge you to be kind and respectful to your employees, and then you'll put me out of business," she said with a smile.

Statistically, "age plaintiffs are the most successful discrimination plaintiffs," agreed William Milani of Epstein Becker & Green. If Ms. Raskin and her colleagues on the plaintiff's side can get to a jury, there's two-to-one chance that "she's going to win that case."

A recent federal-court case called Tomassi vs. Insignia underscores these risks, said Mr. Milani. The plaintiff, a woman in her 60s, was hired by MetLife to manage resident services at Peter Cooper Village, an apartment complex in Manhattan. Later on, MetLife engaged Insignia to oversee the complex, and Insignia became the plaintiff's employer. But then she was fired; and she sued on the basis, among other things, of age discrimination.

The lower court dismissed her case on summary judgment. She appealed, and the Second Circuit Court of Appeals held in her favor and overturned the lower court's decision.

"Throughout her employment," Mr. Milani recounted, "even while she was getting good appraisals and increases and bonuses and promotions, the supervisor was making comments. He would say things like 'in your day and age.' He would say 'you can understand our senior residents.' He would say 'you would be better off retiring soon if you're tired today.'"

"In the very meeting in which he terminated her," the appeals court said, the supervisor told her "she got along so well with seniors, she should do something in that area."

"So this issue of quote 'stray remarks' in the age area is something that courts are focused on and will allow" to reach the jury, Mr. Milani observed.

The Second Circuit found it relevant that Peter Cooper Village had launched a marketing campaign "to attract young professional tenants, and they went out aggressively recruiting younger workers who they thought would work better perhaps with those younger tenants that they were trying to recruit," he noted.
The employer argued that the plaintiff was fired for poor performance, "but the court said that's inconsistent with the way you appraised her and treated her and promoted her," Mr. Milani continued. "The court also noted that in the termination meeting, in giving her the explanation, she wasn't told it was performance. They said nothing about any issues related to that; instead, said it was because they wanted someone with website experience," and in fact the supervisor who terminated her "said that he would be delighted to serve as a reference for her because of her great skill."

"The area of age discrimination in Japanese companies, foreign-owned companies, can be even more challenging" than for American companies, Mr. Milani cautioned. To illustrate, he cited a case in which Ms. Raskin represented the CEO of an American subsidiary of EniChem, an Italian company that had decided to consolidate two U.S. subsidiaries as part of a global restructuring.

The EniChem America CEO, along with others employed in the U.S., was terminated at age 61. The CEO sued both the U.S. subsidiary and the Italian parent for age discrimination, and asked the court to order discovery on a global basis: "they wanted to know who was fired by EniChem around the world."

EniChem argued that what happened overseas was irrelevant to what happened in the U.S. But the company lost the case.

"The plaintiff argued, Ms. Raskin argued, and successfully, that the information about the global restructuring was relevant, because to the extent that the statistics demonstrated that the company, EniChem Italy, had a preference and an intent to get rid of its older workers globally, and even in those jurisdictions where age discrimination is not unlawful" and mandatory retirement systems are allowed, "that would be relevant to show that age was relevant with respect to decisions here. The court agreed, and allowed that discovery," Mr. Milani said.

"In the last year or so," he continued, "many of our clients, many of our Japanese clients, have been facing what almost sounds like the same case."

In this scenario, "a long-service, locally hired employee in his or her late 50s or early 60s, somebody with historically good performance reviews, salary increases, bonuses and promotions," is being let go, "because of poor performance or a decision to eliminate the job"; and the employee's lawyer calls Mr. Milani's firm, "alleging that the appraisals have always been good, the increases have been good, in fact there have been age-based remarks recently, inquiries about when are you going to retire, are you thinking about leaving, when might it be."

"And they are pointing to many of the things we've talked about already, insofar as mandatory retirement policies that may be effective for the Japanese parent, and the fact that they're alleging that there is this expectation, because they're in their late 50s or early 60s, that they're being asked to leave for that unlawful reason."

"Japan can be directing very generally budgets, and numbers, and workforce size and the like, perfectly fine," Mr. Milani summed up. However, "to the extent Tokyo was involved in those day-to-day decisions" on local personnel matters, "it is running the risk of being named as a defendant and being subject to discovery here."

In the severance context, age discrimination waivers are subject to many detailed requirements, and "it's one area where those of us who are lawyers, those of you who may be lawyers or have human resources responsibility, are particularly vulnerable, because this is our responsibility to get this right. So please be aware of that; we're seeing a lot of litigation in that area," he concluded.

Is there a concern that allowing plaintiffs to introduce evidence of a Japanese company's mandatory retirement policy will have an undue prejudicial effect, or itself involves a certain stereotyping of Japanese companies?

With this type of evidence, the notion is not that the companies "are doing something wrong in these other countries, but that they think of their workforce overall in terms of age," replied Ms. Raskin.

"We would certainly make all of those arguments, that it's lawful in Japan" and irrelevant to a decision here, said Mr. Milani. But the judge may decide to let it in. "From my standpoint, the best defense is likely to be that the decision to fire X was not made in Japan," but locally, by U.S. management.

What can job candidates do when they're filling out application forms that ask for date of birth, year of graduation, and so forth?

This kind of question is appropriate on other forms, for example benefits forms, but should be kept separate from the application process, Mr. Milani answered. If asked about age in an interview setting, one approach is to respond with a polite chuckle and "I really don't think you want to ask me that."

Ms. Raskin's advice, she said, is similar to what she suggests for women who are asked about pregnancy: "It's kind of better to answer the question and get hired."

How best can a company ensure that HR procedures don't create problems in this area?

Training for all managers is critical--prevention is the best strategy, the three panelists agreed.

It's important to underscore respect and professionalism, Ms. Raskin commented. It's not always a question of what's legally required, but what's "humanly required."

What about data for background checks, which are more and more needed in the wake of 9/11?

Mr. Milani replied that as an example, the Fair Credit Reporting Act has specifics on disclosure and consent by the employee. The key is that this should be a separate process from the interview application--have it centrally run by someone other than the manager and decision maker.

Is there a trend towards settlement of age discrimination claims?

The stereotype of Japanese companies as terrified of lawsuits is no longer the case, said Ms. Raskin. Even if a company has settled other cases, it may decide to draw a line in the sand; there are many factors, including the dignity of the person being accused of age bias, and "you have to really go with how strong the case is."

In his firm's experience, Mr. Milani said, the situation has changed, "really over the last decade, where you've become increasingly sophisticated, you've got very talented HR people supporting you now, and you are no different than, in my experience, American and other companies" that have to decide whether a given case should be settled.

Moderator Michael Levine of Epstein Becker & Green asked:

Can multinationals' rotating staff be plaintiffs in age discrimination suits?

Yes, staff who are rotating through a U.S. posting are protected, said Mr. Milani. Let's say a Japanese staffer is in his late 50s, and his salary would begin to diminish under the policies of the headquarters company in Tokyo: he'd be eligible to bring suit for age discrimination. "Our advice has generally been 'send them home, get them on that next JAL flight to Tokyo,'' he added.

What if there genuinely is an issue of a decline in performance?

The secret is documentation, said Ms. Raskin. If there was an opportunity to correct, if the criticism was explicitly detailed and not vague, that may deter plaintiffs' lawyers from even taking a case.

What you want to do, commented Mr. McKenna, is make personnel decisions for rational reasons, but think about how American expectations are different from expectations in Japan.

Are voluntary early-retirement plans lawful?

Mr. Milani answered, "Yes, but it must be truly voluntary." If there's a first-phase voluntary retirement plan and then in phase two there's an involuntary reduction in force, "the 60-year-old will be calling Debbie in a hurry."

--Katherine Hyde


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