I work in customer service for a large utility company. Our department has about 50 employees; other than our managers, everyone does the same job of answering phone calls and email messages. The utility has been struggling, and our managers told us they have been instructed to lay off six employees. Because the goal is to save money, they plan to review the performance records of the highest paid half of the department's employees, then lay off the six who have the lowest performance ratings. However, our pay rate is based entirely on how long we've been with the company. Everyone starts at the same basic salary, and we receive annual increases each year. Occasionally, an employee will receive an additional bump in pay for excellent service. For the most part, though, the highest paid employees are those who have been with the company the longest. They also tend to be the oldest employees in the department. I am one of the highest paid, and I'm 60 years old. Can the company lay us off by seniority if it results in mostly older employees losing their jobs?
In the circumstances you've described, the answer is most likely yes, your company may do this. Although age discrimination is illegal, employers may rely on what the law calls "reasonable factors other than age" -- including seniority -- when making job decisions.
The federal Age Discrimination in Employment Act (ADEA) and similar state laws prohibit employers from basing their job decisions on an employee's age, if the employee is at least 40 years old. If, for example, your employer had simply decided to lay off its oldest employees (who are all over 40), that would be illegal age discrimination.
Your employer hasn't used age explicitly as a basis for the layoffs. If you thought your employer really was making decisions based on age, but was hiding it by talking about seniority and performance, you might still have a claim for intentional age discrimination. In this situation, you would have to show that your employer wasn't actually relying on its stated criteria, but instead was using these justifications as a pretext to discriminate. However, it doesn't sound like you believe your employer is trying to cover its age discrimination tracks.
Employees may still bring an age discrimination lawsuit even if their employers are not engaged in intentional discrimination. These cases, called "disparate impact" cases, claim that the employer's practice has a disproportionate impact on a protected class of employees (in your case, older employees).
In an age discrimination case, an employer may defend itself against this type of claim by proving that it relied on a reasonable factor other than age. The Equal Employment Opportunity Commission (EEOC), which interprets the ADEA, has said that an employer can meet this requirement by showing that its challenged practice was reasonably designed to achieve a legitimate business purpose and administered in a way that reasonably achieves that purpose.
The U.S. Supreme Court has found that seniority may qualify as a reasonable factor other than age (even though the two are often closely aligned). In your situation, it sounds like your employer has clearly defined the criteria it will use to select employees for layoff. The purpose of the layoff is to save money, undoubtedly a legitimate business purpose. The method it has chosen to decide who will get laid off will reasonably achieve the goal of cutting costs, while also allowing your employer to keep its highest performing long-term employees, another reasonable business goal. Even if your employer ends up laying off a disproportionate number of older employees, you likely won't have an age discrimination claim.