No Age Bias in Demoting 51-Year-Old Employee for Lack of Accounting Experience

Former employees alleging age discrimination have the burden to prove the employment decision in question hinged on their age. In a recent case arising in Nebraska, the U.S. 8th Circuit Court of Appeals (which has jurisdiction over employment claims arising in the state) found the federal trial court in Omaha had properly dismissed the age claims raised by a 51-year-old woman. While restructuring its financial department, the employer demoted the employee because she lacked accounting experience, after which she ultimately resigned.

Facts

Lana Starkey worked for Amber Pharmacy from September 2001 until August 2015. In 2014, her position changed from enrollment director to financial services director. The change coincided with the acquisition of Amber by Hy-Vee, a supermarket chain.

After the acquisition, Amber’s accounting and financial department was found to be “in complete disarray,” a situation exacerbated when the pharmacy implemented a new operating system in February 2015. The company retained a “third-party implementation consultant” for the new operating system, who reported the biggest obstacle to implementing the system was because the financial team was “understaffed” and “potentially not the right skill level” and lacked “management in the financial area.” The consultant recommended restructuring the team.

At about the same time the consultant delivered the report, Starkey reported to others that Amber was being overpaid by Texas Medicaid, incorrect billing codes were being used for the payments, and some employees were engaged in e-mail practices that raised concerns about violating the Health Insurance Portability and Accountability Act (HIPAA).

The company considered various plans for restructuring the financial department, ultimately determining Starkey’s position would be eliminated. According to the company, the decision was based on accounting expertise, which Starkey lacked, and her struggles in adapting to the new operating system.

Starkey was told her job was being eliminated and was offered a choice of two new positions, both of which were demotions with a pay cut. In June 2015, she reluctantly accepted one of the positions but questioned whether the demotion was caused by her report of the Medicaid and HIPAA issues.

In August 2015, Starkey resigned, after which she didn’t receive a timely COBRA notice about her right to elect temporary continuation of health insurance coverage.

Legal Action

Starkey filed suit in Nebraska state court, claiming her resignation was caused by discrimination, retaliation, the demotion, and a hostile work environment, asserting various federal and state claims against Amber, Hy-Vee, and Mike Agostino, Amber’s president. The defending parties moved the case to federal court and promptly asked for summary judgment (dismissal without a trial), asserting no material facts were in dispute and that they were entitled to judgment as a matter of law.

The federal court granted summary judgment on each of Starkey’s federal charges, including her Age Discrimination in Employment Act (ADEA) claims. It also dismissed all state claims except for a particular portion of her claim under the Nebraska Fair Employment Practices Act (NFEPA). It remanded the retaliation claim based on her reporting of the Medicaid discrepancies to state court.

The federal court also found Hy-Vee and Agostino weren’t proper parties and dismissed all claims against them.

8th Circuit’s Decision

Starkey appealed the trial court’s decision on all claims except for one filed under Title VII of the Civil Rights Act of 1964, which she abandoned on appeal. Amber appealed the district court’s partial denial of summary judgment on the NFEPA claim.

Age bias claims tossed. The 8th Circuit upheld the trial court’s summary dismissal of Starkey’s age discrimination claims. After noting there was no direct evidence of age bias and assuming she could establish an initial prima facie (or minimally sufficient) case, it found Amber articulated a legitimate, nondiscriminatory reason for eliminating her position in the newly restructured financial department and demoting her, specifically the need to put a stronger emphasis on accounting and more effectively implement the new operating system.

In addition to the fact the company needed to prioritize accounting skills and experience to operate the new system, Starkey had candidly admitted “(a)ccounting is not for [her].” The court noted it would not second-guess the employer’s business judgment, particularly when it was based, at least in part, on the third-party consultant’s recommendations.

Therefore, to prevail on the age claim, Starkey would’ve had to show the stated reasons were a mere pretext (or cover-up) for age discrimination, i.e., “but for” her age, she would not have been demoted. The court quickly rejected her assertion that since other employees over the age of 40 were terminated and younger employees absorbed her job duties, she was a victim of age bias. The court found all the accused parties were entitled to summary judgment on her age-based claims.

COBRA claim fails. The 8th Circuit likewise upheld the dismissal of Starkey’s COBRA claim since she hadn’t pointed to any facts showing an interference with her attainment of benefits or that she was harmed in any way by any lack of notice. Starkey admitted she (1) knew about her COBRA rights, (2) wouldn’t have elected the coverage anyway, and (3) had enrolled in her husband’s less expensive employer plan in which she had no out-of-pocket medical expenses.

Hostile environment, emotional distress charges also thrown out. Finally, the 8th Circuit found the trial court had properly dismissed Starkey’s claims for hostile environment and intentional infliction of emotional distress based on the demotion. She hadn’t alleged sufficient facts to establish outrageous conduct and severe emotional distress, as Nebraska law requires.

Retaliation claims survive. The 8th Circuit found all of Starkey’s retaliation claims under the NFEPA should be remanded (or sent back) to state district court to analyze and determine whether her activity was “protected conduct” and whether it would apply the “manager rule” in the context of a retaliation claim under the state statute. The manager rule has become an emerging trend in many courts. It provides that a management employee who, in the course of her normal job performance, disagrees with or opposes her employer’s actions doesn’t engage in protected activity. Lana L. Starkey v. Amber Enterprises, Inc., et al., Case No. 19-3688 (8th Circuit, 2021).

Lesson for Employers

Starkey’s case underscores the importance of developing a well-reasoned plan for any company or department restructuring that will involve the elimination of certain positions. You should develop and apply clear criteria for executing the restructuring.

Mark Schorr is the editor of the Nebraska Employment Law Letter and a frequent contributing author to HR Daily Advisor today, which goes out to more than 200K employers, HR pros, GC, etc., across the country

New Year’s Resolutions for HR Professionals – 2020 Checklist

The start of a new year is an excellent time for HR professionals to focus on key New Year’s resolutions in terms of proper Human Resources management. Although none of us typically follow through on every New Year’s resolution we make, the following provides a thoughtful checklist of resolutions and actions that should pay great dividends in the coming year, and potentially save costly resources down the road through avoidance of employment claims and litigation. Let’s get right to the checklist.

Employee Handbook & Policy Review: Conduct a thorough review of your employee handbook and other written policies to determine if revisions are necessary due to changes in employment laws at the state or federal level. Do your employee handbook and other policies sufficiently preserve your right to exercise management discretion to determine when employees can be terminated at will? Do you have an appropriate acknowledgement form on file for every employee to whom your employee handbook has been issued, which confirms receipt of the handbook and acknowledges that, absent a formal contract, employment is at will? Do you have an appropriate sexual harassment/workplace harassment policy? Has it been provided to all employees, and does it clearly articulate an internal mechanism to register complaints? If you are covered by the Family and Medical Leave Act (FMLA), are your FMLA policies up-to-date?

Review Employment Applications: Your employment application should be carefully reviewed on an annual basis, to ensure that you are only requesting valid job-related information, and not requesting any information about an applicant’s age, previous injuries, worker’s compensation claims or disabilities? Your application is critical, as the application itself can become the subject of an employment discrimination charge or legal action.

FMLA and ADA FORMS: Review your form library to ensure that you have all of the proper forms in place for utilization whenever an employee requests medical leave or accommodation for a disability. Are you possibility using outdated forms or handling requests on an inconsistent basis? This is simply a good time to review your policies and procedures in this area.

Wage & Hour Audit – Exempt Classification Review: Conduct a thorough audit of your exempt and non-exempt classifications, to ensure that your salaried employees who are deemed exempt from overtime truly meet all aspects of one of the recognized exemptions, and do all such employees who are “exempt” meet the “salary basis” test? Are your hourly employees subject to overtime properly recording all hours worked? Do you have sufficient procedures in place to ensure compliance with overtime requirements and regulations? Are you properly including non-discretionary bonuses in the regular rate for hourly employees for overtime calculation purposes?

Review Job Descriptions: Job descriptions are not a luxury, but rather a necessity. Accurate, up-to-date job descriptions are critical, not only with respect to establishing employee expectations and performance parameters, but also when it comes to complying with the Americans with Disabilities Act (ADA) and its various requirements.

Supervisory Training: When was the last time you conducted training for all supervisors on the basics of diversity and harassment in the workplace, wage and hour administration, FMLA and ADA requirements, etc.? If it has been more than 18 months to 2 years ago, now would be an excellent time to conduct supervisory training early in the new year.

Review Employee Evaluation Policies and Procedures: You should thoroughly review and examine how you are evaluating employees and grading performance. Employee evaluations can be an excellent management tool, but they can also become a major problem if not properly and effectively administered., e.g. we are often called upon to defend a disciplinary or termination decision, and although it is apparent that performance problems existed, the problems and issues were never accurately reflected on a recent performance evaluation. It is imperative that employee evaluations are performed on a timely and accurate basis to reflect the employee’s actual performance and any identified shortcomings.

The above checklist presents a few suggested New Year’s resolutions. No such checklist is ever complete, and everyone will undoubtedly want to expand on this list. Taking some time at the start of the year to focus on these issues will provide continuous benefits going forward.