Discriminating on the basis of age is illegal under the Federal Age Discrimination in Employment Act (ADEA). Age discrimination also violates state and local laws. Under all laws, there are some special limitations on who can sue. People under forty years old are not protected by age discrimination laws. If an employer refuses to hire somebody because he or she is thirty-nine, and therefore "too young" or even because they are “too old”, that is not illegal. But if the employer refuses to hire someone because he or she is forty (or older) it is illegal. Age discrimination has some special aspects that make it different from other types of employment discrimination, a few of which are discussed below.

Severance Packages

Sometimes when employers are down-sizing, they lay people off by offering severance packages, which are special packages to employees who agree to take early retirement. This is not age discrimination, even if it disproportionately affects older workers. However, if it is being done for the express purpose of getting rid of older workers simply on account of their age, and if it can be shown that there is a real discriminatory motive, then it is illegal.

Replacing Older Workers

It is illegal to replace a person over 40 with a person under 40, if age is the actual real reason for the change. It may also be illegal to replace a person who is well over forty with a younger person who is also over forty. Proving discriminatory motive can be a real challenge. Consider: What are the comparative experience and qualifications of the older and younger workers? Is there a pattern of replacing older more qualified workers with younger, less qualified workers? Have managers, especially decision makers at the company, made derogatory or discriminatory remarks about older workers or older age groups?

Replacing Higher Earners

It is not illegal to replace people who are making high wages with people who will make less because they have less seniority, even though this usually means replacing older workers with younger ones. If the wage considerations are not the real motivator, however, and the employer is actually trying to replace older workers with younger ones, that it illegal. Here, the employee must prove that it is the age of the workforce, and not the lower wages, that is the motivating factor causing the employer to fire the older workers – often a very difficult contention to prove.