The New, Old IBM

For those who recall the 1960s and ’70s—in all their youthful fury and upheaval—IBM likely fits in as a symbol of a prior era. IBM had a quiet, middle-age profile. It embodied innovation without flash, corporate conformity, focus and efficiency. The IBM personal computer helped change the world, but lacked style and panache. IBM workers—programmers, sales reps and executives, mostly white and male—famously wore white button-down shirts, company ties, dark suits and wing-tips. IBM was a counterweight to the counterculture.

Changes in the tech sector hit IBM hard:

“Back when companies relied on mainframe computers to crunch their numbers and process their words, times were good at IBM’s Kingston, NY, plant. Workers were well paid, families were invited to picnics on the company’s sprawling campus, and prosperity was real for thousands of hardworking Ulster County residents. As technology changed, so too did the demand for mainframe computers and IBM’s sales plummeted, taking with them the jobs, benefits and economic security many IBMers thought would last forever. Layoffs started in 1993 . . . .” Liz Cooke, Kingston: The IBM Years, June 18, 2014.

Out with the Old, Literally

In the early 2000s, IBM’s response included a new youth focus. As documented in investigative journalism by ProPublica and alleged in multiple lawsuits, IBM began to concentrate recruitment on Millennials and to terminate large numbers of older employees. For instance, a 2006 IBM internal report is cited in one such lawsuit as referring to older workers as “old heads,” declaring younger workers “generally much more innovative and receptive to technology than baby boomers,” and urging IBM’s “organizational technology” to focus on younger workers.

Lawsuits filed in New York, Texas and Connecticut, among other jurisdictions, have cited IBM management’s expression of ageist stereotypes in reports, interviews, and company training materials, etc.: i.e., the supposed weaknesses of older workers and corresponding supposed strengths of younger workers. For example, in 2014, a Connecticut jury awarded $2.5 million for age discrimination to a 61-year-old executive who was fired after 41 years with IBM, in Castellucio v. Int’l Bus. Machs. Corp., No 3:09-cv-01145 (D. Conn. July 23, 2014).

A new IBM strategy—to deny laid off workers information needed to bring an age-discrimination case—was alleged in the 2019 case, Estle, et al. v. IBM Corp., No 7:19-cv-02729 (S.D.N.Y.). As background, the Age Discrimination in Employment Act (“ADEA”) prohibits companies from requiring terminated workers to sign away their right to sue for age discrimination in exchange for severance pay, unless providing key age-related information about the layoffs.  Plaintiffs alleged that IBM subverted this scheme by now requiring laid off workers to sign waivers only of their rights to sue in court and to bring collective actions in arbitration. IBM contended that, since this still permitted the sliver of a right to sue (individualized arbitration), the company had no duty to disclose information on the role age played in the terminations. IBM no longer had to identify, for instance, the criteria supposedly applied by the company in selecting employees for layoff, the ages and job titles of all individuals laid off and all those considered for layoff but retained by the company.

In short, the Estle plaintiffs retained the right to sue, but did not get data needed to assess the strength of their case. While Estle, et al. found their way to the courthouse to lodge claims (and engaged highly skilled counsel), most older workers fired in a layoff are unlikely to get that far, without information on the layoff’s age impact. IBM’s policy also forbade plaintiffs from pursuing a collective action akin to the “class actions” permitted in race and sex discrimination cases under Title VII of the Civil Rights Act of 1964. So much for “strength in numbers” and the efficiency of litigating claims of those “similarly situated” in a single proceeding.

Estle, et al. challenged the “collective action waiver,” arguing that IBM failed to comply with strict requirements contained in the ADEA for extracting such a waiver. On September 21, 2020, Judge Paul Gardephe ruled that the OWBPA only protects older workers against waivers of “substantive” rights—i.e., the right to bring an age bias claim in some form and in some forum, not “procedural” rights—such as the right to proceed collectively under the ADEA. That ruling is now on appeal in the Second Circuit.

‘More than 100 plaintiffs are pressing ahead with ADEA claims in individual arbitration.’

Two other cases against Capital One are testing the issue of whether companies can lawfully demand that employees agree to waive a right to bring an ADEA collective action to challenge their terminations in return for severance pay. A federal judge in Richmond, Va., ruled for Capital One on this point but permitted the plaintiffs, Nanette Hutchens and Virginia Stirnweis, to file a petition to the U.S. Court of Appeals for the Fourth Circuit (also in Richmond) to reconsider this issue. The court observed that another U.S. Court of Appeals (the Sixth Circuit, headquartered in Cincinnati) had ruled—in a case not involving an employer-imposed agreement to arbitrate any disputes arising out of employee terminations—that no such waiver could be required. 

Yet another case, along with Estle and the Richmond cases, will determine the effectiveness of companies’ efforts to avoid legal liability for their aggressive youth orientation. In Rusis, et al. v. IBM, 1:18-cv-08434-VEC (S.D.N.Y.), fired IBM workers are maintaining a different, two-pronged strategy. Instead of challenging their waiver of the right to proceed collectively, more than 100 plaintiffs are pressing ahead with ADEA claims in individual arbitration. This could be quite costly for IBM. And yet another group of plaintiffs, who did not sign a waiver of claims, are pursuing a collective action.

Finally, on Aug. 31, the New York office of the U.S. Equal Employment Opportunity Commission (EEOC) issued a letter to former employees of IBM who complained to the agency about age discrimination, concluding that its investigation confirmed that between 2013 and 2018 terminations at IBM showed a pattern of intentional age bias. The agency cited various evidence supporting its conclusion that the company focus on reducing its headcount by firing older workers in order to replace them with younger employees. The EEOC noted that although IBM contended that those terminated lacked skills, the company rehired some as contract employees.

It remains to be seen how the EEOC will proceed based on its findings.

Stay tuned.      

Daniel Kohrman is a Senior Attorney at AARP Foundation in Washington, DC.