Opinion ID: 3042452
Heading Depth: 3
Heading Rank: 1

Heading: The VSIP

Text: The ADEA creates a safe harbor for an employer’s early retirement program, allowing an employer “to observe the terms of a bona fide employee benefit plan . . . that is a voluntary early retirement incentive plan consistent with the relevant purpose or purposes of [the ADEA].” 29 U.S.C. § 623(f)(2)(B)(ii). Morgan argues A.G. Edwards did not prove its VSIP fell within this safe harbor provision, and thus, the VSIP should be considered as evidence of age discrimination. Specifically, Morgan contends the program was neither voluntary nor consistent with the purposes of the ADEA.4 Both arguments fail. 4 On appeal, Morgan also contends the VSIP is not a “bona fide employee benefit plan” within the meaning of the Older Workers’ Benefit Protection Act of 1990, 29 U.S.C. §§ 621 to 634. Because Morgan did not specifically raise this argument before the district court, he normally may not do so now. See Wever v. Lincoln County, Neb., 388 F.3d 601, 608 (8th Cir. 2004) (“Ordinarily, this court will not consider arguments raised for the first time on appeal.”). We find no good reason to deviate from this general rule in Morgan’s appeal. Even if we were to consider this newly asserted argument, we find it unavailing. “A ‘bona fide employee benefit plan’ is one in which substantial benefits are paid to employees who are covered by it.” Raskin v. Wyatt Co., 125 F.3d 55, 61 (2d Cir. 1997). Here, employees electing to terminate their employment and to accept the VSIP’s severance benefits would receive one year’s base salary, a lump-sum bonus payment, health coverage and basic group life insurance, and the right to continue to vest in an unvested portion of deferred compensation. We have no difficulty concluding such substantial benefits payable to -7- First, Morgan argues A.G. Edwards made misleading and coercive statements to persuade employees to participate in the VSIP. In support of his argument, Morgan points to language contained within A.G. Edwards’s VSIP memorandum5 to eligible employees and argues the threat of involuntary reductions, combined with A.G. Edwards’s encouragement for employees to take advantage of the VSIP, eradicated any voluntary character of the VSIP. We disagree. “To determine whether a retirement plan is voluntary, a court must consider whether, under the circumstances, a reasonable person would have concluded that there was no choice but to accept the offer.” Auerbach v. Bd. of Educ. of the Harborfields Cent. Sch. Dist. of Greenlawn, 136 F.3d 104, 113 (2d Cir. 1998). In offering the VSIP, A.G. Edwards stressed the program’s voluntary nature, informing employees it was “not pressuring you or any employee to elect the [VSIP] and terminate your employment with A.G. Edwards. Whether you terminate your employment with A.G. Edwards and elect to accept the compensation and other benefits is entirely up to you.” A.G. Edwards also allowed employees forty-five days to decide whether to participate in the VSIP and seven days after execution of the agreement to revoke acceptance, thus affording employees adequate time to consider their options and make an informed choice on whether to terminate their employment voluntarily, and even to change their minds. Employees were not required to accept participating employees demonstrate the VSIP is a “bona fide employee benefit plan.” 5 A.G. Edwards’s VSIP memorandum stated, in part: The [VSIP] will help A.G. Edwards achieve the required cost reductions while rewarding some of the firm’s most long-term employees. We anticipate, however, that A.G. Edwards will implement other initiatives, including involuntary reductions in employment. The decisions concerning involuntary reductions have not yet been made and could be affected by the number of employees who participate in the [VSIP]. Employees eligible for, but who choose not to participate in, the [VSIP] along with other employees may be considered for any involuntary reductions. -8- the offer, and those who elected not to terminate their employment would continue to work and receive the benefits of their employment. Although the memorandum referred to the possibility employees who elected not to participate might be considered for any future involuntary reductions, a reasonable person would not have viewed this language as a coercive threat to “quit or be fired.” Rather, the possibility of involuntary reductions arguably is an obvious and integral corollary of A.G. Edwards’s cost-reduction initiative in the event the company did not achieve its desired goal of reducing costs solely through the VSIP. While a reasonable person, after viewing the terms of the plan, might feel less certain of his continued employment with A.G. Edwards, it nevertheless was possible enough eligible employees might accept the VSIP, thus obviating the need for A.G. Edwards to implement involuntary reductions. See Rowell v. BellSouth Corp., 433 F.3d 794, 806 (11th Cir. 2005) (rejecting an employee’s constructive discharge claim brought following the employee’s acceptance of an early retirement plan offered before the company instituted an involuntary reduction in force). A.G. Edwards was being open and frank with its employees, disclosing a potential future cost reduction alternative and supplying more information to assist the employees’ consideration whether to participate in the VSIP. We also reject Morgan’s argument the VSIP memorandum misled employees into believing they would not be replaced. The memorandum specifically addresses A.G. Edwards’s goal to reduce costs. Nothing in the memorandum gives the impression A.G. Edwards was attempting solely to downsize its number of employees. Furthermore, nothing suggests A.G. Edwards’s goal of reducing costs was incompatible with later replacing some employees. Indeed, as A.G. Edwards points out, it is not difficult to imagine a situation in which some long-term employees may have voluntarily terminated their employment, and the company might have responded by combining the responsibilities of remaining employees, eliminating some remaining positions, and moving some remaining employees into positions voluntarily vacated by the long-term employees. Such a scenario may well result in an overall reduction of both costs and workforce. The VSIP was voluntary. -9- Second, Morgan contends the VSIP is inconsistent with the purposes of the ADEA because it resulted in arbitrary age discrimination and threatened long-term employees with the risk of being fired if they refused to accept the VSIP. The purpose of the ADEA is “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). “Arbitrary age discrimination occurs when an employer denies or reduces benefits based solely on an employee’s age.” Jankovitz, 421 F.3d at 654. In Auerbach, the Second Circuit, in reviewing whether an early retirement incentive plan arbitrarily discriminated on the basis of age, examined whether the plan treated all plan participants equally once they met the eligibility requirements. Auerbach, 136 F.3d at 113. The court held, “An early retirement incentive plan that withholds or reduces benefits to older retiree plan participants, while continuing to make them available to younger retiree plan participants so as to encourage premature departure from employment by older workers[,] conflicts with the ADEA’s stated purpose to prohibit arbitrary age discrimination in employment.” Id. at 114. Because the plan at issue in Auerbach did not decrease benefits to employees as the age of the plan’s participants increased, the Second Circuit found the plan satisfied the ADEA’s stated purpose by not discriminating based on age. Id. In Jankovitz, we performed a similar inquiry and found an early retirement plan arbitrarily discriminated against individuals on the basis of age by treating employees over the age of 65 differently from younger employees. Jankovitz, 421 F.3d at 65455. The plan at issue in Jankovitz employed a “time-related window,” where employees were offered special incentives to retire between ages 55 and 64, but where all benefits were cut off by an upper limit fixed age of 65. Because “[t]hat adverse change in benefits [was] based solely upon age,” we concluded the plan violated the ADEA. Id. at 655. Contrary to Morgan’s argument, the VSIP differs substantially from the faulty Jankovitz plan and is more akin to the valid Auerbach plan. The VSIP does not favor -10- younger employees over older employees. Rather, employees who were age 50 or older with fifteen or more years of service were eligible for the VSIP. The VSIP offered the same incentives to all eligible persons and did not employ an age-based phase-out where plan benefits decreased over time or were reduced to zero upon a certain age in order to encourage employees to participate in the plan. Because the VSIP does not arbitrarily discriminate on the basis of age, the plan is consistent with the purposes of the ADEA. The VSIP is a lawful early retirement incentive plan, and thus falls within the safe harbor provision of 29 U.S.C. § 623(f)(2)(B)(ii). The district court properly declined to consider the plan as evidence of age discrimination. 2. Existence of Direct Evidence of Age Discrimination A plaintiff asserting an ADEA claim may attempt to prove intentional discrimination by either of two methods. Kneibert v. Thomson Newspapers, Mich., Inc., 129 F.3d 444, 451 (8th Cir. 1997). The plaintiff may present direct evidence that age was a motivating factor in the challenged employment decision. Id. (citing Price Waterhouse v. Hopkins, 490 U.S. 228, 258 (1989)). In the alternative, the plaintiff may rely on the three-stage proof scheme established in McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973). Id. Morgan contends the district court erroneously applied the burden-shifting framework of McDonnell Douglas given the existence of direct evidence of age discrimination, including: (1) testimony by “agents” of A.G. Edwards that the company was terminating older employees to transition to a younger workforce; (2) testimony by Pietroburgo, Morgan’s supervisor, regarding Medley (Morgan’s replacement) hiring “younger individuals”; and (3) testimony by Bagby concerning the demotion of three younger employees who, according to Morgan, were treated more favorably than he. Direct evidence “refers to the causal strength of the proof,” Richardson v. Sugg, 448 F.3d 1046, 1058 (8th Cir. 2006), meaning such evidence “must be strong enough to show a specific link between the [alleged] discriminatory animus and the -11- challenged decision, sufficient to support a finding by a reasonable fact finder that an illegitimate criterion actually motivated the employment decision,” Schierhoff v. GlaxoSmithkline Consumer Healthcare, L.P., 444 F.3d 961, 965 (8th Cir. 2006) (alteration in original) (internal quotation omitted). This category of proof “includes ‘evidence of conduct or statements by persons involved in the decisionmaking process that may be viewed as directly reflecting the alleged discriminatory attitude,’ where it is sufficient to support an inference that discriminatory attitude more likely than not was a motivating factor.” Id. at 966 (quoting Radabaugh v. Zip Feed Mills, Inc., 997 F.2d 444, 449 (8th Cir. 1993)). Direct evidence does not include “stray remarks in the workplace, statements by nondecisionmakers, or statements by decisionmakers unrelated to the decisional process.” Radabaugh, 997 F.2d at 449 (internal quotation marks omitted). With these principles in mind, we conclude none of Morgan’s proffered evidence constitutes direct evidence of age discrimination. First, with regard to the comments allegedly made by agents of A.G. Edwards that the company was transitioning to a younger workforce, Morgan cites only to the deposition testimony of himself and Emile Bizot (Bizot), a non-management employee. A review of Bizot’s testimony indicates Bizot lacked personal knowledge of the management decisions about which he was questioned, gave vague and ambiguous testimony regarding his observations, and made no reference to specific conduct or statements by persons involved in the decision to demote Morgan that could be characterized as reflecting a discriminatory attitude. Similarly, Morgan’s testimony, based solely on unsubstantiated hearsay, fails to identify the source of his information that certain older employees of A.G. Edwards felt they were being forced out. Such evidence falls short of demonstrating a specific causal link between the alleged discriminatory animus and the challenged decisions sufficient to support a finding Morgan’s age actually motivated A.G. Edwards’s decision to demote Morgan. Second, Pietroburgo’s testimony does not constitute direct evidence of discrimination. Pietroburgo testified regarding his knowledge of Medley’s actions as -12- a branch manager, stating, “It was pretty clear to me [Medley] was transitioning the branch. He was getting younger individuals–I shouldn’t say younger. He was getting other individuals involved in management.” However, Pietroburgo merely was describing his perceptions of Medley’s management decisions within Medley’s own office, and Medley indeed was the oldest in his office. We cannot see how Pietroburgo’s reflective depiction of Medley’s conduct, which occurred in a different environment than the one in which Morgan worked, forms the requisite causal link between any alleged discriminatory animus and Morgan’s demotion. Finally, we reach a similar conclusion with regard to Bagby’s testimony concerning the demotion of three younger A.G. Edwards employees, who Morgan alleges were treated more favorably than he. Morgan bears the burden to demonstrate these employees were similarly situated to him, a showing we repeatedly have characterized as “rigorous.” EEOC v. Kohler Co., 335 F.3d 766, 775 (8th Cir. 2003). “[T]he individuals used for comparison must have dealt with the same supervisor, have been subject to the same standards, and engaged in the same conduct without any mitigating or distinguishing circumstances.” Id. at 776. Morgan fails to make this showing. Two of the individuals with whom Morgan compares himself, Ben “Tad” Edwards and Pietroburgo, reported to a different supervisor and held higher-level positions than Morgan. Although the third individual, George Grimes (Grimes), reported to Pietroburgo (as did Morgan), Grimes held a different position than Morgan. Morgan alleges Grimes was told of Grimes’s performance problems and was given an opportunity to improve; however, Morgan received no similar notice of deficiency. We disagree with Morgan’s characterization of his employment history. Indeed, Morgan was notified on numerous occasions over a lengthy time regarding performance issues related to his management style, his inaccessibility to his supervisors and branch managers, and his poor office attendance. Morgan also contends he was the only employee asked to sign a non-compete agreement to continue his employment as a financial consultant with A.G. Edwards, and the other three younger demoted employees were not required to sign similar -13- agreements. We reject Morgan’s unsubstantiated allegation. According to A.G. Edwards, it did not require Morgan to sign such an agreement to continue working as a financial consultant; rather, its discussion of Morgan signing the agreement occurred in the context of negotiating a proposed severance agreement, which Morgan requested. Beyond his own allegation, Morgan fails to provide any evidence sufficient to withstand a motion for summary judgment that A.G. Edwards required him to sign a non-compete agreement simply to continue working for the company. Because Morgan failed to present any direct evidence of age discrimination, the district court properly analyzed Morgan’s claim under the burden-shifting framework of McDonnell Douglas. 3. Morgan’s Ability to Establish a Prima Facie Case Morgan challenges the district court’s conclusion that he failed to establish a prima facie case of age discrimination given Morgan was not “replaced by someone substantially younger.” Haas, 409 F.3d at 1035. The district court found it was undisputed Morgan was replaced by Medley, who was four years older than Morgan, and while some speculated Medley would be retiring soon, no evidence indicated Medley planned to do so or had informed anyone of such a plan. Attempting to bypass the general rule of showing replacement by a younger employee, Morgan alleges A.G. Edwards temporarily replaced Morgan with Medley as a mere subterfuge to insulate A.G. Edwards from potential liability for age discrimination. In support of his argument, Morgan offers evidence that following oral argument of this case, Medley retired as regional manager on November 17, 2006, approximately three years after replacing Morgan. Notwithstanding Medley’s alleged abbreviated term as regional manager, we decline to view this fact or inference purely as evidence of A.G. Edwards’s intent to thwart Morgan’s age discrimination claim. Although some courts have allowed plaintiffs to establish a prima facie case of age discrimination where the plaintiff’s replacement is older, those courts typically have required the plaintiff to put forth -14- additional evidence supporting the notion the older replacement worker was a mere subterfuge to protect the employer from liability under the ADEA. See Greene v. Safeway Stores, Inc., 98 F.3d 554, 560-62 (10th Cir. 1996) (concluding a 52-year-old plaintiff, who was replaced by a 57-year-old employee, presented sufficient evidence the plaintiff’s age was a motivating factor in his termination, where (1) within twelve months of installing a 42-year-old president, eight top-level executives over the age of 50 were replaced by younger employees; (2) the company’s new president had made several statements to the plaintiff suggesting age bias; and (3) the plaintiff’s older replacement had announced plans to retire and was surprised he was selected to replace the plaintiff); Alphin v. Sears, Roebuck & Co., 940 F.2d 1497, 1499-1501 (11th Cir. 1991) (finding a 50-year-old plaintiff, who was told he had been around “too long,” was “too old,” and was “making too much money,” established a prima facie case of age discrimination despite being replaced by an older employee, given the initial older replacement employee resigned after only one day and was replaced by a 24-year-old trainee). We decline to follow the approach of Greene and Alphin because the present case lacks sufficient evidence supporting the notion A.G. Edwards chose Medley as Morgan’s replacement merely to gain a tactical advantage in any future litigation with Morgan. Unlike Greene, there is no evidence A.G. Edwards’s top executives were being systematically forced out and replaced by younger employees. At the time of Morgan’s demotion, four of the thirteen remaining regional managers were older than Morgan, and two more were within five years younger than Morgan. There also is no evidence of any statements made to Morgan during his employment suggesting any intent to discriminate on the basis of age. Furthermore, Medley emphatically testified during his deposition he “never, ever communicated to anyone that [he] wanted to retire any time soon.” When Medley interviewed for the position of regional manager, he stated he would work as long as his health remained good, for at least three years, and, if the company was happy with him, perhaps as long as five or ten years. True to his word, Medley remained in the regional manager position for over three years before retiring. -15- In reaching this conclusion, we express no opinion regarding whether a plaintiff’s inability to show he was replaced by someone substantially younger is an absolute bar to establishing a prima facie case of age discrimination. Rather, we merely hold, under the circumstances of this particular case, Morgan fails to put forth sufficient evidence demonstrating A.G. Edwards intended to discriminate against him on the basis of age. Because Morgan has not established a prima facie case of age discrimination, summary judgment is appropriate.