Eighth Circuit Finds State Agency's "Early Retirement Incentive Program" Arbitrarily Discriminated on Basis of Age
The U.S. Court of Appeals for the Eighth Circuit held that an “Early Retirement Incentive Program” (ERIP) that offered specified benefits to employees aged 50 to 55 was discriminatory on its face in violation of the Age Discrimination in Employment Act (ADEA), 29 U.S.C. § 621, et seq. Further, the Court concluded that, because the ERIP was not consistent with the relevant purpose of the ADEA, it was not protected under the ADEA’s safe harbor provision for ERIPs set forth in 29 U.S.C. § 623(f)(2)(B)(ii).
The Minnesota Department of Corrections (DOC) included an ERIP provision, also known as the “age 55 cliff,” in its collective-bargaining agreements (CBAs). The ERIP provided that employees who retired at age 55, and were covered by one of DOC’s retirement plans, were eligible to receive an unreduced continuation of the employer’s contribution toward their healthcare insurance premiums until they reached age 65. This contribution was intended to encourage early retirement for employees in this age group. Meanwhile, any employee between the ages of 50 and 55 who elected to retire received lesser benefits. Finally, any employee older than 55 who chose to retire received no continuation of employer contributions.
Amid growing concern that a court might consider this ERIP unlawfully discriminatory, other state agencies and their respective employee unions eliminated the ERIP from their CBAs. Only the Minnesota Law Enforcement Association (MLEA), the union representing all non-supervisory DOC personnel, refused to negotiate any modification to the ERIP. Consequently, the EEOC sued DOC and MLEA for injunctive and monetary relief, alleging that their ERIP unlawfully discriminated against employees on the basis of age in violation of the ADEA. The district court granted summary judgment in the EEOC’s favor. EEOC v. Minnesota Department of Corrections, 702 F.Supp.2d 1082 (D.Minn. 2010). Only MLEA appealed.
Because Employees over 55 Were Ineligible for Early Retirement Benefits, ERIP Was Discriminatory on Its Face
The ADEA prohibits employers from discriminating against any individual on the basis of age with respect to “compensation, terms, conditions, or privileges of employment,” 29 U.S.C. § 623(a), including retirement benefits. § 623(l).
The Court observed that, under MLEA’s ERIP, no employee over the age of 55 was eligible for early-retirement benefits. As the Court had previously recognized, where “it is undisputed that an employee is ineligible for early retirement benefits under the . . . ERIP if he or she is over [a certain] age,” the ERIP is “discriminatory on its face.” Jankovitz v. Des Moines Independent Community School District, 421 F.3d 649, 653 (8th Cir. 2005).
ERIP Failed to Meet ADEA’s Safe Harbor Requirements
Nevertheless, MELA contended that its ERIP fell under the “safe-harbor” provision of § 623(f)(2)(B)(ii) that insulates an employer from ADEA liability so long as the ERIP is “voluntary” and “consistent” with the “relevant purpose” of the ADEA.” The Court first noted that, because the safe harbor constitutes a statutory affirmative defense, MLEA bore the burden of demonstrating that its ERIP met these requirements. Further, the Eighth Circuit had previously held that an ERIP, identical to the MLEA ERIP in all material respects, failed to satisfy the ADEA’s ERIP safe harbor because plans that effect “adverse changes in employment benefits based solely upon age are inconsistent with the purposes of the ADEA.” Jankovitz, at 655. In reaching this conclusion, the Jankovitz court first recognized that the “relevant purpose” in the ERIP context is the ADEA’s aim of “prohibit[ing] arbitrary age discrimination in employment.” Id. at 654. The court then reasoned that “[a]rbitrary age discrimination occurs when an employer denies or reduces benefits based solely on an employee’s age.” Id.
The Court found that MLEA’s ERIP also denied benefits based solely on age because an employee’s eligibility for the attractive early-retirement benefits vanished when the employee reached 55 years of age. The Court held that this exclusively age-based reduction in benefits typified “arbitrary age discrimination” and therefore failed to meet the ADEA safe harbor’s requirements.
MLEA next contended that, because other portions of the ADEA explicitly authorize state agencies to compel the retirement of firefighters and law enforcement officers at age 55, see 29 U.S.C. § 623(j), MLEA’s ERIP could not logically be viewed as inconsistent with the ADEA’s relevant purposes. The Court, however, found that, although DOC was not obliged under federal law to employ certain persons over the age of 55 for reasons that may include age, it could not discriminate against all persons over age 55 solely due to their age. Thus, the Court held that the district court correctly concluded that, as a matter of law, MLEA’s ERIP violated the ADEA.
Lawful Early Retirement Incentive Program
The Court contrasted MELA’s ERIP with one it had found lawful in Morgan v. A.G. Edwards & Sons, Inc., 486 F.3d 1034 (8th Cir. 2007). In Morgan, the Eighth Circuit held that an ERIP that allowed employees who were age 50 or older and had at least 15 years of service to retire early in exchange for certain severance benefits qualified for the ADEA’s safe-harbor protection. Id. at 1037. The Morgan court reasoned that, because the ERIP “offered the same incentives to all eligible persons and did not employ an age-based phase-out where plan benefits decreased over time or were reduced to zero upon a certain age in order to encourage employees to participate in the plan,” the ERIP did not arbitrarily discriminate on the basis of age and was therefore consistent with the purposes of the ADEA. Id. at 1042.
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