by Art Gutman Ph.D., Professor, Florida Institute of Technology

In an April 8, 2010 ruling by Judge Paul A. Magnusen of the US District Court for the District of Minnesota (EEOC v. Minnesota DOC [No. 08-5252 (PAM/FLN]), Judge Magnusen agreed with the EEOC that a policy providing better retirement benefits based on age constitutes illegal facial discrimination under the ADEA. As of April 16, this case is not yet available on Lexis. However, the case is described for subscribers to the BNA Daily Labor Report and on the EEOC website (viewable to all).

The EEOC filed suit in this case in September 2008, challenging a collective bargaining agreement relating to an early retirement incentive plan (ERIP) permitted employer contributions for health and dental insurance up to age 65 for employees retiring at age 55 or earlier, but not for employees retiring after age 55. Although clearly facially discriminatory, the DOC issued two interesting defenses.

First, the DOC argued that the rules for discrimination in retirement plans were altered by the Supreme Court’s ruling in Kentucky Retirement Systems v. EEOC (2008) [128 S. Ct. 2361]. That case featured a pension disability plan in which “hazardous position” workers (e.g., policemen) were eligible for normal retirement benefits after 20 years service or after working 5 years upon reaching age 55. Additionally, years were added for disabled workers to total 20, or number of years needed to reach age 55. Thus, a 15-year employee would receive five additional years if disabled at age 40, but only one additional year if disabled at age 54. This was a controversial 5-4 ruling in which five justices viewed the plan as consistent with Supreme Court’s ruling in Hazen v. Biggens (1993) [507 US 604] in which a unanimous court agreed age discrimination is not implied by “factors correlated with age” (such as years of service). The four dissenters argued that the Kentucky plan constituted facial discrimination under the Older Workers Benefit Protection Act (OWBPA) of 1990, which overturned a controversial facially discriminatory policy in Public Employees Retirement System of Ohio v. Betts (1989) [492 US 158],.

As an aside, the Kentucky ruling featured an unusual grouping of justices, with Breyer joined by Roberts, Stevens, Souter and Thomas in the majority and Kennedy joined by Alito, Ginsburg and Scalia in the dissent. Interestingly, the only two justices left from the Betts ruling (Kennedy and Scalia) were in the majority in the Betts case and in the minority in Kentucky case. Indeed, Justice Kennedy wrote the Betts ruling. It wouldn’t shock me if Congress overturns the Kentucky ruling much as it did the Betts ruling.

Getting back to basics, Judge Magnusen rejected the Kentucky Retirement defense ruling “the law on intent is clear: when a plan is discriminatory on its face, intent to discriminate can be presumed.” The second defense was that ERIP was a valid Bona Fide Benefit Plan (BFBP), which is a statutory defense to discrimination based on age, but only if it costs more to provide benefits for older than younger workers, in which case, employers may require higher contributions from the older workers. However, under no circumstances does it cover a facially discriminatory plan in which benefits are provided based on age, even if it is part of a collectively bargained agreement.

Stay tuned. I will provide the link to the ruling when it becomes available.

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