Opinion ID: 786790
Heading Depth: 2
Heading Rank: 1

Heading: Violations of the ADEA

Text: 12 The ADEA was passed to promote employment of older persons based on their ability rather than age and to prohibit arbitrary age discrimination in employment. 29 U.S.C. § 621(b). The Act, in part, prohibits an employer from fail[ing] or refus[ing] to hire or to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's age. 29 U.S.C. § 623(a)(1). In order to establish a disparate treatment claim under the ADEA, an employee must make a prima facie case of discrimination, Auerbach v. Bd. of Educ. of the Harborfields Cent. Sch. Dist. of Greenlawn, 136 F.3d 104, 109 (2d Cir.1998), by showing: (1) that the employee is a member of the protected class, (2) that the employee is qualified for the position, (3) that the employee suffered adverse employment action, and (4) that the circumstances surrounding the action give rise to an inference of age discrimination. See McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973); see also Hazen Paper Co. v. Biggins, 507 U.S. 604, 612, 113 S.Ct. 1701, 123 L.Ed.2d 338 (1993) (noting that the McDonnell Douglas proof standard applies to ADEA claims). 13 Here, the District Court found, and neither party disputes, that the plaintiffs-appellees were members of the protected class as they were all older than age 40 at the time they were denied the benefits of Option # 2. Further, no one disputes that the appellees were qualified to continue teaching in the Wappingers District as they all did exactly that. The teachers contend that they have also shown adverse employment action and that the circumstances surrounding the adoption of the CBA with Option # 2 raises an inference of age discrimination. The School District and the Union contend that no adverse employment action has been shown and that, even if a prima facie case has been established, Option # 2 falls within the safe harbor provision for bona fide early retirement incentive plans contained in § 623(f) of the ADEA. 14
15 The appellees argue, and the District Court agreed, that their exclusion from Option # 2 and its $7,000/year benefit constituted an adverse employment action because it violated the ADEA by excluding them on the basis of their age. The Union and the School District contend that no adverse employment action occurred because the teachers who now complain elected not to participate in the early retirement plan under the old CBA and, consequently, forfeited their right to participate in the new plan. They also argue that Option # 2 does not discriminate on the basis of age but, rather, is offered to all teachers who meet the service-based eligibility criteria for the first time under the new CBA. See Hazen Paper Co., 507 U.S. at 609-14, 113 S.Ct. 1701 (holding that discrimination on the basis of non-age factors that may be correlated with age, such as pension status or seniority, does not violate the ADEA). 16 We hold here that the appellees met their de minimis burden of establishing a prima facie case of age discrimination under the ADEA. See, e.g., Criley v. Delta Air Lines, Inc., 119 F.3d 102, 104 (2d Cir.1997); Scaria v. Rubin, 117 F.3d 652, 654 (2d Cir.1997). In Auerbach, we faced an almost identical question. There, the defendants school district and union had implemented an early retirement incentive plan that provided a $12,500 cash payment when a teacher who had fulfilled the retirement criteria (reaching age 55 and providing 20 years of service under the NYSTRS) actually retired at the end of the first year in which they became eligible. That is, in order to receive the cash payment, those teachers who had reached age 55 were required to retire at the end of the first year in which they had completed 20 years of service and those teachers who had completed the 20 years of service were required to retire in the year they reached age 55. Auerbach, 136 F.3d at 107-08. If teachers did not retire in the first year they became eligible, they could not receive the lump sum payment at a future date. In considering whether the plan discriminated on the basis of age, we concluded that, because teachers who were over the age of 55 but had not retired in the precise year they became eligible were barred from the retirement benefit while teachers under the age of 55 who had fulfilled the plan's service requirements still have the future option of receiving the benefit, age is a trigger for the denial of [the teachers'] employee benefits. Id. at 110. Consequently, we held that the teachers in Auerbach had established discrimination on the basis of age. 17 The School District and Union argue that their requirements for eligibility differ from the Auerbach plan's requirements. They contend that Option # 2 is strictly based on years of service and not on age as was the case in Auerbach. However, this is simply not true. Option # 2 requires that teachers meet the service retirement criteria established by the NYSTRS. Consequently, retirement eligibility is determined by when state service started. Those members who entered the system before July 1, 1973 are classified as Tier I, those who entered between July 1, 1973 and July 1, 1976 are classified as Tier II, and those entering after July 1, 1976 are classified as Tier III. Reichler v. New York State Teachers' Ret. Sys., 79 A.D.2d 268, 268-69, 437 N.Y.S.2d 754 (1981). Under both Tiers II and III, eligibility for retirement requires teachers to reach a minimum age of 55 and to have completed at least 30 years of credited service. N.Y. Retire & Soc. Sec. Law §§ 442(b)(1), 503(a). Under Tier I, there are three ways to qualify for retirement: two require the teacher to reach age 55 and complete either four or five years of state service while one allows a teacher who has accumulated 35 years of state service to be eligible for retirement regardless of whether or not he or she has reached age 55. N.Y. Educ. Law § 535(1). 18 The School District's contention that Option # 2 is entirely service-based rather than age-based is inaccurate. The only way to qualify for retirement under Option # 2 and have not reached the minimum age of 55 is to have joined the system prior to July 1, 1973 and have completed 35 years of state service. We agree with the District Court that this minor distinction is not enough to insulate Option # 2 from the logic and holding of Auerbach. Since all teachers must hold a four year post-secondary degree to qualify to teach grades pre-K through 12 and since the NYSTRS does not credit more than one year of service per calendar year or time of unpaid leave, it is extremely unlikely that any teacher who had not yet reached age 55 would ever have accumulated the 35 years of service necessary to qualify for retirement under Tier I. Thus we conclude that the reasoning of Auerbach applies here. Under Option # 2, teachers over age 55 (and those hypothetical teachers who accumulate 35 years of state service without reaching age 55) who do not elect Option # 2 in the precise year that they qualify under the service requirements are forever barred from receiving the $7,000/year benefit. However, teachers under 55, who have similarly met the other CBA service requirements for retirement still have the future ability to elect Option # 2 once they reach age 55 and qualify for retirement under the NYSTRS. Consequently, here, as in Auerbach, age — and not years of service — is the effective trigger for eligibility under Option # 2. This result constitutes a prima facie case of age discrimination. 19
20 Once the plaintiff has established a prima facie case of age discrimination, the defendant bears the burden of showing that his actions are lawful under the Act. Auerbach, 136 F.3d at 112; see 29 U.S.C. § 623(f)(2). The School District and the Union contend that the ADEA's safe harbor provision permits them to carry this burden. The ADEA, as amended by OWBPA, provides that: 21 It shall not be unlawful for an employer, employment agency, or labor organization — ... 22 (2) to take any action otherwise prohibited under subsection (a), (b), (c), or (e) of this section — ... 23 (B) to observe the terms of a bona fide employee benefit plan — 24 (i) where, for each benefit or benefit package, the actual amount of payment made or cost incurred on behalf of an older worker is no less than that made or incurred on behalf of a younger worker ...; or 25 (ii) that is a voluntary early retirement incentive plan consistent with the relevant purpose or purposes of this chapter. 26 29 U.S.C. § 623(f). Thus, an employee benefit plan that otherwise discriminates on the basis of age may still be valid under the ADEA if: (1) it adheres to the equal benefit or equal cost principle under which the employer expends equal amounts on both younger and older workers, or (2) it is a voluntary early retirement incentive under which an employer need not expend an equal amount as long as the plan is voluntary and consistent with the ADEA's goals of protecting workers from arbitrary age discrimination. Auerbach, 136 F.3d at 112. Here, the School District and the Union do not contend that Option # 2 is saved by the equal benefit or equal cost rule. 27 They do, however, claim that Option # 2 is a voluntary retirement incentive plan exempt from the Act under § 623(f)(2)(B)(ii). They argue that Option # 2 is truly voluntary, is made available for a reasonable amount of time, and does not arbitrarily discriminate on the basis of age. But these contentions miss the mark since they only address whether an actual early retirement plan is voluntary and thus valid under § 623(f)(2)(B)(ii). Auerbach, 136 F.3d at 112-13 (quoting S.Rep. No. 101-263, at 28 (1990)). They tell us nothing about the answer to the predicate question of whether the plan is, in fact, an early retirement incentive plan. 28 In Auerbach, we began our analysis with the determination that the sick leave benefit is, in fact, a retirement incentive under the plan because the sick leave benefit is not paid out unless and until a teacher retires under the plan. Id. at 112. The teachers would have us read this statement as a requirement that any plan that does not mandate actual retirement cannot be an early retirement incentive plan. We decline to decide whether such a broad interpretation of our statement in Auerbach is appropriate, since it only asserted that if a plan mandates retirement in exchange for a benefit then it is an early retirement incentive plan. The teachers incorrectly conclude that the converse must also be true — that if a plan does not mandate retirement, then it is not an early retirement incentive plan. It is unnecessary for us to resolve the question of whether such a converse rule should apply because we have no trouble concluding, on a different basis, that Option # 2 is not an early retirement plan. 29 Regardless of whether an early retirement incentive plan must invariably mandate retirement in exchange for a benefit, an early retirement plan must, at a minimum, provide some incentive to retire. In other words, the plan must make retirement a relatively more attractive option than continuing to work. Consider, for example, the plan in Auerbach, which offered a $12,500 payout if the teacher retired in the first year of eligibility. In the absence of the plan, a teacher could choose to continue to work and earn her usual salary or choose to retire in the year she met the criteria and begin drawing a pension. With the plan, retirement became more attractive than continuing to work because the teacher received an additional $12,500 payout from retirement, while continued employment yielded the same salary as before. 30 Here, Option # 2 provides no real incentive to retire because it does not make retirement a relatively more attractive financial option than continuing to teach. In the absence of Option # 2, a teacher meeting all the criteria for the first time can retire or continue teaching. With Option # 2, the teacher has the identical option of retiring when first eligible and starting to collect a pension — the same pension as in the absence of Option # 2. Thus Option # 2 has not made retirement more attractive relative to continuing to work for this teacher and, therefore, has not supplied any incentive to retire. On the contrary, Option # 2 actually supplies the incentive to continue working. Without Option # 2, the teacher could continue working with the usual salary increases but now, with Option # 2 in place, the same teacher could continue working and receive an extra $7,000 per year for three years. So, if anything, Option # 2, by supplying $7,000 salary increases, makes continued employment relatively more attractive than retirement and actually encourages teachers to work for at least three years beyond when they first become eligible for retirement. 31 The School District and Union argue that Option # 2 was intended to induce early retirement and that common sense ... indicate[s] that those who choose Option 2 would in fact be expected to retire immediately, or not long, after the three-year period ends. Applt. Br. of Wappingers Congress of Teachers at 19. This common sense argument hinges on what appellants term the laws of economics and psychology. Id. at 20. They posit that a teacher who selects Option # 2 but then does not retire at the end of the three-year period would suffer a significant drop in salary when the $7,000 payments ceased and would, therefore, have to work a substantial number of additional years in order to receive a pension equivalent to one that included the $7,000 in the final annual salary on which a pension would be calculated. 3 The School District and Union believe that this means an incentive exists to retire after three years because — in their words — the marginal utility of continued employment declines thereafter due to the time it would take a teacher to boost his pension payment over that reached using the three-year period as the final average salary. See Abrahamson v. Bd. of Ed. of the Wappingers Falls Cent. Sch. Dist., 2002 U.S. Dist. LEXIS 11054 at  (S.D.N.Y. July 21, 2002). 32 But a teacher's marginal utility of working extra years is not limited to the prospect of increasing her final pension payout — it also includes the marginal income generated by another year's employment. Thus, a teacher who elects Option # 2 and finishes the three-year period of service at the increased salary will not face any incentive to retire then either. The teacher could elect to retire at the end of the period and collect the increased pension payments. Alternatively, the teacher could work one more year, collect an extra year's salary, retire, and then collect exactly the same pension payments as she would have had she retired at the end of the three-year period (by electing the three Option # 2 years in the calculation of her final average salary). See N.Y. Educ. Law § 501(11)(a), (b). In fact, she could work any number of extra years and always elect the three Option # 2 years in the calculation of her pension benefits. Because a teacher who elects Option # 2 can always choose to have those years serve as the basis for her pension calculations, retirement is made no more attractive relative to further employment, and there is, therefore, no incentive to retire at the end of the three-year period. The School District's and Union's argument that it was their intention to induce early retirement through Option # 2 is irrelevant where, as here, the actual effect of the plan is to induce teachers not to retire but to teach for at least three more years. 4 We therefore conclude that Option # 2 is not entitled to safe harbor protection as a valid early retirement incentive plan.