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Federal Appeals Court Upholds Age Discrimination Challenge

As urged in AARP’s brief, the 8th Circuit reinstated an ADEA challenge by a terminated worker whose employer described her as one of its “oldest and sickest” employees.

Background

Just one day prior to scheduled knee surgery, Marjorie Tramp was terminated from her job at Associated Underwriters (AU) shortly after refusing her employer’s request that she withdraw from the company health care plan and instead rely solely on Medicare. In 2008, the company experienced a nearly 20 percent increase in the cost of its group health care plan and was seeking new quotes for group coverage. One insurer proposed coverage at a cost much lower than the other bidders, because the proposal did not include Tramp and another older employee. A representative of the insurer informed AU that the reason the older employees had not been included was that people above age 65 “usually don’t get quoted” since they are eligible for Medicare. The president of AU met with the two older employees and suggested they use Medicare instead of the company health insurance plan, but both declined.

Later that year, Tramp received a formal reprimand for poor performance and was placed on a 90 day probationary period. In February 2009, during a reduction in force blamed on the company’s lackluster financial performance, four employees lost their jobs. The four included Tramp and her other co-worker who had been asked to drop health coverage. The employer said Tramp’s termination was due to her poor performance.

Tramp sued, citing violations of the federal Age Discrimination in Employment Act (ADEA) and Americans with Disabilities Act (ADA). A trial court dismissed all of her claims. The 8th Circuit Court of Appeals affirmed dismissal of the ADA claim but allowed Tramp to proceed with her age discrimination claim.

AARP Foundation Litigation attorneys filed AARP’s friend-of-the-court brief in her appeal. The brief argued that the lower court misread the ADEA by excusing the company for dismissing Tramp as a way to save healthcare costs, rather than based on her age. AARP explained that the company had assumed a correlation between Tramp’s age and such savings, and thus, fired her “because of” her age. Echoing many arguments in AARP’s brief, the appeals court cited specific reference to age in two e-mails AU sent to a health insurer demanding lower rates because the company had terminated its “oldest and sickest employees,” specifically including Tramp. The court agreed with AARP that these statements could be a “manifestation of discriminatory intent in the process used by AU to be rid of its older (and/or oldest) employees in general.” Citing a 1993 Supreme Court decision, Hazen Paper v. Biggins, the court clarified that where companies assume a correlation between age and a non-age factor — here healthcare costs, and act adversely to an employee based on that assumption, as apparently happened in this case, they may be liable for age discrimination, and may not be excused for their attention to the non-age factor.

What’s at Stake

This decision breathed new life into a theory of age discrimination, described over two decades ago in Hazen Paper v. Biggins, which has long been ignored. This case also addressed an emerging concern for AARP: age discrimination in the workplace related to employer fears, and health insurance industry assumptions, that older workers have higher healthcare costs.

Case Status

Tramp v. Associated Underwriters was decided by the U.S. Court of Appeals for the Eighth Circuit.