Source: http://openjurist.org/686/f2d/208
Timestamp: 2016-04-30 03:31:18
Document Index: 537900053

Matched Legal Cases: ['§ 626', '§ 623', '§ 226', '§ 255', '§ 623', '§ 623', '§ 1052', '§ 623', '§ 623', '§ 623']

686 F2d 208 Crosland v. Charlotte Eye Ear and Throat Hospital R M Crosland | OpenJurist
686 F. 2d 208 - Crosland v. Charlotte Eye Ear and Throat Hospital R M Crosland HomeFederal Reporter, Second Series 686 F.2d.
686 F2d 208 Crosland v. Charlotte Eye Ear and Throat Hospital R M Crosland 686 F.2d 208
29 Fair Empl.Prac.Cas. 1178,29 Empl. Prac. Dec. P 32,958,3 Employee Benefits Ca 1954Lavinia M. CROSLAND, Appellee,v.CHARLOTTE EYE, EAR AND THROAT HOSPITAL, a North CarolinaGeneral Partnership; Nahum R. Pillsbury, Jr., asAdministrator of Charlotte Eye, Ear and Throat Hospital andas Plan Administrator in the Employees' Pension Plan andTrust of Charlotte Eye, Ear and Throat Hospital; NorthCarolina National Bank as Trustee for the Employees' PensionPlan and Trust of Charlotte Eye, Ear and Throat Hospital,Appellants.Lavinia M. CROSLAND, Appellant,v.CHARLOTTE EYE, EAR AND THROAT HOSPITAL, a North CarolinaGeneral Partnership; Nahum R. Pillsbury, Jr., asAdministrator of Charlotte Eye, Ear and Throat Hospital andas Plan Administrator in the Employees' Pension Plan andTrust of Charlotte Eye, Ear and Throat Hospital; NorthCarolina National Bank as Trustee for the Employees' PensionPlan and Trust of Charlotte Eye, Ear and Throat Hospital, Appellees.
Nos. 81-1292, 81-1293.
Argued Nov. 2, 1981.Decided Aug. 12, 1982.
The Hospital has not disputed that claimant's exclusion from the original plan-the action apparently found violative by the district court-falls within the prohibitions of these sections, but asserted two statutory defenses. The first is 29 U.S.C. § 626(a)(1), the applicable statute of limitations. The second is 29 U.S.C. § 623(f)(2) (hereafter (f)(2) or the (f)(2) exception), which permits an employer "to observe the terms of ... any bona fide employee benefit plan ... which is not a subterfuge to avoid the purposes of (the Act) ...."2
As noted, the district court's order provides no detailed reasons for finding these defenses unavailing and summary judgment appropriate. In consequence, though claimant offers several alternative reasons why each of the Hospital's defenses was factually and legally unavailing, it is not clear which of these, if any, was relied upon by the district court. Indeed, even more fundamentally, it is not altogether clear what specific action of the defendant the district court concluded was violative of the Act-a point brought home by claimant's concession on oral argument that "it is difficult to say (which acts of the Hospital) I'm challenging (as unlawful)." It is therefore necessary to make some assumptions as we review the propriety of granting summary judgment. We take the statute of limitations and subsection (f)(2) defenses in that order.
29 U.S.C. § 226(e)(1), in conjunction with 29 U.S.C. § 255(a), requires that an action under the ADEA be commenced within two years (or three years if the employer's violation is willful) after a cause of action accrues. Here claimant alleged that the Hospital unlawfully failed to allow her to participate in the original plan from its inception or to provide a substitute plan of benefits at comparable cost. Plainly, from 1968 until claimant's actual retirement in 1980 the Hospital had it in its sole power to, and repeatedly did, alter both the type of plan and the amount of benefits to which claimant was said by it to be entitled. Against this background of constant change by unilateral action, essential fairness compels the holding that the Hospital did not finally decide claimant's status and benefit entitlement until her actual retirement. We hold that it was only at that time that her claim accrued. Since she filed her suit promptly thereafter we agree with the court below that her claim was not time-barred. See Alford v. City of Lubbock, 484 F.Supp. 1001, 1004 (N.D.Tex.1979), aff'd in part and rev'd in part on other grounds, 664 F.2d 1263 (5th Cir. 1982).
The district court's exact basis for finding the "bona fide/not subterfuge" defense foreclosed on the summary judgment record is not apparent. We cannot tell whether the court thought the (f)(2) exception not applicable as a matter of law to any age-based exclusion or whether it thought it not available here on undisputed facts of record. The parties have simply joined issue on this appeal on the question whether, as a matter of law on the summary judgment record, the benefit plan with its age-based exclusion was, in the language of the (f)(2) exception, "a subterfuge to avoid the purposes of (the Act)." The issue so framed of course subsumes both alternatives and we address it on that basis.3
We agree in general with the defendant's position that it may, by proper proof of economic justification, invoke the protection of the (f)(2) exception; that exclusion of claimant from the original plan was not per se a subterfuge making that protection unavailable. We further agree that on the summary judgment record the question whether claimant's exclusion from the plan was a disqualifying subterfuge under the (f)(2) exception presented a genuine issue of fact that could not be resolved by summary judgment. Reaching that conclusion requires resolving several problems of statutory interpretation centered on the "bona fide/not subterfuge" exception provided by subsection (f)(2).
The first has to do with the meaning in context of the key term "subterfuge," and the closely related question of how the absence of subterfuge may be proved by an employer seeking the protection of this statutory exception to otherwise "unlawful" conduct. See 29 U.S.C. § 623(a) (1). The answers are not self-evident in the Act but we think they are compelled by the Supreme Court's decision in United Air Lines, Inc. v. McMann, 434 U.S. 192, 98 S.Ct. 444, 54 L.Ed.2d 402 (1977), and by the legislative history of the (f)(2) exception.
In McMann the Supreme Court held that a bona fide employee benefit plan that was set up long before the ADEA's enactment could not, as a matter of plain meaning statutory interpretation, be a "subterfuge to evade the purposes" of an Act not then in existence; that, accordingly, by virtue of the (f)(2) exception an age-based retirement forced under the plan did not violate the Act. In so holding, the McMann Court rejected and reversed this court's contrary holding that post-Act maintenance of such an existing plan might be violative unless the employer proved absence of subterfuge by proving a "business or economic purpose" justifying the involuntary retirement feature of the plan.
In the process the Court interpreted "subterfuge" as used in the statute according to its ordinary meaning: "a scheme, plan, stratagem or artifice of evasion," id. at 203, 98 S.Ct. at 450. And the majority opinion seemed plainly to imply acceptance of-certainly did not reject-this court's premise that were it necessary to prove by means other than a plan's pre-existence that it was not a "subterfuge," this could be done by proving a "business or economic purpose" for its specifically challenged terms. See id. (majority opinion); cf. id. at 207, 98 S.Ct. at 452 (White, J., concurring: so construing majority opinion).
Since McMann was decided, its central holding that involuntary retirement provisions in bona fide employee benefit plans (at least those established before the Act) were absolutely excepted from the Act's prohibitions has been overturned by the 1978 amendments to the Act. These flatly removed involuntary retirement provisions from the protection of the employee benefit plan exception. See 29 U.S.C. § 623(f)(2) (1982). Still undisturbed, however, is the McMann Court's interpretation of the meaning of "subterfuge" and its implied acceptance of the means by which an employer may invoke the protection of the (f)(2) exception with respect to benefit plan provisions still within its compass. As indicated, we read McMann to recognize that this can be done by proving that a "business or economic purpose" rather than any intention to evade the ADEA's purposes justified and motivated the inclusion in a plan of such a challenged term.
The remaining question is whether the age-based exclusion of employees-such as claimant here-from the participation in bona fide benefit plans fell within the conditional protection of the (f)(2) exception. With exceptions not pertinent here, such an exclusion-without regard to motivation-is now flatly proscribed by ERISA. 29 U.S.C. § 1052(a)(2). But this does not answer the question whether, before ERISA's enactment, it also lay outside the scope of the "bona fide/not subterfuge" exception provided for employee benefit plans under the ADEA.
On this appeal claimant appears to argue alternatively that age-based exclusions from participation are simply not within the intended scope of the (f)(2) exception or-what comes to the same thing in practical effect-that, if within its intended scope, any appearing in a post-Act plan is per se a subterfuge so that the protection is unavailable. Because we think the second alternative patently unsupportable in logic,5 we address here only the first. On it we are persuaded that before ERISA occupied this specific ground and when only the ADEA provided federal statutory protection against age discrimination in employment-the critical period here in issue-the conditional protection afforded employers by subsection (f)(2) was intended to apply to such exclusionary provisions.
The plain language of relevant provisions of the ADEA supports this interpretation. Were it not for the (f)(2) exception, the exclusion of an employee from participation in a benefit plan because of age would plainly violate the basic prohibition of 29 U.S.C. § 623(a)(1) that makes it "unlawful ... to ... discriminate against any individual with respect to his compensation, terms, conditions or privileges of employment, because of such individual's age." Subsection (f)(2) then specifically excepts as "not unlawful" acts otherwise prohibited that involve the "obser(vance)" by an employer of "the terms of ... any bona fide employee benefit plan ... which is not a subterfuge ...." Age-based exclusions from participation in such plans are not specifically exempted from the conditional protection afforded by this exception, as are both the "failure to hire" and, by virtue of the 1978 amendments partially overruling McMann, "the involuntary retirement" of employees before age 70.
If the plain meaning we ascribe to these provisions be not that plain, we believe our interpretation is also supported by relevant legislative history. Congress' failure specifically to provide in the ADEA what it later did in ERISA (and might have done in the ADEA simply by expressly exempting from (f) (2)'s protection age-based exclusions from benefit plans) appears from that history to have been deliberate. As developed by the McMann Court in its review of the relevant legislative history, the concern of those sponsoring the (f)(2) exception was that it was needed in order to give employers "flexibility to hire older employees without incurring extraordinary expenses because of their inclusion in existing plans." McMann, 434 U.S. at 199-200, 98 S.Ct. at 448-449. The resulting encouragement to hire was thought to be of such overriding importance that, in the words of one of the exception's chief sponsors, Senator Javits, "the age discrimination law should not be used to fight the pension battle but ... we ought to subordinate the importance of adequate pension benefits for older workers in favor of the employment of such older workers...." Hearings on S. 830 before the Subcommittee on Labor and Public Welfare, 90th Cong., 1st Sess. 27 (1967). See McMann, 434 U.S. at 199-200, 98 S.Ct. at 448-449.6
We believe that the consequent failure of the (f)(2) exception to deal in express terms with age-based exclusions from benefit plans reflected a deliberate Congressional intention to treat them, for the time being at least, just as any other alleged violation of the ADEA to which a defense might be sought in the "bona fide/not subterfuge" exception.7 That the matter was left this way in the ADEA primarily out of a Congressional concern not to discourage the hiring of older workers whereas the claimant here is an older worker excluded from a newly adopted plan does not of course alter the fact that it was left this way.
Seizing upon this point, however, claimant in oral argument before us sought in it one possible way out of her interpretive difficulty. The failure to include an older worker, already employed, in a new benefit plan is, she contended, for purposes of the ADEA, exactly comparable to the failure to hire an older worker because of an existing benefit plan. The latter was expressly exempted from the protection of (f)(2), so its exact counterpart, exclusion from a new plan, should be deemed also exempted. The short answer to this is that though Congress might well have done that (as it later did in ERISA), it did not; and we may not.
By way of rebutting or avoiding this affirmative defense, it will of course be open to the claimant to attempt to show that instead of a business or economic purpose the actual motivation for her exclusion was an ongoing "scheme, plan, stratagem or artifice of evasion," McMann, 434 U.S. at 203, 98 S.Ct. at 450, designed to thwart the purposes of the ADEA, i.e., that the plan as it affected her was a subterfuge. Relevant for this purpose would be any evidence related to the Hospital's dealings with claimant at the time of and following adoption of the 1968 primary and substitute plans that might bear upon the Hospital's motivation.8
The court had no occasion to consider whether, if this violation were avoided by the (f)(2) defense, another might then have occurred in the admitted failure to pay claimant the benefits to which she would have been entitled under the 1968 substitute plan. Because this question may not arise upon remand, we do not address it now except to observe that we consider it an open one under the Act's general prohibition against conduct of employers that "... otherwise discriminate(s) against any individual with respect to his ... terms, conditions or privileges of employment, because of such individual's age" 29 U.S.C. § 623(a)(1). This question, along with the appropriate measure of damages, if such a violation is found, we leave for first instance consideration by the district court.
Joining issue on this basis may fairly be taken as a concession by the claimant that the other predicates of the (f)(2) defense were present: i.e., that the plan was a "bona fide" one, and that claimant's exclusion resulted from the Hospital's "observ(ance)" of it. 29 U.S.C. § 623(f)(2). In any event we would hold these established as a matter of law on the summary judgment record. The Hospital plainly "observe(d) the terms" of its original plan in excluding claimant from participating in it. The plan was as plainly "bona fide" in the relevant, limited sense that "it exists and pays benefits." See United Air Lines, Inc. v. McMann, 434 U.S. 192, 194, 98 S.Ct. 444, 446, 54 L.Ed.2d 402 (1977); see also Smart v. Porter Paint Co., 630 F.2d 490, 494 (7th Cir. 1980)
Though on its appeal from the district court judgment the Hospital might have challenged not only the grant of claimant's motion for summary judgment but the denial of its own cross-motion for the same relief, the contention was not seriously advanced. If it were considered technically before us, we would reject it on the basis that Arthurs' affidavit standing alone would not establish as a matter of law that claimant's exclusion was excused under the (f)(2) exception as indisputably not a subterfuge. As our opinion indicates, we conclude that on the summary judgment record this presented a genuine issue of fact not properly resolved in favor of either party by summary judgment
Claimant cites several cases, each involving early retirement provisions adopted after the ADEA, as support for an argument that any such post-ADEA plan or amendment is, as a matter of law, a subterfuge. Her reliance is misplaced, for in each case an intent to evade the purposes of the ADEA was addressed. See, e.g., EEOC v. Baltimore and Ohio R.R., 632 F.2d 1107 (4th Cir. 1980); Smart v. Porter Paint Co., 630 F.2d 490 (7th Cir. 1980). See also Marshall v. Atlantic Container Line, 470 F.Supp. 71 (S.D.N.Y.1979) (retirement age reduction provision, adopted post-ADEA, found adequately explained)
Thus, where a pension plan provides for a defined benefit, such as a flat dollar amount per month after retirement or an amount determined by a formula based on salary and years of service, Section 4(f)(2) may justify the exclusion of an older worker hired when he or she is less than five years from the plan's stated "normal retirement age". The employer, in our view, would be able in such a case to demonstrate that the plan provision authorizing the exclusion is not a subterfuge to evade the purposes of the Act, since the substantial cost of funding a specific level of benefits in a relatively short period of time would be the reason for the exclusion. In other words, the employer could prove that cost, rather than age, explains the otherwise discriminatory practice. Under these circumstances, we would not assert any violation, provided that the other tests of the exception were met.
... (w)e have (also) concluded ... that where an employer excludes a newly hired older worker from a retirement plan, and that exclusion meets the terms of Section 4(f)(2) as set out above, the Act does not require that the excluded employee receive other payments in lieu of the employer's contributions to the benefit plan. In our judgment, it would be inconsistent with the purposes of Section 4(f)(2) to require that an employer, who is excluded from making pension contributions on the employee's behalf, to nevertheless make those payments in cash, particularly where the purpose of pension plans is to provide deferred, rather than present compensation. The Section 4(f)(2) exception was intended to protect the older worker's opportunities for employment, and so long as the primary objective of employment is met, no other compensatory payments are required by the Act, where the employer proves entitlement to the exception. There may, of course, be other types of employee benefit plans (other than pension or retirement plans) where an equivalent cash value would be required.