Wednesday, January 9, 2008

Oral Argument Transcript Analysis of Kentucky Retirement Systems v. EEOC

4united_states_supreme_court_112904 The United States Supreme Court heard oral arguments this morning in the case of Kentucky Retirement Systems v. EEOC, a case about the intersection of age discrimination law and public pension plans.

Rather than reinvent the wheel on the facts, here is brief backgrounder by the ACS Blog:

Kentucky drew the ire of the EEOC because its pension program for workers in hazardous state jobs, such as fire or police protection, provides younger workers with a richer disability retirement package than it provides for their older counterparts. Under the plan, hazardous duty workers under the age of 55 – the age at which Kentucky employees become eligible for retirement – if forced to retire because of a disability, are eligible for a special enhanced package of benefits. In contrast, disabled hazardous duty workers over 55 are eligible only for “normal” retirement benefits. In addition, the Kentucky formula uses age as an explicit criterion for determining individual benefit levels for eligible disability retirees in ways that produce better results for younger retirees than similarly situated older colleagues.

In its defense, Kentucky insists that its two-tiered, age-based design was not driven by the sort of invidious stereotypical assumptions about older workers that the architects of the ADEA aimed to banish from American workplaces. Rather, Kentucky explains, their plan aims at giving younger disabled employees an appropriate “boost” by ensuring that their benefits approach or equal the levels for which they would have been eligible, had they been able to work a full career until normal retirement age. The age-discriminatory formula is justified, the state contends, because older workers, having been in the workforce longer, may reasonably be expected to have accumulated additional resources, whereas their younger colleagues would not have had that chance.

In response, the Solicitor General’s brief for the EEOC – echoing an en banc Sixth Circuit Court of Appeals decision (467 F.3d 571) in the EEOC’s favor – spotlighted a 1991 amendment in which Congress acted to clarify that discrimination in the provision of fringe benefits like pensions was covered by the Act (overruling a Supreme Court decision to the contrary). In this revision, Congress spelled out a particular, narrow, exception: it permitted differential treatment of fringe benefits for older and younger workers if necessary to equalize the amount of actual payments or the actual costs incurred. The government stressed, “Congress wisely chose a regime of specific, objective defenses over a regime in which certain ‘non-malevolent motives’ for facially discriminatory laws would preclude the establishment of a prima facie case.”

So on to an analysis of the oral argument transcript which should certainly interest millions of baby boomers in the public sector:

(1)  Justice Breyer, not surprisingly, goes right for the jugular and is clearly siding with the EEOC/SG on this one:

Now, this individual says, I was working there after the age of 55, I only worked for 14 years, now I become disabled. If I become disabled before I was 55, let's say I had six years to go, they would give me six years extra. But because I was disabled after I'm 55, I get nothing extra. Nothing is imputed. Is that right?


See, that's why I think the result in this case is just terrible. I think it takes disabled people and cuts their benefits with no benefit. I cannot believe for two minutes that Congress would have intended that result. But the reason I asked you the question was I want you to tell me how to get to that result under this statute.

Similarly, the SG states:

If they are going to give the 45-year-old with 10 years of service 10 years of credit, they have to give the 55-year-old 10 years of service --with 10 years of service 10 years of credit, again, unless they can establish the cost-justification defense.


We are simply saying the method of determining how many years will be imputed, absent an affirmative defense, can't be dependent on the employee's age.

Justice Ginsburg also clearly sees the case this way. In fact, she schools counsel on the legislative history of Title VII. No surprise there.

(2)   But Kentucky's advocate is game: "The purpose of the plan for disability purposes, which is not a separate plan, it's simply a means of getting one to normal retirement who is not otherwise eligible."

(3)  Justice Kennedy, always an important vote, seems to be supportive of Breyer (not good for Kentucky):

You began by saying something to the effect that this does not discriminate on the basis of age. It does. Age is the explicit factor that the statute uses in order to answer Justice Breyer's question. And the Act does not prohibit the use of age in all circumstances to which it applies, but it does -- the Act goes on to prohibit the use of age in some of the circumstances. And one of those circumstances is the hypothetical of the 55-plus-year-old person used in Justice Breyer's statement and example.


I think this does explicitly discriminate based on age as to some people, and you're telling me you don't want me to do that. But Suppose I don't agree with you. Is there some other way to reach the result?

(4)   Justice Scalia comes to the side of the employer: "You're saying you're one step removed. You're making your determination on the basis of eligibility for retirement, which in turn is based on age." And Chief Jusice Roberts chimes in that he agrees with this assessment. Justice Alito is also on board:

Because when someone is over the retirement age, it's rather hard to see how many years you would add on projecting how long that person would continue to work beyond the age of retirement eligibility.

And one can only imagine, so is the ever-silent Justice Thomas.

(5)  Justice Souter restates petitioner's argument:

And the tradeoff is because the 55-year-old retiree may get a benefit after very little work and very little risk, it is therefore fair and not a discrimination that on the average the windfall is less for that person by the imputation than the windfall to the person who retires on the basis of age 20.

(6)  Most interestingly, Justice Stevens is ambiguous about whether he agrees with Kentucky or if he is merely pointing out that implausibility of Kentucky's argument.  Consider this further exchange between Stevens and the SG:

JUSTICE STEVENS: It seems to me your argument boils down to the claim that people who have already reached -- become eligible for retirement by either age or period of service, the State has a duty to give them a chance to recover a disability benefit if they give a disability benefit to younger workers.
MR. STEWART: No. Our point is that they should use the same computation methodology for both categories of employees.
JUSTICE STEVENS: The computation is for a different purpose in that -- in -- for the younger workers the purpose is to make them eligible for retirement. For the older workers, they are already eligible for retirement.

I have to admit that after reading this transcript, my head was swimming with numbers and different scenarios and it really hurt.  In any event, this might be one of those cases in which the usual sides are not the same with Kennedy siding with the progressives and Stevens with the conservatives. If so, look for a 5-4 reversal in favor of Kentucky allowing it to continue this system for those who started in the system before 2004.

In practical effect, this may lead to the case being remanded back to the district court to determine whether Kentucky can meet the cost-justification defense under the ADEA.


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