By Adam Cohen
New York Magazine
Allstate recruited new insurance agents in the 1980's
with a brochure aimed at the dreams of time-clock punchers everywhere.
The cover, which featured tidy-looking offices sporting the company's
iconic blue-and-white logo, promised that signing on was A better than
being in business for yourself," Inside, if offered prospective agents
nothing less than a piece of the American dream. "Have you ever wanted a
proprietary interest in a business?" the brochure beckoned. How about
"unlimited income potential"? And "job security"?
Ron Harper, the son of a tractor salesman from
Gainesville, GA., wanted all of those things. A 38 year old father of
two, he had worked his way up on the supermarket business, starting as a
bagger at 16 and rising to district sales manager in charge of 17
stores. But the supermarket industry was hurting, and after trying out a
couple of other managerial jobs, he was looking for something more
stable.
That was when he heard that Allstate was hiring. Its
Neighborhood Office Agent program offered just the mix of opportunity
and security he wanted. Allstate would give him policies to sell, money
to run his own agency and a brand whose slogan- "You're in Good Hands" -
was a marketing legend. He understood that the money would not be great
at first. He would have to hustle to build a "book of business," and
Allstate's commissions were less than he could earn as an independent
broker. As an Allstate employee, though, he would receive generous
benefits, including a pension. If he honed his skills and worked hard,
he figured, there was no limit to what he could earn. And once he got
past the preliminaries, he was told, he could be terminated only for
dishonesty.
In August 1989, Harper was assigned to the small town
of Thomson, Ga., and he uprooted his family and began hunting for
customers in difficult terrain. Most of Thomson's older residents
already had car and home insurance, and the younger ones were clearing
out for better jobs in Augusta and Atlanta. But Harper "bled blue," as
the company's saying goes. He lived off savings at first pouring his
commission back into the agency, and used his own money for rent, an
assistant's salary and ads in the Yellow Pages. After a few years, he
had his book of business and was making a modest living. Then, in 1998,
Allstate reduced the commissions it paid its neighborhood agents. To
make up the lost revenue, Harper's wife quit her job and worked for him
at below-market wages.
In November 1999, just past Harper's 10 year
anniversary with Allstate, his supervisor called him into his office un
Augusta. Harper and about 17 of his fellow agents were handed a box of
documents - the "job in a box," they would come to call it-radically
redefining their relationship with Allstate. Harper and the others would
now be independent contractors. Their benefits, pensions included, would
end.
The box also contained what Harper now calls the
"damnable release," which guaranteed that the agents would not sue. They
didn't have to sign, but if they refused, their days selling for
Allstate were over. "I read that thing, and honest to God, I felt
nauseous," Harper says. The agents were filled with questions. Prime
among them, What happened to the job security they were promised? Bu the
managers were "on transmit, no receive," Harper recalls. "All they
wanted to was read to us from the script."
The same meeting was being played out in Allstate
offices nationwide. The company, which had more than 15,000 agents of
various kinds, was offering all of its 6,400 employee agents- the
longest-serving agents, and those with the best benefits-the same
unrelenting terms. They could keep their jobs by forfeiting benefits
that were, in some cases, worth hundreds of thousands of dollars. Or
they could give up their benefits and their jobs.
Allstate's reneging on its promise was, Harper
insists, "totally wrong." But he also knew that he couldn't afford to
walk away. In the end, he did what all but a handful of the agents
did-he signed the release. Then he sued for age discrimination.
According to the federal government,
age-discrimination complaints filed with the Equal Employment
Opportunity Commission are up more than 24 percent over the past two
years. Pick up the patter and the cases are everywhere. Ford Motor
Company is paying more than $10.5million to settle suits by older
managers who claim that is evaluation system discriminates against them.
A Pennsylvania judge has cleared the way for 5,665 employees over 40 in
the state Department of Transportation to bring a discrimination class
action. McDonnell- Douglas is paying $36 million in partial settlement
of a suit by about 1,100 older workers who say that the company laid
them off to save on pension costs and medical benefits.
It's an odd time for age bias to be on the upswing.
With the vast improvements in medicine, nutrition and lifestyle in
recent years, old simply isn't what it used to be. The problem is that
workplace culture has, for the most part, stuck to old ways of thinking
about older workers. In many elite job markets-investment banking,
computer programming, publishing-youth is celebrated and regardless of
how young older workers may feel, they only have to look around to
realized that they represent the old school, not the new wave.
Hollywood has been rocked by a recent round of
lawsuits charging television networks, production companies, studios and
agencies with "gray listing" - refusing to hire older talent. (In the
case of some television writing jobs, "old" actually refers to the early
30's.) Last September, Doris Roberts, the septuagenarian actress who
plays Ray Romano's mother on "Everybody Loves Raymond," told the Senate
Special Committee on Aging that society views people her age as
discardable. "My contemporaries and I are denigrated as old, "she said.
"Old coots, old fogies old codgers, geezers...hags and old-timers."
Roberts was testifying about the entertainment
industry, but she could have been describing almost any workplace in
America. Look through the reams of age-discrimination documents, and
you'll see that the biggest cases come not from Hollywood and Madison
Avenue but from Old Economy sectors like auto manufacturing and
retailing. (And some of the cruelest comments about old workers appear
in litigation involving plumbing supplies and fiberglass sales.)
The disconnect between workers who look at themselves
in the mirror and feel you and companies that look at them and think
"old-timer" has fueled much of the explosion in age-discrimination
claims. But there are also some more basic social factors at work. With
the graying of America, there are simply many more people eligible to be
discriminated against- and to sue. The more than 70 million baby boomers
now make up about half of the work force, and by next year even the
youngest boomers will be 40- and therefore covered by federal
age-discrimination laws. The oldest workers, who are mot likely to face
bias, are among the fastest growing part of the work force. Workers over
65 increased by 20 percent in the 1990's; workers over 75 were up more
than 80 percent from 1980 to 2000.
Couple these demographics with a faltering economy,
and the conditions are perfect for a surge in discrimination suits. It's
a typical pattern; when hard times hit, the ax falls disproportionately
on older workers, who may be the most highly paid and who are often
stereotyped as being less efficient. In a bad economy, with other jobs
available and retirement holdings taking a hit, fired workers are also
more willing to sue.
The old face of age discrimination was the solitary
worker quietly tapped on the shoulder and put out to pasture (Willy
Loman, fired when the boss's son took over, left to complain, "You can't
eat the orange and throw the peel away- a man is not a piece of fruit!"
) These days, however, age discrimination is more often the product of
broad based company policies, like decisions to phase out entire job
categories disproportionately held by older workers.
That is precisely what Harper and his fellow agents
have charged Allstate with doing. At the heart of their lawsuit is the
claim that Allstate executives singled out one category of workers-
employee agents- because more than 90 percent of them were over 40. If
Harper and his 28 fellow plaintiffs win an early procedural battle and
are allowed to represent a class of 6,400 onetime employee agents, this
could be the biggest case ever charging a company with age
discrimination.
The suit is still in its early stages, but the agents
have retained two top Washington firms, and AARP has assigned two
lawyers to the case. In late 2001, the EEOC jumped in on the agents'
side, filing its own suit charging that Allstate violated federal
pension and age-discrimination laws when it forced the agents to sign
away their benefits and promise not to sue in order to keep working.
The stakes are high. If the plaintiffs win. Allstate
could be forced to pay hundreds of millions of dollars. But more
important is what the suit could mean for older workers nationwide.
Thousands-maybe millions- of older workers are discriminated against on
the job every year, but many have no idea what their rights are. Age
discrimination is ready for a high-profile case that serves- like Brown
v. Board of Education did for race discrimination, or the Clarence
Thomas-Anita Hill Senate hearings did for sexual harassment- as a
lightning rod.
"I've been looking for a case like this for years,"
says Raymond Gregory, an employment lawyer and the author of a book on
age-discrimination law. A victory in the case, he says, could generate
the kind of enormous damage awards and nationwide publicity that would
force corporate America to rethink its approach to age in the workplace.
Allstate (The nation's second-largest auto and home
insurer and No.57 on the Fortune 500 list) got its start in 1931 as a
mail-order insurance division of Sears Roebuck & Co. After the 1993
Chicago World's Fair, where an Allstate agent sitting at a card table in
the Sears exhibit was mobbed by customers, Sears began putting agents in
booths in its stores- usually under the escalator, the least valuable
space on the sales floor.
In 1984, Allstate initiated the Neighborhood Office
Agent program to get agents out of stores and onto Main Street. The
N.O.A. program recruited agents as exclusive salesmen for Allstate's
insurance products. Allstate offered lower commissions, in many cases,
than the competition, and the office-expense allotments it paid- as Ron
Harper learned- often did not cover an agency's costs. But what Allstate
was really offering was a relationship that turned the job of insurance
agent-often a lonely seat-of-the-pants existence- into the equivalent of
an executive post with a major corporation. In addition to a great
benefits package, Allstates' neighborhood agents would receive the best
training in the industry and would be eligible for an array of old-style
sales incentives- Honor Rings, Chairman Conference Awards and trips to
sunny islands and European capitals.
The Neighborhood Office Agent program was initially a
great success, but things began changing at Allstate in the 1990's. In
an I.P.O. in > 93, Sears spun off 20 percent of its Allstate stake, and
two years later it sold off the rest. As Allstate began to fend for
itself, its managers began rethinking the role of agents. It stopped
hiring employee agents and, the plaintiffs say, began a campaign to
switch the existing ones over to independent-contract status.
Allstate danged carrots, like bonuses for managers
whose agents switched. And it wielded sticks, including tougher rules
for neighborhood offices. But even as Allstate was apparently trying to
prod its employee agents, its reassured them that the choice was theirs
to make. "Rest easy, there is no plan to convert N.O.A. employee agents
to...independent contractors effective 4/1/98!!! a December 1997 sales
update promised.
The late 90's was a time of intense competition in the
insurance business, and agent-oriented companies were worried.
Insurgents like Geico were eliminating agents and selling directly to
customers. And with the dot.com frenzy at a fever pitch, the
conventional wisdom was that commerce of all kinds was moving online.
The Internet's rise looked like bad news for Allstate, whose costly
infrastructure of agents and offices would be a drag on earnings. Wall
Street, certainly was worried. In a booming stock market, Allstate's
C.E.O> Jerry Choate, stepped down. Choate, the creator of the N.O.A.
program, had worked his way up on the sales side and was well regarded
by the agents. His replacement, Ed Liddy, a onetime Sears executive
lacked Choate's ties to the agents and came with a take-no-prisoners
reputation. At Sears, he had helped to shutter the company's famed
catalog, marveling to C.F.O. Magazine, "It's amazing how quickly you can
dismantle a business that took a hundred years to build."
It was 10 months after Liddy took charge that Harper
and the other employee agents were given Allstate's take-it-or-leave-it
offer. Inside the "job in a box" packages handed out that day was a
booklet titled "Preparing for the future," which redefined the
employment rules for employee agents. The tough new rules coincided
with, and seemed designed to bolster, Allstate's widely heralded new
plans to "aggressively expand the company's sales...and streamline the
way the company operates."
The future that employee agents were supposed to
prepare for was a grim one. As the plaintiffs see it, Allstate's motives
were clear. The company was trying to cut costs by taking away their
health insurance and freezing their pensions. At the same time, they
say, Allstate was focused on "re-energizing" to compete against the
Geicos and the dot.coms, and younger workers were the key. "We used to
hear it in meetings all the time; "We have the young people and they
really go out and work," says Sylvia Crew Kelly, a Tampa agent who was
cut off after working 19 years, 8 months and 27 days-three months before
she would have been eligible to start drawing her pension. "They said
older workers just want to sit on their policies and collect
commission."
Allstate sees things differently, "There was no
discrimination, "insists Sue Rosborough, a lawyer for the company. "We
reorganized our agency force for a lot of very good business reasons,"
Allstate says that its new business model cut costs by $600 million but
that almost all the savings came through closing regional offices and
eliminating 4,000 non-agent positions.
The "Preparing for the Future" program was never
intended to cut back on the cost of agent benefits, says Barry Hutton,
the executive who oversaw it. Employee agents were asked to become
independent contractors, he says, to "streamline" operations. Allstate's
6,400 employee agents were part of a force of more than 15,000 agents
hired under different rules at different times. There were 11 categories
of agents, Hutton says, each with its own commission rates. Simplifying
the categories made Allstate more efficient. "We just flat-out had to
make a business decision so we could be nimble, as nimble as a large
company can be," Hutton says.
What about Allstate's supposed promises that employee
agents would not be terminated except for dishonesty? If these promises
were made, Rosborough says, they are not legally binding on the company.
It is unlikely that any prominent social theorist has
ever put forth a vision of reform with insurance agents in the vanguard.
The Allstate plaintiffs- who were highly compensated and are
overwhelmingly white and male- do not look like typical victims of an
adjust order. And the facts and legal issues in their suit are muddy.
The animosity against older workers, if it was there, may be hard to
find under all the layers of corporate cost-cutting and business
strategizing.
Still, because of the number of workers affected, the
prominence of the defendant, the size of the potential awards and the
brazenness of Allstate's actions, this could represent the next wave in
protecting the rights of older workers.
American workers are invariably surprised when they
first learn often when they have just been fired, about the concept of
"employment at will." The general rule in American law is that employees
hold their jobs at the whim of their bosses. Employers are free to fire
workers, as the Tennessee Supreme Court explained in 1884, for "good
cause, for no cause or even for cause morally wrong, without being
thereby guilty of legal wrong."
Modern employment law has largely been a prolonged
battle to whittle away at this doctrine. There are now a number of
exceptions; workers generally can't be fired for union activity, say, or
for whistle-blowing. But the largest carve-out is discrimination law.
Employers may, as the Tennessee Supreme Court said, fire workers for
good cause or for no cause, but they cannot fire them on the basis of
race, religion, sex or other prohibited factors.
Just where age fits in this list has long been
unclear. It has been a kind of forgotten stepchild of the civil rights
revolution. When the granddaddy of all employment-discrimination laws,
Title VII of the Civil Rights Act of 1964, was adopted, there was
general agreement on most of the categories. But Congress was uncertain
what to do about age. The secretary of labor was asked to study age
discrimination in employment and advise whether it should be covered.
The secretary found that age discrimination was a real problem. At the
time, about 50 percent of job listings were not open to applicants over
55, and 25 percent were closed off to hose over 45. Relying on the
report, Congress passed the Age Discrimination in Employment Act (A.D.E.A).
Based on its language, which almost exactly tracks
Title VII, older workers should be well protected. But is hasn't worked
out that way. "The passage of the A.D.E.A. was the biggest victory,
"says Michael Lieder, a lawyer for the Allstate plaintiffs. "It's been
downhill ever since."
It is almost always harder for older workers to win a
bias claim than it is for the groups covered by Title VII. One of the
biggest differences is the availability of an evidentiary theory known
as "disparate impact." The Supreme Court has held since 1971 that
plaintiffs suing under Title VII do not need to show that they were
intentionally discriminated against (what the law calls "disparate
treatment'); it is enough to show that a supposedly neutral policy
disproportionately hurt a protected group. Once that is shown, the
employer has the burden of showing that the challenged policy (a new
kind of aptitude test, say, or a height requirement) is necessary for
the job. Disparate impact is a powerful tool, since it is often hard for
workers to prove intentional discrimination. Many of the biggest race
and sex discrimination lawsuits could not have been won without it.
There is no reason that disparate impact shouldn't be
available under the A.D.E.A., but many federal courts won't allow it.
Even with intentional discrimination claims. Older workers are worse
off. Many judges just don't like age-discrimination lawsuits. One
federal judge complained in a decision that older workers feel they can
file age suits with no more evidence "than a birth certificate and a
pink slip."
As a result, courts go to great lengths not to see age
bias when it is obviously there. In case after case, judges excuse
blatantly discriminatory comments as mere "stray remarks" and strain to
find alternative reasons that older workers were fired. In one egregious
case, a 56 year-old worker at a North Carolina company was fired. Two
weeks before the firing, a supervisor said to him, "O'Connor, you are
too damn old for this kind of work," This, a federal appeals court held,
did not constitute sufficient evidence for discrimination.
Even when older workers make their case, courts are
more willing to accept employers' defenses. Early in the civil rights it
was established that a company cannot defend a race discrimination claim
by saying it acted for economic reasons. In the classic case, a
restaurant that pleads "customer preference" -that it would happily hire
black waitresses, but its racist customers would stop coming-still
loses.
But in age cases, courts are all too willing to accept
economic defenses. A company that says it laid off older workers because
they were highly paid will often prevail. This can be a potent weapon
for a company like Allstate, which can argue that when it pushed out all
of those agents who were 40 or older, it was looking to get ride of
expensive employees, not old ones.
There are many reasons that courts have been grudging
about age claims. In part, judges do not see old people as a "discrete
and insular minority," the classic legal formulation for a protected
class. Blacks are separate and apart from the majority culture, the
theory goes , but every family has old people in it, and anyone not
currently in the class eventually will be. That logic ignores the fact
that Congress established to its satisfaction 36 years ago that bias
against older workers is real and pervasive-and passed the A.D.E.A. to
do something about it.
Judges are also inclined to see pushing older workers
out as a part of the natural order, because they are less able, or to
make room for the next generation. But stereotypes like these, about who
is capable, or deserving, of employment are just what Congress was
taking aim at with the A.D.E.A. There is no small contradiction in the
fact that some of the worst age discrimination law has come from Supreme
Court justices, who serve for life. Lawyers for older workers have been
reluctant to use the word "hypocrisy," but they have noted in their
arguments that Justice Oliver Wendell Holmes stayed on the court into
his 90's.
Advocates for older workers say, perhaps too
hopefully, that the Supreme Court may be softening on a age
discrimination. They point, in particular, to a case form 2000
reinstating a jury verdict in favor of a Mississippi plumbing products
factor employee who was fired after his supervisor told him that he
"must have come over on the Mayflower" and that he was "too damn old"
for the job. Reversing a lower court, the Supreme Court unanimously held
that the fired worker had put forth enough evidence to prove that his
firing violated the A.D.E.A.
But also important, the E.E.O.C recently signaled a
willingness to challenge the court's stingy view of age discrimination.
After the Supreme Court ruled in 2000 that individuals cannot sue state
entities for damages under federal age-bias laws, the E.E.O.C. stepped
in to represent 1,700 retired police officers, firefighters and other
safety officers who charged the California Public Employees Retirement
System with discriminating in benefits. In January, the retirement
system agreed to pay $250 million- the largest settlement, for any kind
of discrimination, in E.E.O.C. history.
Ron Harper and his fellow plaintiffs know they have
their work cut out for them. If disparate impact were available to them,
they would be off to a fast start. The ratio of terminated agents who
were in the protected class- more than 90 percent- is enormous by the
standards of discrimination law. Under disparate impace, the burden
would shift to Allstate to explain what it was up to.
As things now stand, the plaintiffs will need to come
up with more proof of intentional discrimination to show that Allstate
was biased against its older workers. If they can make the legal claims
work, the plaintiffs say, they believe they have the sort of human
stories that will put Allstate on the defensive. There are certainly
plenty of plaintiffs like Harper who have stayed with the company and
are struggling to stay afloat. More than 2,500 have left, and many of
them describe it as if they have been fired. Gene Romero, 54, a 13-year
Allstate agent in Overland Park, Lan., sold his book of business and has
been unemployed ever since. He has looked for work, but the job market
is weak, he says, and he hasn't found anyone who "wants to hire an old
man." Michael Wilson, a lawyer for the Allstate plaintiffs, says that
his clients are suffering the usual fallout of involuntary job loss-
depression, divorce, alcoholism and worse, "I've had people call me and
say 'I was sitting out in my backyard with a gun in my mouth," he says.
Even if they don't prevail on the age-discrimination
claims, they may win- as often happens in these cases- on a related
claim. With sentiment running strongly against large companies that
leave their retired workers in the lurch, they may do well with their
challenge to the take-it-or-leave-it release.
However things work out for the Allstate plaintiffs,
the case could reshape the legal landscape for older workers. Given the
nation's demographic trends- and the persistence in stereotyped thinking
about older people- there is every reason to believe that the age bias
complaints from television writers and teachers, bus mechanics and
bankers will continue their explosive growth.
Now the law may have a chance to catch up. If the
Allstate plaintiffs prevail, the case could give older workers their
first true landmark case, with damage awards large enough to make
corporate American recalculate the costs of discriminating.
Win or lose advocates for older workers say, this case
could be indispensable to the process of improving age discrimination
law- making it the equal of race, sex and religion. They have not given
up, they say, on getting the courts to rethink the economic-defense
excuse and their antipathy toward disparate impact. "We are not going to
cower in front of these precedents," vows Laurie McCann, a senior AARP
lawyer. "We're going to chip away to show that they are wrong."
They also want Congress to get involved. It could
amend the A.D.E.A. to bring age discrimination rules in line with the
more generous ones available under Title VII. This may seem like a
uniquely inauspicious time to ask Congress to expand a civil rights law,
particularly with Republicans in control of both houses. But advocates
for older workers point out that their constituents are one of the most
potent voting blocs around. Politicians ignore older workers at their
peril.
Harper is hoping that his dispute with Allstate
rewrites the legal rules. Except for marrying his wife and rearing "two
fine boys," he says, taking on Allstate is the most important thing he
has ever done. "I'd be lying if I said we're not fighting for ourselves
and our families," he says. "But every one of us knows that we're also
carrying the ball for other people- people who will be hit by something
like this in the future."
