Thursday, June 19, 2008

Supreme Court: Kentucky Disability Pension Plan Not Age Discriminatory

4united_states_supreme_court_1129_3 In a case that should be of interest for employment discrimination and employee benefit scholars, Kentucky Retirement Systems v. EEOC, the Supreme Court in a close 5-4 decision has found the Kentucky public pension plan not to be age discriminatory in an usual division of the Justices. Justice Breyer delivered another opinion for the Court, in which Roberts, Stevens, Souter, and Thomas joined. Kennedy filed a dissenting opinion, in which Scalia, Ginsburg, and Alito joined.  Anyone recall seeing a split like that before?

In any event, here are selected portions of the syllabus:

Kentucky permits “hazardous position” workers, e.g., policemen, to receive normal retirement benefits after working either 20 years or 5 years and attaining age 55 and pays “disability retirement” benefits to workers meeting specified requirements. Kentucky’s “Plan” calculates normal retirement benefits based on actual years of service. The Plan calculates disability benefits by adding to an employee’s actual years of service the number of years that the employee would have had to continue working in order to become eligible for normal retirement benefits, adding no more than the number of years the employee had previously worked. Charles Lickteig, who continued working after becoming eligible for retirement at age 55, became disabled and retired at age 61.

He filed an age discrimination complaint with respondent (EEOC) after the Plan based his pension on his actual years of service without imputing any additional years. The EEOC filed suit against Kentucky and others (collectively Kentucky), arguing that the Plan failed to impute years solely because Lickteig became disabled after age 55. The District Court granted Kentucky summary judgment, holding that the EEOC could not establish age discrimination, but the Sixth Circuit ultimately reversed on the ground that the Plan violated the Age Discrimination in Employment Act of 1967 (ADEA).

Held: Kentucky’s system does not discriminate against workers who become disabled after becoming eligible for retirement based on age.

    (a) The ADEA forbids an employer to “discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s age.”  A plaintiff claiming age-related “disparate treatment” (i.e., intentional discrimination) must prove that age “actually motivated the employer’s decision.” Hazen Paper Co. v. Biggins, 507 U. S. 604. In Hazen Paper, the Court found that, without evidence of intent, a dismissal based on pension status was not a dismissal “because … of age,” noting that, though pension status depended upon years of service, and years of service typically go hand in hand with age, the two concepts are “analytically distinct." And the dismissal at issue there, if based purely on pension status, would not embody the evils prompting the ADEA: It was not based on a “prohibited stereotype” of older workers, did not produce any “attendant stigma” to those workers, and was not “the result of an inaccurate and denigrating generalization about age.” However, the Court noted that discrimination based on pension status could violate the ADEA if pension status was a “proxy for age.”

    (b) Applying Hazen Paper, the circumstances here, taken together, show that the differences in treatment in this particular instance were not “actually motivated” by age. (1) Age and pension status remain “analytically distinct” concepts. (2) Here, several background circumstances eliminate the possibility that pension status serves as a “proxy for age.” Rather than an individual employment decision, at issue here are complex system-wide rules involving not wages, but pensions—a benefit the ADEA treats somewhat more flexibly and leniently in respect to age. Further, Congress has otherwise approved programs, such as Social Security Disability Insurance, that calculate disability benefits using a formula that expressly takes account of age. (3) The disparity here has a clear non-age-related rationale. The Plan’s disability rules track Kentucky’s “normal retirement” rules by imputing only those additional years of service needed to bring the disabled worker’s total to 20 or to the number of years that the individual would have worked had he worked to age 55. Thus, the disability rules’ purpose is to treat a disabled worker as though he had become disabled after, rather than before, he had become eligible for “normal retirement” benefits. Age factors into the disability calculation only because the normal retirement rules themselves permissibly consider age. The Plan simply seeks to treat disabled employees as if they had worked until the point at which they would be eligible for a normal pension. Thus, the disparity turns upon pension eligibility and nothing more . . . .

    The Court’s opinion in no way unsettles the rule that a statute or policy that facially discriminates based on age suffices to show disparate treatment under the ADEA. The Court is dealing with the quite special case of differential treatment based on pension status, where pension status—with the explicit blessing of the ADEA—itself turns, in part, on age. Further, the rule for dealing with this sort of case is clear: Where an employer adopts a pension plan that includes age as a factor, and that employer then treats employees differently based on pension status, a plaintiff, to state a claim under the ADEA, must adduce sufficient evidence to show that the differential treatment was “actually motivated” by age, not pension status.

    (c)  Since Hazen Paper provides the relevant precedent here, an ADEA amendment made in light of Public Employees Retirement System of Ohio v. Betts, 492 U. S. 158 , is beside the point. And a contrary interpretation contained in an EEOC regulation and its compliance manual does not lead to a different conclusion.

Justice Kennedy, in dissent, writes in a strident voice:

The Court today ignores established rules for interpreting and enforcing one of the most important statutes Congress has enacted to protect the Nation’s work force from age discrimination, the Age Discrimination in Employment Act of 1967. That Act prohibits employment actions that “discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s age.”  In recent years employers and employees alike have been advised by this Court, by most Courts of Appeals, and by the agency charged with enforcing the Act, the Equal Employment Opportunity Commission (EEOC), that the most straightforward reading of the statute is the correct one: When an employer makes age a factor in an employee benefit plan in a formal, facial, deliberate, and explicit manner, to the detriment of older employees, this is a violation of the Act. Disparate treatment on the basis of age is prohibited unless some exemption or defense provided in the Act applies . . . .

Even were the Court correct that Kentucky’s facially discriminatory disability benefits plan can be justified by a proper motive, the employer’s own submission to us reveals that the plan’s discriminatory classification rests upon a stereotypical assumption that itself violates the Act and the Court’s own analytical framework.       

As a threshold matter, all should concede that the paradigm offered to justify the statute is a powerful one: The young police officer or firefighter with a family is disabled in the heroic performance of his or her duty. Disability payments are increased to account for unworked years of service. What the Court overlooks, however, is that a 61-year-old officer or firefighter who is disabled in the same heroic action receives, in many instances, a lower payment and for one reason alone: By explicit command of Kentucky’s disability plan age is an express disadvantage in calculating the disability payment.

This is a straightforward act of discrimination on the basis of age. Though the Commonwealth is entitled by the law, in some instances, to defend an age-based differential as cost justified, 29 U. S. C. §623(f)(2)(B)(ii), that has yet to be established here. What an employer cannot do, and what the Court ought not to do, is to pretend that this explicit discrimination based on age is somehow consistent with the broad statutory and regulatory prohibition against disparate treatment based on age.

As much as I usually agree in employment discrimination cases with Justices Stevens and Souter, you can never be wrong in following Justice Ginsburg's instincts in these types of cases.  For that reason among many, I think this case sets a dangerous precedent for age discrimination in the provision of pensions and runs counter to the explicit language of the ADEA.  Also, the Supreme Court majority is back to treating the EEOC like an ugly-step child agency. At the very least, I would have preferred that the case be remanded back to the district court to determine whether Kentucky can meet the cost-justification defense under the ADEA.

And because it happens ever so rarely, I can say that I predicted this one to a tee ("[L]ook 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 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.").


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I even saw on a billboard that he was a worker comp Law judge and nows
hes a worker comp lawyer? Doesnt get any better then that! And I even heard he was working with Eric C. Conn and he did my neices case in 2004 and passed with in 4 months and she had all the social benefits she needed. So you know if hes working with a guy like that he has to be the best!!

Posted by: Abby | Jul 16, 2008 7:10:39 AM

Eric C. Conn and John Earl Hunt are both great lawyers! He helped win my dads case! I agree completely. Very nice and helpful staff as well.

Posted by: b200 | Nov 4, 2009 5:20:18 PM

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