good morning our first case today is brian versus government the government of the virgin islands number eight hundred s one nine hundred forty one granted section seven case requirement that employees you have thirty years of more service at the time but prior to october first two thousand and eleven they pay in additional three percent towards legislative findings in the muni act say it's going to see you know that there's this much money at stake did the act does your honor say that there's forty seven million dollars identified with a specific group of employees for thirty years o of service but then it goes on to say that we need these people to retire and then that when you look at the the way it's structured they had two pieces to that one piece of it was to offer an incentive of ten thousand dollars which we don't challenge because i think that's permitted of the day but the second piece was the three percent piece which said that if you do not it essentially if you do not accept the ten thousand dollars and retire and you remain on the payroll then we're going to charge you this three percent there wasn't a point of that to help make the pension system more solvent than it would otherwise have been your honor that was not a reason that was articulated by the government the government did not take the position in this case that the purpose of the three percent was designed to shore up the finances of the retirement system and where does that money go so that the you want them to charge your clients more than three percent necessary i thought i mean the minimal is good for you right well it's i think and this gets back to how the cases it in the record there is an expert report that we submitted that deals that tackles this precise issues seeming that it was going to be brought up well we tried when the case was being heard and argued the virgin islands disavowed that submitted a report wherein he says that you would never design a three percent provisional like this if your intent was to shore up the finances in fact what you would do is if you wanted to increase three percent you want to increase all in c you would increase it across the board to everybody to every single government employee and in fact that's what they subsequently ended up having to do it because the target audience the higher salaried employees i mean within their job category to be receiving the highest salaries r in that that was what was discussed but there was very little evidence of that introduced into the record in fact there's no evidence in the record that doesn't analysis of what these employees in this group that was targeted for the three percent what their wages were and how our wages compared to other employees and that's sort of one of the points one of the the the sort of issues that we take with the district court's opinion is that it talks about that as the basis for the cost saving justification the higher salaries but all that yet although it uses a sort of an aggregate number it uses a a a a forty seven million dollar without without really delineating on an individual basis what each of the individual who are took each of the individuals with thirty years of more service actually made and as we point out in the in our  regulations the e e o c regulations on this point it's twenty nine u s c sixteen twenty five point seven and it's talking about the reasonable a reasonable factor of the name and what those factors are that particular provision in subsection f i think of that so paragraph if state that you cannot use average compensation of a group as a basis for making a decision that would otherwise discriminate on the basis of age that it's not it is not a reasonable factor other than age to simply treat this group and say well they make forty seven million dollars so therefore we're going to impose this penalty on them if they decide not to take the incentive ripping the retirement incentive that we're offering what we do about the hasan decision well the hasan paper decision is the decision to the court primarily relied on and that is the employee to prevent them from testing in a painting and based on that question they answered that the arguments at least they were presented but what was happening was that in the hasan paper case i believe it's mr big and mr big in obviously the argument was that the inference there was that the purpose of terminating them was to prevent an older worker investing in the court there i think correctly said but in that context the because you vest after ten years there's no correlation between vesting under the scheme that was in existence at the time which is a ten year vesting scheme and age and they give the example of an employee who could have been there for their entire life the twenty years old worked there for fifteen years wouldn't have the protections of the act but yet it would be also have the number of years towards vested so that's why the the decoupled it in this case right because they're not hiring nine year olds that's correct you know but so that really i think strengthens your argument but the other side of the coin that perhaps weakens your argument correct me if i'm wrong is that many people in the protected class fifty year old sixty year olds maybe seventy year olds are unaffected by the three percent contribution because some of them have not achieved thirty years of service and that is correct you on that there are that there are likely individuals who are in the protect the classroom unaffected by the three percent but i don't think that's really the relevant question what you look at mean that that argument is sort of wrong a variation on the bottom line argument that this court in carlow didn't accept namely that what you would you're looking at is who are actually who are the people that are actually being  and then you do a comparison of those individuals and i am sort of slipping into the disparate impact analysis but that doesn't get us back to judge restrepo question though because i think you framed it right whom does this affect the answer seems to be people with thirty years of service so it's a year of service issue not an age issue because it affects some people over forty and it doesn't affect other people over forty years of age and so how do you get out of the sort of haze and paper i guess your answer is thirty years is different than ten years or well that's part of the nuts and no go ahead that that's part of the answer but i think the one of the factors is perhaps the most important factors is the criteria that's being used here something that exclusively applies to only individuals in the protected class and that's clearly met in this particular situation and then you look at other reasons for example what's the purpose of the statute the purpose of the statute in this case is clearly coerce people into retiring and that's an impermissible reason under  see that my time's up you know that that is an impermissible purpose under the act itself that that other section four f two of the act or talks about voluntary incentive programs one of the things that the x makes clear is that you cannot have a bar in terry incentive program that has within it a requirement or permits and involuntary retirement and that the purpose of that provision is to prevent employers from adopting course of measures that essentially force people into voluntary into return meant and when they're not frankly ready to retire but it's a reasonable factor other than age can it be with the government contends which is we need we need to shore up the system we're undergoing a financial crisis here and we need to do something that may be a reasonable i'm not contesting the doc could be a reasonable factor in some other situation but the question presented is whether this section seven k actually accomplishes that or whether it was designed to mean the testimony in the record from mr harmon i mean you know i cited certain parts but i got the sense looking at his testimony that he you know he said there would be some significant savings here there would be significant savings from the overall plan and center plan and that's sort of the you know the the the issue would be you know do they have to have this punitive aspect to the plan and that's really what's being challenge here because that they'd never really test it first what would happen for example if we offered a voluntary incentive program and offered people tend that which is what they did here offer them ten thousand dollars to this group of thirty or more have retired how many folks would that dentist towards the goal of s savings and i think he did frankly if you look at the numbers the the best thing they shouldn't of disclose the three percent contribution at the same time they offered the ten thousand incentive w under that seems that seems harsher on the employee because you just can imagine many employees saying well gee i wasn't really interested in the ten thousand but if they had told me i was going to have to contribute three percent i would have taken the ten thousand so the whole notion that they should have just offered everyone the ten thousand and then seen what happened before they assess the three percent it seems sort of backwards challenging is the very premise that you can impose a three percent penalty on employees who do not take the voluntary the resend the retirement incentive because it's designed to punish them for not retiring and that doesn't matter whether it's three percent two percent one percent it does not matter you're not ok so ok or so your argument is clear then you're saying that any requirement that employees in a protected class have to not applied evenly across the board we're not challenging the fact that they could have had that the three percent would have been lawful had they said that every single employee who's participating in a retirement system will now have to additional three percent but was there a quid pro quo here they got ten thousand dollars upfront if they went out correct that's correct and not everybody is offered the ten thousand dollars offer that's correct so is a coercive or is it a voluntary retirement option its course of if if you decide i mean that the whole purpose of a voluntary incentive program is to let employees make a choice voluntarily if they're ready to retire so the court i mean the statute itself recognizes that employers can offer incentives that allow that to retirement eligible employees that would incentivize them to to take a return that's what they did here well here they did with the ten thousand but the three percent aspect which is it's sort of the i guess for lack of a better word you can use a tear to can't use a stick and that's what's happening again we evaluate the stick without considering the carrot when they're both offered at i don't know i guess i guess sort of following up on generous troubles question wouldn't this be a different case if there was no money offered to anyone to retire and they just said look if you've got thirty years of service you have to start paying three percent it would be well in some respects yes it would be a different case but i don't know i don't know that the fact that they didn't offer an incentive bones changes the punitive nature because what what we have here is we have who are thirty years or more of service which is only individuals in the protected class and only those individuals are being required to pay an additional three percent right now they currently contribute i believe about eleven percent or twelve percent of their pay it was eight percent at the time of the act and it's slowly increased so these employees still have to pay the incremental men and there frankly is just because it targets then there's simply no and there's really very little justification the ideas the stereotyping of over all the workers and negative perceptions of all the workers that the attempted to combat in fact the government of the virgin islands specifically  not target its employees least on their age that thirty years of credit is service is specific to our g r g e r s system i thirty years of service for tier one employees you are able to retire with full benefits these were the particular set of employees that were being targeted as a panel discussed earlier there are employees in the government system that were over the age of forty that were not targeted and that were not affected by the additional contributions save you money if these folks could stop working and get full benefits right they got then you going to bat you're going to replace them with someone who you have to pay something to that sounds like it increases your costs not decreases but overall it would be it did decrease the cost how because a majority of those workers would have been at a higher salary than the employees that we brought that we would have brought in additionally section of your haying there feller either while they are not working right well g r s now takes on those retired employees ok so it's not an expense of the government of the virgin islands would direct paddle to mr herman's testimony that he did testify that there was substantial cost savings i believe the number he testified to was three hundred seventy five people retired i believe that's the number that he gave and that is that would have been a substantial i believe that p twenty some members in the protected class that were affected and may have had a disparate impact but there read there is a reasonable other factor which is the cost savings the evidence is clear especially from the recycles that freeze it diverted some of the funds from local revenues directly to the general fund to assist with payroll they didn't hire any retirees which is something matt the government did and  they also made a concerted effort to collect a lot of delinquent taxes out there whether it be property tax excise taxes so it was an all inclusive attempt to shore up the government should we approach the territorial claims using the same matrix or should we follow the district with respect to the statutory interpretation whether it was discriminatory or not and even if it is and as we argue it's not discriminatory based on the federal statutes it's also not discriminatory based on the local statutes it does raise an interesting issue sort of when  don't you know i think it is a tough issue i don't i'm not i can't say that if i were arguing below that's the route that i would have taken in addressing  that i think that the better argument would be that they're all in the same matrix the virgin islands generally uses establish that shoots like the aid like so follow and to create our local peeper analysis that age and pension are analytically distinct and it's clear here where we do have employees who are over the age of forty that were not impacted  testimony appendix eighteen and nineteen because i just find it a little bit confusing and i think the direct quotation is from from herman is there was no cost savings with respect to implementation of the three percent that three percent goes directly to your us there's no savings to the g and shortly after he says that on page nineteen he then says i'm paraphrasing now that the three percent contributions purpose was to compel retirement eligible employees to leave the payroll and that there was quote a significant variance in pay and quote between a new hire and someone with thirty years of credit services so i'm having trouble reconciling those two things first two saying there was no cost savings with three percent and then he says there's a significant variance in pay can you reconcile those for me just argument what i would say is that  below argued that mr herman's testimony shouldn't be brought in here because it was an eight percent piece and additionally that he was called by one the unions and two he was not speaking on behalf of the government purpose and the goals of the statute so and those purpose the purpose and goals of the statute included swapping out highly compensated workers in favor of lower carbon city workers and obviously when you do that you save a lot of payroll in theory yes but by use also put in a hiring freeze so when those workers but but the with the higher compensated workers are the older workers in general terms yes but that's but there are other older workers that work all right instead of eyes to leave with the ten thousand because they were lower cost workers exactly as i understand your argument you're saying we didn't treat these people the way we did because of their age we treated them the way we did because they were x pensive employees and people that were the same age as them or older than them who were not expensive employees were not treated that way with their full benefits they had reached their max to passy and did that play a role to the the government when they were looking at seven k they thought well there's no adverse financial impact because if they can go on the g s and get paid full salary as retirees they're not suffering an adverse economic impact they did not receive full pay what they received was a full and reduced benefit the way retirement not the retirement plan doesn't isn't the full pay plan right it's i believe it's about a fifty percent pay so in may it may vary if you have forty years of service i think it goes up a little bit and when she said full benefit i i should have taken that to mean equal to their pay but rather the maximum benefit available the people with thirty year services right that that's about fifty percent of their full that's my recollection your honor it's in the i think we put the statute in the record it specifies how you calculate t for early retirements typically the normal retirement age under the plan is sixty most plans at sixty five right but no retirement on this plan is sixty years you can retire under certain circumstances prior to reaching age sixty right if you reach for example age fifty and you have ten years of service you're allowed to take an early retirement but it's reduced by a certain factors discount factor that she used to recognise that you're taking ten years more of payments then you would have otherwise and if you had to wait to sixty there's a second provision which is the thirty year an out provision which used to be more common but it's less common in defined benefit plans now and then it's a plan that says you can take basically a normal retirement which is your full benefit without any reduction if you have thirty thirty or more years of service as a practical matter that only applies to people who protect the class because everybody there's no one under the age of forty eight that belongs to the category of thirty or more years of service now to respond some arguments that my friend answers to the first the facial challenge that we bring motives are often if the court concludes that thirty years or more of service was nothing facially discriminatory on the act though right i mean it seems to me your your disparate impact theory is stronger than notion that there's facial discrimination here where where does it say anything about age in seven k you are you're correct it doesn't specifically give an age limit but the proxy theory for facial challenges says if you treat a certain category as a proxy for example aren't but if they'd been medicare right but ok so now we're back on the same page of it if it's a proxy theory though how can something be a proxy when there are many people within the protected class who are unaffected by this seven k well that's sort of the definition of a non proxy or a partial i guess maybe you're arguing partial proxy is  no i'm not sure that we're arguing partial proxy i think it doesn't proxy mean if x then y but that what you get i mean there are two bases for the proxy theory part of it is just the thirty or more years  out the reason it's a proxy under this court's precedent is some reasons first is that it only applies to people in a protected class there's no requirement that it need to apply to everybody in the calling the present the class what you're comparing when you're trying to do a proxy analysis is does this particular provision who does it apply to if it only applies and exclusively applies to people a protected class and nobody outside the picked a class is affected by it that is a very important consideration in deciding whether the requirement that's being used is being used as a proxy for age and the second reason is is what's the purpose behind this provision it is clear and i don't think it's disputed that they wanted people to retire and he says there's a in there you know this was a submitted a concerted record right so the government can't testimony from mr herman that there's a significant variance in pay between a new hire and someone with thirty years of credit service so why doesn't that satisfy their have an entry burden of showing that this saves money because it approaches as an average cost approach and that's under the e e o c guidelines that kind of justification specifically found to be a lawful manner and our position would be that the court should defer to the e e o c skylines on this point because e s c says that you cannot use an average cost approach of an entire group as a reasonable factor other than age with one limited exception that has to do with with rule four f two that deals with the equal cost benefit rule and that situation that you might be able to consider average cost but in a situation like this where the sole purpose here is to compel and penalize an individuals who are not ready to retire and then i mean if the a b a stands for anything it should stand for the proposition then an employer may not force people and i think i think that's a strong argument but forces you know if they offered your clients you know a million dollars to leave as are they compelled under the three percent it sounds like you have to say yes because it doesn't matter how sweet the carrot is your argument as i understand it is as long as there is a stick and even if the stick is three percent two percent one percent it ipso facto illegal then that is correct i do not think they could have a stick and i think if they were offered a million dollars i think i'd commit malpractise if i told him but that's why we use hypothetical but the reality is i mean that's not what happened here right well hey look we have a lot of people in the in the court system who are working not only for free but at cost to themselves and so i fully appreciate the desire of someone to find value in their work and remain gainfully employed i completely with you on that but i'm struggling with the notion that that there is compulsion here  you know the the spectrum between incentive and compulsion is not crystal clear to me and i guess at least you're trying to make it crystal clear by saying if there is a disincentive a stick of any kind it's illegal yes and i think that rather than another way to look at it is should this older group of employees be penalize for their decision not two to retire they they made that decision based on their own factors their individual factors and that's what the eighty eight tries to protect not oh you could have a full retirement therefore you're ok to retire you can't make that kind of assumption each individual then upset these individuals like my client we're just not in a position to retire and then how many employees how many clients do you have in this case  clients it's just these two but we have others that are affected you know how many people there are people who are affected by this about well it's a dwindling number yeah that's because as they get older they but the last count it was about fifty five people so it's not a terribly large population and what's at issue isn't a terribly large amount of money but it's important to the it's money that's important to the these individuals that we represent all right thank you council we thank our so for their excellent argument and