Mandatory Retirement and the Age Discrimination in Employment Act: Impacts on Higher Education
June 5, 2002
In recent decades, colleges and universities managed fiscal
operations through fairly predictable levels of faculty turnover, with highly
paid tenured professors retiring at set ages and lower-paid junior faculty
continually moving up the ranks. Because of changes in federal law over the
past several years, however, the budgets of higher education institutions have
been increasingly strained by a "graying" of academia as more and more senior
faculty, often with six-figure salaries, defer retirement until age 70, 80 or
beyond.
The Age Discrimination in Employment Act of 1967 (ADEA),
prohibits employers from using age as a basis for making hiring, firing,
promotion or compensation decisions, or from limiting, segregating or
classifying employees in any way that would deprive them of employment
opportunities or adversely affect their employment status, including enforcing
mandatory retirement ages. Under a special ADEA exemption enacted in 1986,
postsecondary institutions were permitted to enforce mandatory retirement for
faculty who reached the age of 70. The exemption was limited to seven years,
however, and it expired at the end of 1993.
In the area of long-range financial planning, the end to
mandatory retirement has effectively resulted in retirement trends at
postsecondary institutions that are individually determined rather than
institutionally mandated, leading inevitably to an unpredictable planning and
budgeting process. A recent study conducted by the National Bureau of Economic
Research (NBER), which compared retirement rates before and after 1994, strongly
suggests that the abolition of compulsory retirement led to a dramatic drop in
retirement rates at ages 70 and 71.
The NBER research, presented in February 2001 by Orley
Ashenfelter of Princeton University and David Card of the University of
California, Berkeley, found that when mandatory retirement rules were in effect,
fewer than 10 percent of 70-year-old faculty were still teaching two years
later. Since 1994 and the elimination of mandatory retirement, however, the
number of those still teaching after age 70 rose to 50 percent. Other recent
studies confirm the trend toward delayed retirement in academia.
Numerous procedures have been employed to encourage faculty
retirement, such as retirement enhancements and buyouts, but are costly and so
do not necessarily relieve budget constraints. One institution, Indiana
University at Bloomington, seemed to have found a way to force out at least some
older campus employees. Until earlier this year, the university had continued a
policy dating from 1937 that forced many campus administrators to retire by age
65, provided they were guaranteed payment of a specified sum. When a
63-year-old linguistics professor, Paul Newman, applied for a position as the
associate dean of faculty, he was told that he was too old for such a job.
Professor Newman, aware that federal law prohibited the university from
compelling the retirement of its faculty or staff, filed an age-discrimination
complaint with the U.S. Equal Employment Opportunity Commission (EEOC). In
defending its position, the university relied on an exemption to the ADEA
through which executives or high-level policy makers can be forced to retire at
age 65 if they are entitled to receive retirement benefits of at least $44,000 a
year, exclusive of Social Security. Professor Newman's complaint was resolved
earlier this year with a ruling by the EEOC that Indiana University's policy,
which covered a wide range of administrative positions-from the president to
librarians and head coaches-was in violation of federal law. The university has
agreed to revise its policy so that it only affects top administrators-those in
fact intended to be exempted from the ADEA protections.
The current debate over the consequences of "academic
graying," which ranges from worries about resultant tuition increases to the
impact on the ability to hire women and minorities in entry-level teaching
positions, has renewed the tenure debate that dominated the '60s and '70s.
Supporters of academic tenure contend that it provided compensation for salaries
and benefits lower than most highly educated faculty could have commanded in the
business sector and also afforded academic freedom. Critics of tenure, who
earlier argued that it afforded a degree of job security that did not exist
outside academia, now note that the abolition of mandatory retirement
effectively guarantees lifetime employment to the tenured professoriate.
Academic institutions can expect to grapple in the years to
come with the consequences stemming from the ADEA prohibition on mandatory
retirement. Discussions in academic circles are likely to be increasingly
centered on more persuasive voluntary inducements to retire. Among these will
be the creation of more part-time emeritus and senior scholar positions that
ease the transition from full-time teaching and research status and the
structuring of faculty retirement benefits so that the later one retires, the
fewer the years that benefits will be paid. In addition, many voices in higher
education today advocate instilling the notion that, in exchange for having had
a career protected by tenure, senior faculty owe an obligation to move on to
retirement for the good of the institution, notwithstanding the protections
afforded them by federal law.
For more information, please contact Carolyn B. Hall at
888-688-8500, by e-mail at cehall@hklaw.com.
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