It depends. Generally, employers are permitted to make employment decisions based on factors other than discriminatory ones and there is no expressed rule against firing someone who makes more money than the employer wants to pay.
The problem for employers is that this “otherwise neutral” conduct can have a “disparate impact” on older workers. Older workers tend to make more money than younger workers, in part because they’ve been on the job longer.
An employer who decides to layoff all workers who make over a certain salary could face liability for age discrimination if that policy affects older workers more than younger workers. Our Second Circuit Court of Appeals and the U.S. Supreme Court have both recognized “disparate impact” claims under the ADEA (Age Discrimination in Employment Act of 1967).
By the way, Happy Birthday ADEA! It was enacted December 15, 1967 so it is 48 years old! Click here to see the EEOC Statistics on this important law (spoiler alert: over $77 million dollars in damages were obtained by the EEOC under this law in 2014!)
Contact Hayber, McKenna & Dinsmore with any questions.