February 18, 2019

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Do Mandatory Retirement Age Requirements For Directors Violate California Law?

While the Securities and Exchange Commission requires disclosure of the ages of directors (Item 401(a), Regulation S-K), it does not impose any age limitations on directors.  Nonetheless, many public companies have adopted mandatory retirement age policies.  According to TheCorporateCounsel.net,

Of the 100 largest public companies, 77 had disclosed a mandatory retirement age policy for their non-management directors as of 2015 - almost half of which permit the board to make exceptions. The most commonly used retirement age for policy purposes is 72, with 30% of policies containing a retirement age of 73 or older.

Checklist: Director Service - Mandatory Retirement Age Policies.

This set me to thinking about California's Unruh Civil Rights Act which provides: "[a]ll persons within the jurisdiction of this state are free and equal, and no matter what their sex, race, color, religion, ancestry, national origin, disability, medical condition, genetic information, marital status, or sexual orientation are entitled to the full and equal accommodations, advantages, facilities, privileges, or services in all business establishments of every kind whatsoever."  Civ. Code § 51.  The statutory listing of categories protected from discrimination is long, but it is not exclusive.  Courts have held that the Act is intended to prohibit all arbitrary discrimination by business establishments, regardless of whether the basis for that discrimination is listed in the statute.  Javorsky v. Western Athletic Clubs, Inc., 242 Cal. App. 4th 1386, 1394 (2015).  Thus, discrimination by age may in some circumstances violate the Act.  See, e.g, Candelore v. Tinder, Inc., 19 Cal. App. 5th 1138 (2018) (finding plaintiff had sufficiently alleged a claim for age discrimination).  

Therefore, the next time you see a mandatory retirement policy based on age, you may want to consider the Unruh Civil Rights Act.  I'd like to hear from readers who have studied the question and reached a conclusion. Note that this post relates to mandatory retirement of non-employee directors and not employees who are governed by specific statutes and regulations.  See, e.g., 2 CCR § 11084.

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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm

Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...