Court Opinion

ID: 2658979
Source: CourtListenerOpinion
Date Created: 2014-03-31 19:21:28.598927+00
Date Added: 2024-06-11T13:01:15.302007
License: Public Domain

PUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT

                               No. 13-1106

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION,

                 Plaintiff - Appellee,

           v.

BALTIMORE COUNTY,

                 Defendant – Appellant,

           and

AMERICAN FEDERATION OF STATE, COUNTY & MUNICIPAL EMPLOYEES
LOCAL #921; BALTIMORE COUNTY FEDERATION OF PUBLIC EMPLOYEES,
FMT,AFT,AFL-CIO; BALTIMORE COUNTY SHERIFF'S OFFICE FRATERNAL
ORDER OF POLICE/LODGE NUMBER 25; BALTIMORE COUNTY LODGE NO.
4 FRATERNAL ORDER OF POLICE INCORPORATED; BALTIMORE COUNTY
FEDERATION OF PUBLIC HEALTH NURSES; BALTIMORE COUNTY
PROFESSIONAL   FIRE   FIGHTERS   ASSOCIATION   INTERNATIONAL
ASSOCIATION FIRE FIGHTERS LOCAL 1311-AFL-CIO,

                 Defendants.

Appeal from the United States District Court for the District of
Maryland, at Baltimore.    Benson Everett Legg, Senior District
Judge. (1:07-cv-02500-BEL)

Argued:   January 30, 2014                   Decided:   March 31, 2014

Before GREGORY, SHEDD, and KEENAN, Circuit Judges.

Affirmed by published opinion. Judge Keenan wrote the opinion,
in which Judge Gregory and Judge Shedd joined.
ARGUED: James Joseph Nolan, Jr., BALTIMORE COUNTY OFFICE OF LAW,
Towson, Maryland, for Appellant.    Paul D. Ramshaw, U.S. EQUAL
EMPLOYMENT   OPPORTUNITY  COMMISSION,   Washington,  D.C.,   for
Appellee.   ON BRIEF: Michael E. Field, BALTIMORE COUNTY OFFICE
OF LAW, Towson, Maryland, for Appellant.        P. David Lopez,
Lorraine C. Davis, Daniel T. Vail, Office of General Counsel,
U.S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Washington, D.C.,
for Appellee.

                               2
BARBARA MILANO KEENAN, Circuit Judge:

       In     this    interlocutory         appeal,        we    consider     whether     an

employee       retirement         benefit    plan        (the    plan)    maintained      by

Baltimore County, Maryland (the County) unlawfully discriminated

against older County employees based on their age, in violation

of the Age Discrimination in Employment Act (ADEA), 29 U.S.C.

§§ 621 through 634.              The challenged plan provision involved the

different      rates       of    employee   contribution          to    the   plan,    which

required that older employees pay a greater percentage of their

salaries based on their ages at the time they enrolled in the

plan.

       The district court initially determined that the plan did

not    violate       the   ADEA,    holding       that    the    disparate     rates    were

based on permissible financial objectives involving the number

of    years    an    employee      would    work     before      reaching     “retirement

age.”       In the first appeal of this matter, we concluded that the

district court failed to consider a critical component of the

plan     regarding          retirement       eligibility,           namely,      that    an

employee’s years of service could qualify the employee to retire

irrespective         of    the    employee’s       age.         Thus,    we   vacated   the

judgment and remanded the case for further consideration.

       On remand following the first appeal, the district court

concluded that the plan violated the ADEA, and awarded partial

summary judgment in favor of the Equal Employment Opportunity

                                              3
Commission (EEOC) on the issue of the County’s liability.                              The

County filed this interlocutory appeal.                          Upon our review, we

hold       that    the   district    court       correctly       determined     that   the

County’s plan violated the ADEA, because the plan’s employee

contribution rates were determined by age, rather than by any

permissible factor.              We further conclude that the ADEA’s “safe

harbor provision” applicable to early retirement benefit plans

does       not    shield   the    County    from    liability       for   the    alleged

discrimination. 1          Accordingly, we affirm the district court’s

award of summary judgment on the issue of liability, and remand

the case for consideration of damages.

                                             I.

       In        1945,   the   County      established       a    mandatory     Employee

Retirement System (the plan) for all “general” County employees. 2

At that time, the plan provided that employees were eligible to

retire and to receive pension benefits at age 65, regardless of

the length of their employment.

       1
       The ADEA “safe harbor provision” at issue in this case is
set forth in 29 U.S.C. § 623(l)(1)(A)(ii)(I).
       2
       Employees ages 59 and older when hired by the County were
not required to participate in the plan.     All other employees
were required to enroll in the plan within two years from the
first date of their employment.

                                             4
     The County did not fully fund the plan but instead required

that employees contribute a certain fixed percentage of their

annual salaries over the course of their employment (employee

contribution rates or the rates).                    The employee contribution

rates were established based on calculations developed by Buck

Consultants (Buck), an actuarial firm employed by the County.

     The County directed Buck to calculate rates to ensure that

employees’     contributions,        as       well        as    earnings     on     those

contributions, would fund about one-half of employees’ pension

benefits.     The County’s contributions to the plan and related

earnings     would    fund   the   remaining          one-half       of    the    pension

benefits.

     To     achieve    these   objectives            and       to   ensure   that     all

employees    received    the   same   level          of    pension    benefits,      Buck

based its calculations for employee contribution rates on the

number of years that an employee would contribute to the plan

before being eligible to retire at age 65.                      Buck also considered

numerous     actuarial    factors,    including            anticipated       percentage

increases in salaries, probable lengths of employees’ careers,

the potential interest rates on earnings, mortality rates, and

the likelihood of employees’ withdrawal from the plan before

retirement.

     Using the retirement age of 65, Buck ultimately concluded

that older employees who enrolled in the plan should contribute

                                          5
a     higher      percentage              of     their          salaries,          because           their

contributions          would        earn       interest         for    fewer       years      than     the

younger      employees’        contributions.                   The    County       adopted      Buck’s

recommended         rates           and        determined         that          “[t]he        rate     of

contribution        of        the        employee         shall       be    determined         by      the

employee’s       age     at    the       time    the       employee        actually        joins”      the

plan.      Balt. Cnty. Code § 5-1-203(1) (2006).                                   Thus, under the

County’s decision, the older that an employee was at the time of

enrollment, the higher the rate that the employee was required

to contribute. 3

       The      County     modified            the    plan       several        times        since    its

inception in 1945.                  In 1959, the County expanded the plan to

include employees who worked in fire and police departments and

permitted those employees to retire at age 60, or after 30 years

of service regardless of age.                         By 1973, the County had reduced

the “retirement age” for general County employees from 65 to 60.

The     County     also        added        an       alternative           term     of       retirement

eligibility that permitted general employees to retire after 30

years      of    service       irrespective               of    their       age.         Correctional

officers later became eligible to retire after only 20 years of

service,        regardless          of    age,       or    at    age       65   with     5    years    of

       3
       In 2007, the County altered the contribution rates so that
all employees paid an equal percentage of their salaries
regardless of their age.    That version of the plan is not at
issue in this appeal.

                                                     6
service.       The plan referred to all these pension benefits as

“normal service retirement benefits.”

     In    1990,    the    County    expanded         the     plan    to   permit      “early

retirement”       for     general    employees.               Under    this      provision,

employees who were at least 55 years old and who had completed

20 years of service could retire, but would receive a reduced

amount of pension benefits.

     Despite       the    many     changes       to     the    plan    over      the   years

regarding      retirement        eligibility,           the    employee       contribution

rates   were    amended     only    one   time        during    the    relevant        period

between    1945    and     2007.      The        sole    adjustment        to    the    rates

occurred in 1977, when the rates were lowered slightly based on

expected    increases        to     the      rate        of     return      on     invested

contributions.          This reduction did not alter the fact that rates

were based on an employee’s age at the time of plan enrollment

and were higher for older employees.                      For example, after 1977,

employees who enrolled in the plan at age 20 contributed 4.42%

of their annual salaries, while employees who enrolled in the

plan at age 40 and 50 contributed 5.57% and 7.23% of their

annual salaries, respectively.

     In 1999 and 2000, two County correctional officers, Wayne

A. Lee and Richard J. Bosse, Sr., aged 51 and 64, respectively,

filed charges of discrimination with the EEOC alleging that the

County’s    plan    and     disparate     contribution           rates     discriminated

                                             7
against       them      based       on   their      ages.         The   EEOC     conducted       an

investigation           and,    after     the    parties         were   unable    to     reach    a

conciliation agreement, the EEOC filed the present action in the

district court in September 2007.

       The EEOC filed its complaint against the County on behalf

of     Lee,    Bosse,      and       a   class          of    similarly       situated    County

employees, who were in the protected age group of 40 years of

age and older when they enrolled in the plan. 4                               The EEOC alleged

that the plan discriminated against these employees in violation

of the ADEA by requiring them to pay higher contribution rates

than       those   paid        by   younger      employees.             The    EEOC    requested

injunctive relief and reimbursement of “back” wages for affected

employees.           In    response,          the       County     denied      that    the     plan

violated the ADEA.

       After conducting discovery, the parties filed cross-motions

for    summary       judgment.           In    January         2009,    the    district      court

granted       summary     judgment        to     the         County.      EEOC   v.    Baltimore

Cnty.,      593    F.    Supp.      2d   797     (D.      Md.    2009).       Relying     on   the

Supreme Court’s holding in Kentucky Retirement Systems v. EEOC,

       4
       The EEOC’s amended complaint also named as defendants
American Federation of State; County & Municipal Employees Local
#921; Baltimore County Federation of Public Employees; Baltimore
County Sheriff’s Office Fraternal Order of Police, Lodge Numbers
4 and 24; Baltimore County Federation of Public Heath Nurses;
and Baltimore County Professional Fire Fighters Association. We
refer to the defendants collectively as the County.

                                                    8
554 U.S. 135    (2008),      the    district         court     concluded         that   the

plan’s employee contribution rates were not motivated by age,

but by the number of years remaining until an employee reached

retirement age. 593 F. Supp. 2d at 802.                      Because the County

intended to make “relatively equal contributions on behalf of

all plan members” and “older new-hires ha[d] less time to accrue

earnings on their contributions,” the court concluded that age-

based        rates      were      permissible            based       on       the     financial

consideration of “the time value of money.”                          Id. at 801-02.

       On appeal, we vacated the district court’s judgment.                                   See

EEOC    v.    Baltimore        Cnty.,    385    F.       App’x.    322    (4th      Cir.     2010)

(unpublished         opinion).          We     held      that     the     district      court’s

decision focused only on age-based retirement eligibility, and

failed to consider the plan’s separate provision for service-

based    eligibility         irrespective           of    age.          Id.    at     325.      We

explained the significance of this omission by providing the

following example.               If two correctional officers, ages 20 and

40, enrolled in the plan at the same time, both employees would

become       eligible      for    retirement         after      20    years      of    service,

irrespective of their ages when completing the years-of-service

requirement.         Id.    Yet, the 40-year-old in this situation would

be required to contribute 5.57% of his annual salary while the

20-year-old would be required to contribute only 4.42%.                                 Id.    We

concluded that “[t]his disparity is not justified by the time

                                                9
value of money because both employees contribute for the same

twenty years.”             Id. (footnote omitted).          Therefore, we remanded

the    case        for    the     district   court    to   determine   whether    the

disparate          rates     were     supported      by    “permissible   financial

considerations.”            Id.

       On     remand,       after     conducting     additional    discovery,     the

parties again filed cross-motions for summary judgment.                     On the

issue of liability, the district court concluded that the “but-

for”       cause     of    the    disparate    treatment     was   age.    EEOC    v.

Baltimore Cnty., 2012 U.S. Dist. LEXIS 149812 (D. Md. Oct. 17,

2012).       Thus, the court granted partial summary judgment for the

EEOC, holding that the County was liable for violating the ADEA.

Id. at *2.           Before the court considered the issue of damages,

the County filed this interlocutory appeal. 5

                                              II.

       We review the district court’s award of summary judgment de

novo.       Baldwin v. City of Greensboro, 714 F.3d 828, 833 (4th

Cir. 2013).          According to the County, the district court erred

as a matter of law in concluding that the plan violated the

ADEA.       The County contends that the district court’s fundamental

       5
         The district court granted the County’s request to
certify the order for interlocutory appeal under 28 U.S.C. §
1292(b).     This Court granted the County’s petition for
permission to appeal.

                                              10
error was its failure to apply the factors identified by the

Supreme Court in Kentucky Retirement, 554 U.S. 135, which the

County argues would have established that “the time value of

money,”     rather       than    employees’     ages,       motivated      the   plan’s

disparate employee contribution rates.

     The     County       maintains     that    the     “time      value    of   money”

remained    a     reasonable      justification       for    the   disparate     rates,

even after the plan began to permit service-based retirement

irrespective of age, because those service-based benefits were

funded     entirely       by    the   County    while       employee    contributions

continued         to      subsidize      only     the        age-based       benefits.

Additionally, the County asserts that the ADEA’s “safe harbor

provision” relating to early retirement benefit plans, 29 U.S.C.

§ 623(l)(1)(A)(ii)(I), authorized the County’s subsidies to the

plan and shielded the County from liability.                       We disagree with

the County’s arguments and address them in turn.

     The     ADEA        prohibits    employers       from     refusing     to   hire,

discharging, or otherwise discriminating against any person who

is at least 40 years of age “because of” the person’s age.                           29

U.S.C. §§ 623(a)(1), 631(a).              The ADEA prohibits discrimination

with respect to “compensation, terms, conditions, or privileges

of employment,” which includes “all employee benefits, including

such benefits provided pursuant to a bona fide employee benefit

plan.”       29        U.S.C.   §§ 623(a)(1),     630(l).           Accordingly,    it

                                          11
generally is unlawful for an employer to maintain a retirement

benefit plan that treats older employees in the protected age

group       differently          from        younger        employees,          unless         the

differentiation “is based on reasonable factors other than age.”

29 U.S.C. § 623(f)(1).

      An    employer       violates       the       ADEA    either      by     relying      on   a

“formal,        facially        discriminatory             policy      requiring       adverse

treatment of employees” or by acting on an “ad hoc, informal

basis”     motivated       by    an    employee’s      age.           Hazen    Paper     Co.     v.

Biggins, 507 U.S. 604, 609 (1993) (citations omitted).                                   In the

present     case,     the       EEOC    alleges      that       the    County’s      plan      was

facially discriminatory.

      To prove facial discrimination under the ADEA, a plaintiff

is not required to prove an employer’s discriminatory animus. 6

Rather, a policy that explicitly discriminates based on age is

unlawful regardless of the employer’s intent.                                 Ky. Ret. Sys.,
544 U.S.      at   147-48       (stating      that        a   “policy       that     facially

discriminates based on age suffices to show disparate treatment

under     the   ADEA”);     see       also   Int’l     Union      v.    Johnson      Controls,

Inc., 499 U.S. 187, 199-200 (1992) (explaining in the context of

a   Title    VII     sex    discrimination           challenge        that     “[w]hether        an

employment         practice       involves          disparate          treatment        through

      6
        The parties agree in this case that there is no evidence
of any discriminatory intent by the County.

                                               12
explicit       facial   discrimination          does    not    depend      on     why    the

employer discriminates but rather on the explicit terms of the

discrimination”).         A plaintiff nonetheless must demonstrate that

the employer engaged in disparate treatment “because of” the

employee’s age and, accordingly, age must be the “but-for” cause

of such treatment.           Gross v. FBL Fin. Serv., 557 U.S. 167, 177-

78    (2009)    (rejecting      “mixed    motive”       theory      of   liability       for

claims brought under the ADEA).

       Initially, we disagree with the County’s contention that

the district court was required to apply the ADEA discrimination

factors discussed by the Supreme Court in Kentucky Retirement.

See 554 U.S. at 143-47.             In that case, the EEOC asserted that

Kentucky’s      retirement      plan     for    state     employees       discriminated

against employees who were over 55 and became disabled, by not

giving them the same additional retirement credits awarded to

younger employees who became disabled.                  Id. at 140.

       The     Kentucky      plan   at     issue        permitted        certain        state

employees to retire with “normal retirement benefits” after 20

years of service, irrespective of age, or at age 55 with five

years of service.            Id. at 139.        However, under that plan, when

an    employee     became      disabled        before     qualifying        for    normal

retirement benefits, the plan imputed enough years of service to

permit immediate retirement and included those imputed years in

the    calculation      of    pension     benefits.           Id.   at    139-40.         In

                                           13
contrast, when an employee became disabled after qualifying for

normal       retirement             benefits,     the     plan     did     not   impute      any

additional             years   of     service     to     the     calculation     of    pension

benefits.          Id. at 140.

       In analyzing Kentucky’s plan, the Supreme Court considered

several factors that primarily focused on the question whether

“pension status” unlawfully constituted a “proxy for age.” 7                                 Id.

at 142-43 (citing Hazen Paper, 507 U.S. at 613).                                    The Court

ultimately         concluded         that   the    plan    did     not    violate     the   ADEA

because          the    disparate       treatment       between     the    two   classes      of

employees was not “actually motivated” by an employee’s age.

Id. at 147.

       In    contrast          to    Kentucky’s        plan,   which      treated     employees

differently based on their pension status rather than on their

age,       the    County’s      plan     mandated       different        contribution       rates

that escalated explicitly in accordance with employees’ ages at

the time of their enrollment in the plan.                                Under the County’s

plan, an employee’s “pension status,” or eligibility to retire,

had no bearing on the disparate treatment requiring that older

employees at plan enrollment contribute a higher percentage of

       7
        Other factors considered by the Court included whether
the plan always resulted in more advantageous results to younger
employees, whether the plan relied on any “stereotypical
assumptions that the ADEA sought to eradicate,” and whether the
alleged disparity could be corrected. Id. at 143-147.

                                                  14
their salaries than younger employees.                 Thus, unlike in Kentucky

Retirement,      the   district     court      in   the    present    case   was    not

confronted with the question whether “pension status” unlawfully

constituted a “proxy for age,” but was required to determine

whether the different contribution rates based on age could be

justified on any permissible basis.                   Accordingly, the Kentucky

Retirement      factors   were     not    germane     to    the   issue   before    the

district court.

     We find no merit in the County’s argument that the employee

contribution rates lawfully were based on a reasonable factor

other than age, namely, the “time value of money.”                        While this

justification may have explained the basis for the disparate

rates at the plan’s inception, when the only possible basis for

retirement was reaching retirement age, the County amended the

plan in 1959 and in 1973 to permit employees to retire based

solely on years of service.              The County did not modify the rates

after     employees    were      permitted      the    alternative        benefit    of

retiring after working a fixed number of years.

     Additionally, the County’s greater subsidies for service-

based benefits that were unrelated to age did not provide a

reasonable basis for the disparate treatment in this case.                          The

example    we    provided     in    our     initial        decision   continues     to

illustrate the defect in the County’s position.                       If a 20-year-

old correctional officer and a 40-year-old correctional officer

                                          15
enrolled in the plan at the same time, and both employees chose

to    retire    after        20     years    of    service,         the    older     employee

contributed      a    larger       percentage      of   his    annual      salary     to    the

plan, despite receiving the same level of pension benefits as

the    younger       employee.             This    disparity        in     the     employees’

contributions would occur even though the County subsidized both

employees’ pension benefits.

      The   County’s         plan    required      that   employees         contribute       in

accordance      with    the        age-based      rates   regardless         whether       they

chose to retire after reaching retirement age or after working

the required number of years.                     Therefore, the number of years

until an employee reached retirement age could not have served

as the basis for the disparate rates.                         Because those disparate

rates were not motivated by either the “time value of money” or

other funding considerations, we conclude that the plan treated

older employees at the time of enrollment less favorably than

younger employees “because of” their age.

      Our conclusion is not altered by the County’s reliance on

the    ADEA’s        “safe        harbor     provision”        in     29    U.S.C.      § 623

(l)(1)(A)(ii)(I).            As relevant to this appeal, that provision

states that “it shall not be a violation” of the ADEA “solely

because” a retirement benefit plan “provides for . . . payments

[by the employer] that constitute the subsidized portion of an

early retirement benefit . . . .”                   Id.       The County asserts that

                                              16
it is shielded from liability in the present case because the

safe harbor provision authorizes the County to subsidize pension

benefits      awarded      based     on     employees’      years   of    service.       We

disagree.

     Even if we assume, without deciding, that the service-based

pension    benefits        qualified        as    an   “early    retirement      benefit”

under   the    safe     harbor       provision,        we   conclude     that    the   safe

harbor provision is not a defense to the challenged disparate

treatment.       As     the    district       court     observed,      the   safe   harbor

provision      permits      an      employer      to   subsidize    early       retirement

benefits without violating the ADEA.                         However, the provision

does not address employee contribution rates nor does it permit

employers to impose contribution rates that increase with the

employee’s     age    at      the    time    of    plan     enrollment.          Thus,   we

conclude that the safe harbor provision is inapplicable here.

                                             III.

     For these reasons, we hold that the district court did not

err in granting partial summary judgment in favor of the EEOC on

the issue of the County’s liability for maintaining a retirement

plan in violation of the ADEA.                     We remand the case for further

proceedings to address the issue of damages.

                                                                                  AFFIRMED

                                              17