Opinion ID: 494609
Heading Depth: 1
Heading Rank: 3

Heading: lost pension benefits as front pay

Text: 17 Turning to the issue of damages, we must consider the important question whether front pay in the form of lost pension benefits may be awarded under the ADEA, and if so, whether such an award was proper in this case. In Maxfield v. Sinclair Int'l., 766 F.2d 788, 795-96 (3d Cir.1985), cert. denied, 474 U.S. 1057, 106 S.Ct. 796, 88 L.Ed.2d 773 (1986), we held that front pay is available under the ADEA based on the Act's broad language giving courts the power to grant such legal or equitable relief as may be appropriate to effectuate the purposes of this chapter.... Id. (quoting 29 U.S.C. Sec. 626(b)). The inclusion of equitable relief strengthens the conclusion that Congress intended victims of age discrimination to be made whole by restoring them to the position they would have been in had the discrimination never occurred. Id. at 796. 18 Employing this make-whole philosophy, we now hold that lost pension benefits are recoverable as front pay under the circumstances presented in this case. We caution, however, that such benefits may not be available where an award would make a plaintiff more than whole, such as where a plaintiff has found subsequent employment at a greatly increased salary that would offset any loss of pension benefits, or where defendant can prove that the new employer's pension plan would provide plaintiff with approximately the same benefit he lost due to the defendant's discriminatory firing. 19 Back pay coupled with reinstatement is the preferred remedy to avoid future damages in ADEA cases. Maxfield, 766 F.2d at 796. The relevant time period for calculating an award of back pay begins with wrongful termination and ends at the time of trial. Berndt v. Kaiser Aluminum & Chemical Sales, Inc., 604 F.Supp. 962, 964 (E.D.Pa.1985), aff'd, 789 F.2d 253 (3d Cir.1986). Back pay compensates the plaintiff for loss of past wages, and reinstatement insures that no future losses will accrue due to discrimination. Unfortunately, reinstatement is not always feasible, e.g., because of irreparable animosity between the parties or, as in this case, because of a reduction in the employer's work force. In such a case, back pay will still defray past losses, but the alternate remedy of front pay must be used to make the plaintiff whole for future expected losses. Maxfield, 766 F.2d at 796. In calculating a front pay award, the jury must consider the expected future damages caused by defendant's wrongful conduct from the date of judgment to retirement. 4 A plaintiff, of course, has a duty to mitigate damages, and his new salary will be deducted from the old to avoid a windfall award. 20 Under the facts presented here, plaintiffs were not entitled to an award of back pay. All three plaintiffs had secured jobs with slightly higher salaries by the time of trial, and severance pay compensated them for the unemployed period. In addition, the future wages element of a front pay award was entirely offset by plaintiffs' new salaries. Nonetheless, plaintiffs suffered very real economic injuries as a result of Witco's discrimination. Another element of future damages, expected compensation in the form of pension benefits, was not offset by their new salaries, nor by any deferred compensation plans offered by their new employers. See infra at 376. Here, plaintiffs proved a net future loss, despite their mitigation efforts, that would not have occurred but for Witco's unlawful conduct. Awarding future damages in the form of (net) lost pension benefits under these circumstances serves the ADEA's joint purpose of making plaintiffs whole and deterring future discriminatory acts by employers. Koyen v. Consolidated Edison Co., 560 F.Supp. 1161, 1168 (S.D.N.Y.1983). 21 Pension benefits, unlike lesser fringe benefits, are an integral part of an employee's compensation package, and indeed are generally referred to as deferred compensation. Because of the paramount importance of pension benefits to an employee's future financial security, it would be unfair to exclude them from a calculation of front pay. 5 Ventura v. Federal Life Ins. Co., 571 F.Supp. 48, 50 (N.D.Ill.1983). An employee illegally discharged near the end of his working career is particularly vulnerable to suffering economic injury in the form of lost pension benefits. If he secures subsequent employment, he will often be unable to work the number of years that are required for vesting under the new employer's pension plan, and thus he will receive no pension benefits for his last few years of employment. 6 22 Plaintiffs' expert, William Troyan, made two calculations for the jury. First, he took the actual pension benefits each plaintiff was receiving from Witco and, using the life expectancy and interest rate tables provided by the Pension Benefit Guaranty Corporation, reduced the figure to present value. He then analyzed the salary history of each plaintiff to arrive at an average annual salary increase of 6.45%. Using these salary projections and the PBGC tables, Troyan calculated for the jury the present value of the benefits each plaintiff would have received had he remained at Witco until age 65. The difference between the two figures represents the damages in lost pension benefits due to Witco's unlawful discharge. 7 23 Witco had an opportunity to prove a set-off to these damages by reason of benefits received by plaintiffs from their new employers. Although we have held that pension benefits received by a plaintiff from the defendant after an illegal discharge are analogous to a collateral benefit and should not be set off against a back pay award, McDowell v. Avtex Fibers, Inc., 740 F.2d 214, 217-18 (3d Cir.1984), vacated on other grounds, 469 U.S. 1202, 105 S.Ct. 1159, 84 L.Ed.2d 312 (1985), pension benefits received from a subsequent employer are simply another form of earned income, which, of course, may be set off from a front pay award consistent with plaintiff's duty to mitigate damages. Witco, however, failed to carry its burden of proving a set-off. Rodriguez v. Taylor, 569 F.2d 1231, 1243 (3d Cir.1977) (burden is on defendant on the issue of any set-offs to damages), cert. denied, 436 U.S. 913, 98 S.Ct. 2254, 56 L.Ed. 2d 414 (1978). 24 Witco's employee, Harold Miller, testified as to the retirement benefit each plaintiff was receiving from Witco. He then reviewed the retirement plans of the plaintiffs' new employers. Blum's employer, Acolac, had no pension plan. Spitsbergen's employer, Unitrue, had no pension plan, but did have a profit-sharing plan. Miller testified that, depending on whether the company made a profit, Spitsbergen could receive some retirement income from his new employer. Miller also testified that Kapur's new employer, Colgate-Palmolive, had a retirement plan similar to Witco's in which Kapur was eligible to participate after one thousand hours of employment. Kapur's benefits under the plan would not vest, however, until he had accumulated ten years of service with his new employer, which would be some three years after his normal retirement age. Defendant's Exhibit 18, App. at 647. Witco did not attempt to set off any net increases (after expenses) in earnings against reduced pension benefits. 25 Thus, there was sufficient evidence in the record from which the jury could conclude that plaintiffs suffered lost pension benefits in the amounts testified to by Troyan, see note 7, supra, and that these losses were not offset by the higher salaries or pension plans offered by the plaintiffs' new employers. We therefore see no reason to set aside the jury's award. 26 We are aware that the speculative nature of future damages has been cited as a reason for denying such awards. See, e.g., Loeb v. Textron, Inc., 600 F.2d 1003, 1013 (1st Cir.1979). However, we agree with the court in Koyen, 560 F.Supp. at 1168-69, that the problem is more imaginary than real. Courts and juries have been calculating future damage awards in personal injury cases for years. In the present case, the uncertainty was diminished by the fact that all three plaintiffs were re-employed by the trial date, leaving little question as to their future earnings and benefits. Cf. E.E.O.C. v. Prudential Fed. Sav. & Loan Ass'n, 741 F.2d 1225, 1232 (10th Cir.1984) (uncertainty not relevant consideration where court granted only future pension benefits, not future wages). The only remaining variable is that a future damage equation assumes that the plaintiff would have remained with the employer until normal retirement age, absent the illegal termination. Gibson v. Mohawk Rubber Co., 695 F.2d 1093, 1101 n. 8 (8th Cir.1982). Since the plaintiffs were all within eight years of normal retirement age when terminated by Witco, this assumption does not require unreasonable speculation. See Davis v. Combustion Eng'g, Inc., 742 F.2d 916, 923 (6th Cir.1984) (award of front pay to 41-year old until normal retirement age might be unwarranted while failure to make such an award to 63-year old might be abuse of discretion). 27