Source: https://openjurist.org/630/f2d/478/sexton-v-beatrice-foods-co
Timestamp: 2017-08-21 20:42:49
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Matched Legal Cases: ['§ 4', '§ 4', '§ 4', '§ 4', '§ 4', '§ 4', '§ 4', '§ 4', '§ 4', '§ 4', '§ 4', '§ 4', '§ 4', '§ 4', '§ 623', '§ 4', '§ 4', '§ 4', '§ 4', '§ 4', '§ 4', '§ 4', '§ 4', '§ 4', '§ 4', '§ 860', '§ 4', '§ 4', '§ 4', '§ 4', '§ 4', '§ 4', '§ 4', '§ 4', '§ 4']

630 F. 2d 478 - Sexton v. Beatrice Foods Co
630 F2d 478 Sexton v. Beatrice Foods Co
630 F.2d 478
23 Fair Empl.Prac.Cas. 717,
23 Empl. Prac. Dec. P 31,178
William C. SEXTON, Plaintiff-Appellant,
BEATRICE FOODS CO., Defendant-Appellee.
Beatrice argues on appeal that if it pays "substantial" pension benefits after firing an individual because of his age, the employer may avail itself of the § 4(f)(2) defense because it has "observe(d) the terms" of the plan by paying benefits. However, if the payment of benefits pursuant to a plan, coupled with the common law right to fire an employee for any reason, were enough to avail it of the § 4(f)(2) exception, the Supreme Court in McMann need not have engaged in any analysis of McMann's argument that United had failed to "observe the terms" of its plan. The Supreme Court rejected McMann's contention that United had failed to "observe the terms" of its plan not because such terms were superfluous and unnecessary as long as benefits were paid, as Beatrice would have it, but because the specific terms of the United plan were found to provide for age-based terminations before age 65. The Court's extended analysis of the meaning of the terms of United's plan was unnecessary if Beatrice's present interpretation of the § 4(f)(2) exception were correct. Quite consistently with the detailed scrutiny with which the Supreme Court examined the "observe the terms" provision in the McMann case, no case has been brought to our attention where an isolated firing not pursuant to the express provisions of a plan has been held to enjoy § 4(f)(2) protection.
The Supreme Court in McMann also considered whether the plan was a subterfuge to evade the ADEA because it required employees to retire before age 65. After reviewing the legislative history of the ADEA the Court held that a retirement plan adopted before the ADEA was enacted could not be considered a subterfuge to evade the ADEA even though the plan in question expressly provided that the employer could retire a participant because of his age at age 60. The Court concluded that the employer's actions met the requirements of § 4(f)(2), so the employer was not liable for retiring a 60-year-old worker because of his age. 434 U.S. at 203-04, 98 S.Ct. at 450.
Both the majority and dissenting opinions in McMann make sense only on the premise that the § 4(f)(2) exception is applicable only where the scope of involuntary termination is expressly provided for in an employer's retirement plan. Thus, the majority concluded:
Giving meaning to each of these provisions (of § 4(f)(2)) leads inescapably to the conclusion they were intended to permit observance of the mandatory retirement terms of bona fide retirement plans, but that the existence of such plans could not be used as an excuse not to hire any person because of age. 434 U.S. at 201-02, 98 S.Ct. at 449-450. (Emphasis supplied).
The Justices who dissented in McMann argued that in enacting § 4(f)(2) Congress had intended only to permit employers to distinguish between young and old workers by establishing employee benefit plans which would not pay the same benefits to, for example, a worker hired at 55 as they would pay to a worker hired at 25. 434 U.S. at 208-19, 98 S.Ct. at 452-58. The dissenting Justices, however, agreed that if Congress had intended to permit age-based discharges under pension plans, Congress clearly intended that such discharges be provided for in the provisions of the plan:
The critical question, then, is whether the phrase 'employee benefit plan,' as used by Congress here to include a 'retirement, pension, or insurance plan,' encompasses only the rules defining what benefits retirees receive, or whether it also encompasses rules mandating retirement at a particular age. 434 U.S. at 210, 98 S.Ct. at 454. (Emphasis supplied).
In Marshall v. Hawaiian Telephone Company, 575 F.2d 763 (9th Cir. 1978), the Department of Labor (the "Department") argued that the company had improperly discharged several employees because of their age before they reached 65. The Ninth Circuit noted that the plan "explicitly provides that (the employer) may retire any employee who has attained age 60." 575 F.2d at 766. (Footnote omitted). The Department argued that the employer did not "observe the terms" of its plan within the meaning of § 4(f)(2) unless the plan required the employer to retire employees at a certain age.
The Ninth Circuit concluded that § 4(f)(2) permits "an employer to exercise the option of retiring employees pursuant to a bona fide retirement plan even where the plan does not require such retirements." Id. at 767. (Footnote omitted and emphasis supplied). Thus the question whether an employer has "observe(d) the terms" of the plan when it forces an employee to retire must be resolved by examining the provisions of the plan to see if an employer is expressly permitted to require retirement at a particular age. Again the case would not make sense if express plan provisions about involuntary retirement were not essential.
Zinger v. Blanchette, 549 F.2d 901 (3rd Cir. 1977), cert. denied, 434 U.S. 1008, 98 S.Ct. 717, 54 L.Ed.2d 750 (1978), involved a pension plan similar to the one in Hawaiian Telephone, supra, in that it expressly provided that the employer could either retire an employee after he reached 60 or retain him until he reached 65. The Third Circuit found that one of the purposes of the ADEA was to eliminate age-based discharges without benefits. It also noted that Congress had regarded retirement on an adequate pension favorably and had enacted § 4(f)(2) to make such retirements exempt, although discharges without substantial benefits were not covered by the exemption. The court concluded that since the plan in question paid benefits, it could not be a subterfuge to evade the purposes of the ADEA because the ADEA was not meant to affect retirements on an adequate pension.
This Court has also held that § 4(f)(2) applies when a plan expressly gives an employer the option of forcing retirement at an age under 65 or of permitting an employee to work until 65. Minton v. Whirlpool Corporation, 569 F.2d 1012 (7th Cir. 1978). In both these cases it was the plan which expressly conferred on the employer the right to force the employee to retire prior to 65.3
These cases demonstrate that not all age-based discharges are forbidden by the ADEA simply because § 4(f)(2) allows an employer to force an employee to retire on account of his age under a retirement plan which pays benefits. It is also important that a retirement plan gives the employee notice of the age at which the employer may force him to retire, since the lack of such notice deprives the employee of an adequate understanding of his financial and other expectations under the plan. Congress would not have exempted from ADEA liability an age-based retirement pursuant to a plan if the plan did not give the employee sufficient information to enable him to plan for his retirement or to negotiate with his employer for some other mutually acceptable arrangement.
In the instant case, BRIP authorizes involuntary retirement at 65, but it does not expressly provide that Beatrice can force employees to retire before that time. BRIP does indicate that an employee may elect early retirement and receive a pension under certain circumstances. Only one case involving a similar plan has been brought to our attention in which the question presented by the instant case was directly posed. Thus in Marshall v. Kimberly-Clark Corporation, 14 Empl.Prac.Dec. P 7630 (N.D.Ga.1977), the employer sought, on the basis of the substantial pension benefits the employee would receive, to apply the § 4(f)(2) exception to the termination of an older employee, even though the pension plan did not provide for involuntary age-based terminations before age 65. In rejecting this approach, the court said:
(The employee in question) was separated when he was 61 years of age. His claim is based on the alleged involuntary nature of this action, and, if his allegations are substantiated, his retirement would not have conformed to the defendant's retirement policy and the exemption in 29 U.S.C. § 623(f)(2). The cases cited by the parties construing the retirement plan exemption concern involuntary retirement expressly permitted by the company program. (citations omitted). While the court is obliged to follow the literal language of the exception (citation omitted), there is no duty to extend it to encompass the situation here. 14 Empl.Prac.Dec. P 7630 at 5099. (Emphasis supplied).4
The district court in the instant case relied on Marshall v. Baltimore & Ohio Railroad Company, 461 F.Supp. 362 (D.Md.1978), appeal pending, Nos. 79-1210 and 79-1211 (4th Cir.) for the proposition that an employer "observe(d) the terms" of a plan within the meaning of § 4(f)(2) when it forced employees to retire before the normal retirement age even if the plan did not provide that the employer could do so, so long as the plan paid benefits. The district court here likewise rejected Sexton's argument that the ADEA abrogated Beatrice's common law right to fire Sexton because of his age. As will be explained below, we conclude that the district court erred in relying on B & O and misunderstood the effect of the ADEA on Beatrice's common law right to discharge Sexton because of his age.
The facts of B & O, supra, differ crucially from those of the instant case. The B & O experienced a severe loss of revenue in 1971 due to a nationwide coal strike. In order to reduce expenses it decided to terminate 142 workers who were entitled to pension benefits prior to their mandatory retirement age of 65 because they would presumably "be less adversely affected by the loss of a job than individuals who were not entitled to receive pension benefits." 461 F.Supp. at 367. One of the issues presented in the case was whether the B & O "observe(d) the terms" of its plan within the meaning of § 4(f)(2) when it retired these workers prior to their mandatory retirement age because the plan did not expressly provide that the B & O could do so.
In B & O the district court noted that, although the plan did not expressly provide that the B & O could force employees to retire before age 65, the B & O contended "and the Department (of Labor) does not dispute, that they have always had the inherent right to terminate any employee for any legitimate reason." 461 F.Supp. at 373. (Emphasis supplied). The court in B & O also made a specific finding that the option to retire employees involuntarily had been "exercised over the years" by the employer. 461 F.Supp. at 375. Thus, in B & O the court found that the employer's historical retirement policy and system provided for involuntary age-based terminations before 65 even though the B & O's power to do so was not set forth in its pension plan.5 The plaintiff Department of Labor in B & O apparently did not argue that the ADEA altered the B & O's common law right to discharge employees because of age. These findings formed the basis for the court's conclusion of law that the railroad had "observe(d) the terms" of its retirement policy.
Beatrice ignores the effect of the ADEA when it argues that its common law right to discharge an employee for any reason makes it unnecessary for the BRIP to provide expressly that it can force employees to retire before their normal retirement age because of their age. We agree that, in general, the employment contract governs the employer's right to discharge an employee and the pension plan does not affect these rights. We also agree that at common law an employee could be discharged for any reason, including age. However, § 4(f)(1) of the ADEA abrogates the employer's common law right to discharge an employee because of age and makes it illegal for the employer to do so. Thus the relevant consideration is not the effect of the employment contract or common law master and servant principles but the federal statutory prohibition of age-based discharges.
In this limited respect the ADEA makes the terms of the pension plan which relate to the employer's right to force retirement at a particular age of controlling importance because, as explained below, in order to come within the limited exemption of § 4(f)(2), the plan must contain express provisions on this point. That at common law, to sanction discharge for age, no employment contract or pension plan provisions were required is irrelevant to the construction of § 4(f)(2). This is true because the ADEA has eliminated the employer's right to discharge an employee because of his age except as provided in § 4(f)(2). We therefore reject Beatrice's argument that this common law right (which was sharply curtailed by the ADEA) should guide the construction of this limited exception to the general prohibition of the ADEA.
Having determined that B & O may be distinguished from the instant case and that the ADEA had a significant effect on Beatrice's common law right to discharge an employee because of his age, we turn to the question whether Beatrice may avail itself of § 4(f)(2) even though BRIP did not expressly authorize Beatrice to discharge Sexton because of his age before the normal retirement age. We conclude that under the circumstances of the instant case, Beatrice may not avail itself of the exception unless BRIP has such a provision.7
Section 4(f)(2) is an exception to a remedial statute and such exceptions are, in general, to be narrowly construed:
Any exemption from such humanitarian and remedial legislation must . . . be narrowly construed, giving due regard to the plain meaning of statutory language and the intent of Congress. To extend an exemption to other than those plainly and unmistakably within its terms and spirit is to abuse the interpretative process and to frustrate the announced will of the people. A. H. Phillips, Inc. v. Walling, 324 U.S. 490, 493, 65 S.Ct. 807, 808, 89 L.Ed. 1095 (1945).
See also Piedmont & Northern Railway Co. v. Interstate Commerce Commission, 286 U.S. 299, 311-12, 52 S.Ct. 541, 545, 76 L.Ed. 1115 (1932). Section 4(f)(2) must therefore "be narrowly and strictly construed." Marshall v. Eastern Airlines, Inc., 474 F.Supp. 364, 368 (S.D.Fla.1979).
We also note that "(i)n order to qualify for the exemption, an employer must show that it was observing the terms of a bona fide pension plan which was not a subterfuge . . . . Moreover, the burden of proof rests on the employer." Marshall v. Atlantic Container Line, G.I.E., 18 Empl.Prac.Dec. P 8849 at 5508, motion for summary judgment reconsidered and granted, 470 F.Supp. 71 (S.D.N.Y.1979). Accord, Marshall v. Eastern Airlines, supra, 474 F.Supp. at 368.
Since we must construe § 4(f)(2) narrowly, we conclude that in this context an employer does not observe the terms of the plan unless the plan expressly sanctions the decision to force the employee to retire early as well as the decision to pay him substantial benefits. Both of these decisions must be pursuant to some express provision in the plan if the employer wishes to claim that he observed the terms of the plan by forcing an employee to retire early. This follows from the language and analysis of McMann, supra, and other cases dealing with § 4(f)(2) and is in accordance with Kimberly-Clark, supra, the only case in which the precise issue involved in the instant case was presented.
In addition, the Secretary of the Department of Labor, to whom enforcement and interpretation of the ADEA was committed by Congress, issued interpretative regulations soon after the passage of the Act describing the scope of the § 4(f)(2) exception. See 34 Fed.Reg. 322 (1969). The regulations, which are presently codified at 29 C.F.R. § 860.110 (1980), have consistently provided that, for an age-based discharge to fall within the exception, the plan must contain a stipulated age for involuntary early retirement:
Thus, the Act authorizes involuntary retirement irrespective of age, provided that such retirement is pursuant to the terms of a retirement or pension plan meeting the requirements of section 4(f)(2). The fact that an employer may decide to permit certain employees to continue working beyond the age stipulated in the formal retirement program does not, in and of itself, render an otherwise bona fide plan invalid insofar as the exception provided in section 4(f)(2) is concerned. (Emphasis supplied).
Regulations promulgated by the enforcing agency are entitled to great deference. Griggs v. Duke Power Co., 401 U.S. 424, 433-34, 91 S.Ct. 849, 854-855, 28 L.Ed.2d 158 (1971).
An analysis of the legislative history also supports the conclusion that the terms of the plan must authorize pre-65 involuntary retirement. Congress' intent in enacting the exception contained in § 4(f)(2) was to allow involuntary termination only where so provided in employee benefit plans. The bill that ultimately became the ADEA embodied the recommendations made by President Johnson in his Message to Older Americans submitted to Congress on January 23, 1967. The President had specifically suggested an exception for those "special situations . . . where the employee is separated under a regular retirement system." 113 Cong.Rec. 1089-90 (1967). (Emphasis supplied).
Section 4(f)(2) of the Administration bill (S. 830, 90th Cong., 1st Sess.) made clear that the termination decision had to be based upon the provisions of the retirement plan:
Section 4(f)(2) of the Administration bill was amended in response to concerns expressed by Senator Javits that, as originally written, the exception would force employers to grant identical pension and other benefits to newly-hired older workers. Senator Javits feared that this aspect of the bill would discourage employers from hiring older workers. Senate Hearings, at 24, 27-28. These concerns were also expressed by representatives of many other groups which testified before the Subcommittees. See Senate Hearings, at 112-13, 296 and 323 and House Hearings, at 62-69, 413, 418, 481, 483 and 496-99.
This statement by Secretary Wirtz is crucial to an understanding of the problems involved in the instant case. The exception provided in § 4(f)(2) seeks to immunize involuntary terminations which are pursuant to established retirement policies and programs. An indispensable element of any such policy or program is the creation on a non-discriminatory basis, of some consistent expectation of when retirement will take place and what benefits will be available when that time comes. Certainly, established retirement policies do not contemplate the indiscriminate firing of employees motivated by age as a matter of the employer's common law prerogative simply because the fired employee becomes eligible for some pension benefits.
We therefore believe that the court in Kimberly-Clark, supra, was correct when it concluded that the § 4(f)(2) exemption is not available unless the plan empowers the employer to force an employee to retire before his normal retirement age. The legislative history, the consistent interpretation given the statute by the Department of Labor in its regulations and the controlling judicial decisions all strongly support the proposition that an involuntary termination made prior to "normal retirement age," which is not expressly authorized by the terms of the plan is not immunized by the provisions of § 4(f)(2).
Having concluded that Beatrice may not rely on the § 4(f)(2) defense unless BRIP expressly provided that Beatrice could force employees to retire prior to the normal retirement age, we must examine BRIP to determine whether it contains such a provision. We conclude that it does not.
The only provision in BRIP which arguably might give Beatrice the right to force workers to retire was contained in Section 11. It was entitled "Miscellaneous" and is set forth in pertinent part in the margin.12 Such a general provision does not give Beatrice the power to force employees to retire before the normal retirement age for purposes of a § 4(f)(2) defense for two reasons.
Second, even if we were to conclude preliminarily that Section 11.1 in a vacuum were clear enough to give employees notice that Beatrice could terminate them because of their age prior to 65, the notice would be rendered insufficient by Beatrice's booklet describing the plan in layman's language, because it does not mention Beatrice's power to do so. Rather, the booklet states that each employee over 55 who has the requisite seniority may elect early retirement. Since the language used in the booklet contradicts the language of Section 11.1 read in a light most favorable to Beatrice, it cannot be argued that Section 11.1 is sufficient for purposes of § 4(f)(2).
I concur in the judgment. No provision of the Beatrice retirement plan can be construed as granting Beatrice the option to compel the involuntary retirement of an employee prior to age sixty-five. Accordingly, it is impossible for Beatrice to have "observed" a non-existent term of the retirement plan and therefore impossible for Beatrice to claim an exemption under Section 4(f)(2) of the Act. No more need be said.
The Age Discrimination in Employment Act Amendments of 1978, Pub.L.No.95-256, 92 Stat. 189, raised the age limit from 65 to 70 and amended § 4(f)(2) to read as follows:
no such seniority system or employee benefit plan shall require or permit the involuntary retirement of any individual specified by section 631(a) of this title because of the age of such individual . . . . 29 U.S.C. 623(f)(2) (Supp.II 1978).
Although this Court's opinion in Minton does not set forth the terms of the plan, we note that the district court opinion stated that the plan gave the employer the option of retiring the employee at age 55 or continuing to employ him. (Minton v. Whirlpool Corporation, EV 76103C, (S.D.Ind. June 1, 1977), Finding of Fact No. 5)
The district court later granted Kimberly-Clark's renewed motion for summary judgment on the ground that the suit was barred by the statute of limitations. 17 Empl.Prac.Dec. P 8396 (N.D.Ga.1978)
We do not find it necessary to decide whether the employer could avail itself of § 4(f)(2) under facts similar to those in B & O, supra. That is we do not decide whether historical practice is an adequate substitute for an express provision of the plan