Employers Can Set a Mandatory Retirement Age | February 2024

February 2024 | Volume 15, Issue 7

Read the full article on CNN.

Former US Vice President Al Gore, 75, is stepping down from Apple’s board because of the company’s age-based restrictions for its directors, and it raises the question of ageism in Corporate America.

By no means is age 75 — or any age over 65 — an automatic disqualifier for U.S. corporate leaders.

Consider: The top 10 oldest CEOs of companies on the Russell 3000 — led by Berkshire Hathaway’s Warren Buffett — ranged in age from 84 to 91 in 2022, according to The Conference Board and ESG data analytics firm ESGAUGE. As of this writing, they are all still on the job.

In fact, mandatory retirement ages are more of an exception than a rule in Corporate America, and they do not exist for US lawmakers or surgeons or many other jobs. But they do exist in a lot of public-safety occupations.

Here’s a look at where they are most and least prevalent, and why.

Boards Are Most Likely to Have Mandatory Retirement Age Policies

Having a mandatory retirement policy for board members is up to the discretion of individual companies. But a majority do have them.

“In 2023, 69 percent of [S&P 500] boards reported having a mandatory retirement policy — down one point from 2022,” according to an August 2023 report from executive search firm Spencer Stuart.

Among those with such policies, the vast majority (97 percent) set the retirement age at 72 or higher, with 57 percent putting it at 75 or older, the report noted.

“Director retirement policies continue to be quite commonly found in corporate organizational documents, as the need for board refreshment is ongoing,” said Matteo Tonello, a managing director at The Conference Board, who advises members about governance issues.

That is due largely to the need for boards to diversify in several ways, Tonnello said, citing gender and racial diversity and diversification in terms of qualifications and skills, such as having experience with emerging technologies.

CEOs Are Less Likely to Face Push to Retire

It is harder to quantify how many companies impose a mandatory retirement age for CEOs and other senior leaders, Tonello said.

For one thing, some companies may have retirement age policies on paper but will disregard them when they want to keep someone on.

“Boards often override them due to the inconvenient circumstances the company may face when the policy is triggered,” he said.

Those circumstances can be a company going through a crisis (or conversely performing very well); a tight labor market for senior talent; or an economic downturn.

For example: Target CEO Brian Cornell was 63 in 2022, when he and the board agreed he would stay on another three years. The board said it would eliminate its policy of discussing a CEO’s retirement when he or she turns 65.

And in 2021, in the midst of Boeing’s 737 Max crisis, Boeing CEO Dave Calhoun turned 64. The company board waived its mandatory retirement age of 65 and announced it would extend it to age 70 for Calhoun.

But waiving a mandatory retirement age policy for one CEO does not mean a board will not resurrect it for someone else.

“These policies have often disappeared from corporate governance principles or other organizational documents. [That] does not mean though that they have been rescinded, since there is no disclosure obligation related to them. And many boards may choose to unofficially keep them in place, [and] use them only when convenient,” Tonello explained.

Then again, boards may not have to make the call too often since many CEOs leave well before traditional retirement age. Challenger, Gray & Christmas, which tracks CEO exits, reports that “the average age of an exiting CEO was 56 in 2023, down from over 63 in 2017.”

What about Everyone Else at a Corporation?

Thanks to federal and state age discrimination laws, it is generally illegal for companies to impose a mandatory retirement age for rank-and-file employees, according to Thomas McKinney, a partner at the employment law firm of Castronovo & McKinney, LLC.

The Age Discrimination in Employment Act applies to all companies with 20 or more employees. But a state can decide to apply prohibitions to a wider swath of employers if it chooses. For example, McKinney noted, New Jersey prohibits all companies, regardless of how many employees they have, from imposing a mandatory retirement age on workers.

So why is it okay for companies to push their CEOs and board members out the door after a certain age?

There is an exception in the ADEA that lets companies set retirement ages for anyone 65 or older if they are a bona fide executive or high-level policymaker (which includes senior executives other than CEOs or board members) and who stands to receive non-forfeitable retirement benefits valued at a minimum of $44,000 a year.

Individual states may set a lower retirement benefit threshold.

What about Specific Professions?

The ADEA, however, does not apply to organizations of all kinds.

For example, McKinney notes, it does not cover partners and shareholders in closely held corporations. So, doctors or lawyers working in a small practice may be asked to hand in their work ID when they turn 65 or older.

However, there is no official required retirement age for surgeons when it comes to physically operating on patients. But the American College of Surgeons put out a statement in 2016 — which the ACS still stands by today — that recommends surgeons, “starting at age 65-70,” voluntarily seek out physical, visual, and cognitive testing among other measures.

Many other public safety occupations do have mandatory retirement ages. Commercial airline pilots, for instance, under federal law may no longer fly commercially after turning 65 (though there has been a legislative push in Congress to increase that age to 67).

Federal and state police officers are typically subject to mandatory retirement ages, too, McKinney said.

In New York State, for instance, state police officers with at least 20 years’ service must retire after turning 60. But US Capitol Police officers with that same tenure must retire at 57, although in 2020 they were temporarily exempted from that requirement.

Other federal jobs subject to mandatory retirement ages are “firefighters, nuclear materials couriers, air traffic controllers, and customs and border protection officers,” according to the U.S. Office of Personnel Management.

The “Whys” Behind Mandatory Retirement Ages

There may be varied stated reasons for having a mandatory retirement age, such as opening the pipeline for younger talent to have more opportunities. Or, in the case of boards, as Tonello noted, there is often a desire to diversify and fill roles with various types of expertise.

But the underlying reason for retirement age policies is often more of a knee-jerk assumption.

“What is behind these mandatory retirement policies and laws is an assumption that somebody older is not as qualified, competent or productive,” said Mary O’Neill, an attorney for the Equal Employment Opportunity Commission.

Or, in the case of public safety jobs, “there’s an assumption that age is connected with safety and physical competence,” O’Neill said.

But all such assumptions are based more on “myths, fears and stereotypes” than fact, she said, noting that performing individual assessments of employees is a better way to determine competency of all kinds — physical, mental, and psychological.

“There will be some 33-year-olds who don’t have the ability to do a job if you do an individual assessment,” she said.

And some 65-year-olds may not make the grade either. But some will.

For that reason, advocates for older workers, like the AARP, contend all mandatory retirement ages should be eliminated, even for demanding jobs involving public safety.

“Numerous scientific and medical studies find no need for this age-based discrimination,” the AARP notes in its latest policy book on employment issues.

“Public safety would be better served by periodically testing the fitness of public-safety employees, regardless of age, rather than relying on arbitrary age restrictions.”

Discussion Questions

1. Describe the Age Discrimination in Employment Act (ADEA).
   The U.S. Equal Employment Opportunity Commission (EEOC) is a federal administrative agency that was established via the Civil Rights Act of 1964 to administer and enforce civil rights laws against workplace discrimination, including (but not limited to) age discrimination prohibited by the Age Discrimination in Employment Act of 1967. According to the EEOC:
   
   “Age discrimination involves treating an applicant or employee less favorably because of (their) age. The Age Discrimination in Employment Act (ADEA) forbids age discrimination against people who are age 40 or older. It does not protect workers under the age of 40, although some states have laws that protect younger workers from age discrimination. It is not illegal for an employer or other covered entity to favor an older over a younger one, even if both workers are age 40 or older. Discrimination can occur when the victim and the person who inflicted the discrimination are both over 40.
   
   The law prohibits discrimination in any aspect of employment, including hiring, firing, pay, job assignments, promotions, layoff(s), training, benefits, and any other term or condition of employment.
   
   It is unlawful to harass a person because of (their) age. Harassment can include, for example, offensive or derogatory remarks about a person’s age. Although the law does not prohibit simple teasing, offhand comments, or isolated incidents that (are not) very serious, harassment is illegal when it is so frequent or severe that it creates a hostile or offensive work environment or when it results in an adverse employment decision (such as the victim being fired or demoted). The harasser can be the victim’s supervisor, a supervisor in another area, a co-worker, or someone who is not an employee of the employer, such as a client or customer.
   
   An employment policy or practice that applies to everyone, regardless of age, can be illegal if it has a negative impact on applicants or employees age 40 or older and is not based on a reasonable factor other than age (RFOA).”
2. As indicated in the article, there is no official required retirement age for surgeons when it comes to physically operating on patients. Does this surprise you? As further indicated in the article, the American College of Surgeons currently recommends that surgeons, “starting at age 65-70,” voluntarily seek out physical, visual, and cognitive testing among other measures. In your reasoned opinion, should this “recommendation” be converted into a “mandate?” Explain your response.
   These are opinion questions, so student responses may vary. Although your author does not favor a mandatory retirement age for surgeons (given the fact that it is absurd to presume that just because an employee reaches a certain age, they are incapable of performing their ordinary job responsibilities), it does seem reasonable to require mandatory physical, visual, and cognitive testing for surgeons who reach a designated age (for example, 65). Such a requirement could be imposed by the state medical board (the state regulatory authority) as a condition for continued licensure.
   
   In comparison, the American College of Surgeons’ recommendation that surgeons voluntarily seek out physical, visual, and cognitive testing at a certain age (for example, 65) appears to your author as a minimal (and perhaps inadequate) expectation for protecting the health, safety, and general welfare of the public.
3. As indicated in the article, under current federal law, commercial airline pilots cannot fly commercially after turning 65. Does this surprise you? Does this not seem inconsistent with the fact that there is no official required retirement age for surgeons (see the article and Discussion Question 2 above?)
   This is an opinion question, so student responses may vary. Like the response to Ethical Dilemma Discussion Question 2, although your author does not favor a mandatory retirement age for airline pilots, it seems reasonable to require mandatory physical, visual, and cognitive testing for pilots who reach a designated age (for example, 65). Such a requirement could be imposed by the Federal Aviation Administration (FAA) as a condition for continued licensure.
   
   In your author’s opinion, there does appear to be a glaring discrepancy between the lack of required retirement age for surgeons and the federal law that prohibits airline pilots from flying commercially after turning 65. A comparable standard seems more appropriate since both professions affect the health, safety, and general welfare of the public.