Opinion ID: 4305333
Heading Depth: 2
Heading Rank: 3

Heading: Reasonable Factor Other Than Age

Text: The plaintiffs have established a prima facie case, but Caterpillar raises an affirmative defense that its liquidation plan is based on a reasonable factor other than age. To prevail Caterpillar must show that its less favorable treatment of retirement-eligible employees was “reasonably designed to further or achieve a legitimate business purpose and administered in a way that reasonably achieves that purpose in light of the particular facts and circumstances that were known, or should have been known, to the employer.” 29 C.F.R. § 1 We note for completeness that the ADEA does contain certain pensionrelated exceptions. See, e.g., 29 U.S.C. § 623(l)(1)(A)(i) (allowing pension eligibility to turn on age); id. § 623(l)(2)(A) (allowing an employer to consider age-related pension benefits in determining the level of severance pay); id. § 623(l)(3) (allowing an employer to consider age-related pension benefits in determining the level of long-term disability benefits); see also Teufel v. N. Tr. Co., 887 F.3d 799, 802 (7th Cir. 2018) (explaining the relationship between the ADEA and pension plans). Caterpillar did not invoke any of these provisions. 14 No. 17-2956 1625.7(e)(1). This is a “relatively light burden.” Karlo, 849 F.3d at 80. “Unlike the [Title VII] business necessity test, which asks whether there are other ways for the employer to achieve its goals that do not result in a disparate impact on a protected class, the reasonableness inquiry includes no such requirement.” Smith, 544 U.S. at 243. Caterpillar has satisfied its burden. The liquidation plan was justified by a reasonable factor other than age—several, actually. For over a decade, Caterpillar tried to eliminate the unemployment plan to reduce labor costs at the Joliet plant. Unemployment payments were infrequent, so Caterpillar thought it could use the funds more efficiently. Caterpillar also hoped to avoid the expense of upgrading the unemployment plan’s outdated administration system. Recognizing that the union had resisted its prior attempts to eliminate the plan, Caterpillar offered to distribute the trust’s $7.8 million to union members to secure their support. Caterpillar’s proposal was reasonably designed to achieve these cost-cutting measures. See Allen v. Highlands Hosp. Corp., 545 F.3d 387, 392, 406 (6th Cir. 2008) (holding that the termination of “employees based on seniority to facilitate the hiring of new, less costly employees” qualified as a reasonable factor other than age). Caterpillar’s decision to offer an inferior deal to retirement-eligible employees is also valid. Voluntary retirement incentives are permissible under the ADEA, see Henn v. Nat’l Geographic Soc’y, 819 F.2d 824, 826–28 (7th Cir. 1987), and in conducting the reasonableness inquiry, we do not consider “whether there are other ways for the employer to achieve its goals that do not result in a disparate impact on a protected class,” Smith, 544 U.S. at 243. Caterpillar’s proposal killed two No. 17-2956 15 birds with one stone: it maintained the retirement incentives and induced union members to sign off on the deal. The plaintiffs counter that Caterpillar’s use of retirement eligibility was unreasonable for four reasons. First, they argue that we should not consider Caterpillar’s rationale for eliminating the unemployment plan. In their view we should consider only whether it was reasonable for Caterpillar to modify its proposal in a manner that discriminated against retirement-eligible employees. See Romero v. Allstate Ins. Co., 251 F. Supp. 3d 867, 886–87 (E.D. Pa. 2017). But we are required to consider the “particular facts and circumstances surrounding” Caterpillar’s proposal, 29 C.F.R. § 1625.7(e)(1), which include Caterpillar’s long-standing desire to get rid of the unemployment plan, its initial offer to distribute the funds only to retirement-eligible employees, and its subsequent offer to broaden the pool of beneficiaries. Moreover, Caterpillar’s decision to treat retirement-eligible employees less favorably allowed it to secure the union’s approval while keeping the retirement incentives in place. Second, the plaintiffs argue that a desire to placate a union in collective bargaining is an inherently suspect basis to favor younger employees. They suggest that this rationale could serve as a basis for discriminating against older employees in collective bargaining. Such fears are overblown. If an employer seeks to discriminate on the basis of age, a plaintiff may bring a disparate-treatment claim under § 623(a)(1). Further, when an employer enters into an agreement that has a disparate impact on older employees, the employer has the burden to prove that the disparate impact resulted from a reasonable factor other than age. Here Caterpillar needed the union’s agreement to achieve a legitimate business purpose. To 16 No. 17-2956 the extent that the liquidation plan was reasonably designed to further that objective, it is protected by the affirmative defense. Third, the plaintiffs argue that a jury could find that the modified liquidation proposal was not “reasonably designed” or “administered” to secure a contract with the union. Id. The thrust of their argument is that the union would have readily agreed to eliminate the unemployment plan if the funds were distributed equally to all participants. But the reasonableness inquiry does not include a requirement that Caterpillar could have achieved its goals in a nondiscriminatory manner. Smith, 544 U.S. at 243. Along the same lines, the plaintiffs assert that Caterpillar’s decision to modify the proposal made securing an agreement with the union more difficult. They argue that the modified proposal “introduced new objectionable elements” by discriminating against retirement-eligible workers. The union’s actions during the negotiations contradict this account. When it first proposed to eliminate the unemployment plan, it included the modified liquidation plan in its contract proposal—not the original liquidation plan that Caterpillar had favored. Finally, the plaintiffs argue that acquiescence by a union in a civil-rights violation is not a defense for employers. See e.g., EEOC v. Calumet County, 686 F.2d 1249, 1257 (7th Cir. 1982). This argument is a nonstarter. Caterpillar’s defense does not turn on whether the union’s agreement insulates it from ADEA liability. In sum, we hold that the plaintiffs have established a prima facie case of disparate-impact age discrimination: the No. 17-2956 17 liquidation plan constitutes a specific policy and creates a substantial age-based disparity between workers. But because the policy was based on several reasonable factors other than age, Caterpillar has established its affirmative defense to disparate-impact liability. AFFIRMED.