Court Opinion

ID: 9709222
Source: CourtListenerOpinion
Date Created: 2023-08-26 03:43:10.970391+00
Date Added: 2024-06-11T18:22:47.109374
License: Public Domain

JUSTICE LINDBERG, dissenting: I believe a “best-case scenario” for the complainants serves to establish that the severance-pay plan discriminates on the basis of age and, therefore, is facially age discriminatory. Assume that two employees each had 15 years’ service with B&W on October 31, 1983, but one was 54 years old and the other 55 years old or older on that date. Under the plan the 54-year-old would receive about $3,000 in severance pay, and within the following year he would begin receiving his pension benefits. The 55-year-old, only because of his age, would receive no severance pay and would receive only his pension benefits. Because of his age on October 31, 1983, the 55-year-old has been denied about $3,000 in severance pay. This scenario establishes that B&W’s severance-pay plan is facially age discriminatory. The Illinois Human Rights Act provides: “§1 — 102. Declaration of Policy. It is the public policy of this State: (A) * * * To secure for all individuals within Illinois the freedom from discrimination because of *** age *** in connection with employment ***.” (Ill. Rev. Stat. 1987, ch. 68, par. 1— 102(A)). And: “(Q) Unlawful Discrimination. ‘Unlawful discrimination’ means discrimination against a person because of his or her *** age ***.” (Ill. Rev. Stat. 1987, ch. 68, par. 1-103(Q).) And: “§2 — 102. Civil Rights Violations — Employment. It is a civil rights violation: (A) Employers. For any employer *** to act with respect to *** discharge *** tenure or terms, privileges or conditions of employment on the basis of unlawful discrimination.” (Ill. Rev. Stat. 1987, ch. 68, par. 2-102(A).) And: “§2 — 104 Exemptions. Nothing contained in this Act shall prohibit: an employer *** from: * * * (5) Merit and Retirement Systems, (a) Applying different standards of compensation, or different terms, conditions or privileges of employment pursuant to a merit or retirement system provided that such system or its administration is not used as a subterfuge for or does not have the effect of unlawful discrimination.” Ill. Rev. Stat. 1987, ch. 68, par. 2 — 104(5)(a). This statutory scheme makes it clear that in Illinois it is a civil rights violation for an employer to unlawfully discriminate against its employees, and age discrimination constitutes unlawful discrimination. However, an employer may apply different standards of compensation or different terms, conditions or privileges of employment pursuant to a (1) merit or (2) retirement system provided that the system or its administration is not used as (3) a subterfuge for or (4) does not have the effect of unlawful discrimination which, by definition, is discrimination on the basis of age. The precise question is whether an employer can establish under the exemption provision of section 2 — 104(5)(a) of the Illinois Human Rights Act (HRA) a plant closing severance-pay plan which denies severance pay to employees whose age within three length-of-service categories qualifies them to receive their pension benefits. As to Illinois, it would appear we are writing on a clean slate. I have charted B&W’s severance-pay plan for convenience of analysis as follows: B & W Severance-pay Plan Length of Service Categories: I. 15 years or more service: (a) Employees under age 55 receive both the severance pay and their pension (at 55). (b) Employees over age 55 receive no severance pay but only their pension. II. 10 years but not more than 15 years of service: (a) Employees under age 62 receive both the severance pay and their pension (at 62). (b) Employees age 62 receive no severance pay but only their pension. III. Minimum but not more than 10 years service: (a) Employees under age 65 receive both severance pay and their pension (at 65). (b) Employees age 65 or older receive no severance pay but only their pension. I conclude that the severance-pay plan does not qualify for exemption under section 2 — 104(5)(a) of the HRA (Ill. Rev. Stat. 1987, ch. 68, par. 2 — 104(5)(a)), because it is not a merit or a retirement plan. Even if it could be construed as a merit or a retirement plan, nonetheless, it has the effect of discriminating on the basis of age. See Ill. Rev. Stat. 1987, ch. 68, par. 2 — 104(5)(a). The HRA does not define “merit plan,” but it would not be unreasonable to assume that any plan with differentials in pay, hours and other terms of employment based upon quality of performance and/or length of service or other considerations would satisfy the definition of “merit plan.” Here severance pay is being denied on the basis of merit in terms of length of service. Fifty-five- to sixty-one-year-olds with 15 years’ service or more, for example, are denied severance pay while 55- to 61-year-olds with less than 15 years of service are given the severance pay at issue. This phenomenon persists as to each of the three categories of length of service and, thus, disqualifies the severance-pay plan as a “merit plan.” “Retirement plan,” while not defined in the HRA, however is defined as “a systematic arrangement established by an employer for guaranteeing an income to employees upon retirement [withdrawal from active service] according to definitely established rules with or without employee contributions but usu. funded.” (Webster’s Third New International Dictionary 1939 (1986).) “Income” is defined as “a gain or recurrent benefit that is usu. measured in money and for a given period of time, derives from capital, labor or a combination of both.” (Webster’s Third New International Dictionary 1143 (1986).) While the severance-pay plan is a guarantee for withdrawal from service, it is not “income” in that it is not a gain or recurrent benefit for a given period of time. In fact, it is a one-time, lump-sum award of money and does not satisfy either the dictionary definition of a retirement plan, or the general notion of what constitutes a retirement plan such as the one already in place at B&W. Regardless, even if the severance-pay plan were to be viewed as one based upon length-of-service merit or retirement, it has the precise effect of discriminating as to age within each of the three length-of-service categories. As such, the severance-pay plan fails to meet the section 2 — 104(5)(a) exemption of the HRA, and, therefore, it constitutes unlawful discrimination and a civil rights violation under the HRA. Ill. Rev. Stat. 1987, ch. 68, pars. 1-102(A), 1-103(Q), 2-102(A). Obviously, I do not agree with the majority’s reliance on Public Employees Retirement System of Ohio v. Betts (1989), 492 U.S._, 106 L. Ed. 2d 134, 109 S. Ct. 2854. The United States Supreme Court held that the retired employee in that case, Betts, did not establish a prima facie case of age discrimination. The Court relied heavily on its analysis of Congressional debate to ascertain the legislative intent behind the ADEA and in arriving at its final conclusion. The Court found that Congress intended not to regulate retirement programs, which were not a mere subterfuge to implement age-discriminatory practices, when it enacted the ADEA. Betts, 492 U.S. at _, 106 L. Ed. 2d at 155-56, 109 S. Ct. at 2867 The Betts Court decided that the “30% floor” for disability benefits, which were not available to persons who had attained age 60, was part of Ohio’s State-retirement plan and, therefore, did not qualify as a nonfringe benefit subject to the ADEA age-discrimination prohibitions. (Betts, 492 U.S. at_, 106 L. Ed. 2d at 157, 109 S. Ct. 2868.) The Supreme Court said that Betts failed to prove that the discriminatory plan provision was intended to serve the purpose of discriminating in some nonfringe-benefit aspect of the employment relationship under the Federal Age Discrimination in Employment Act of 1967 (ADEA) (29 U.S.C. §621 et seq. (1982)). Betts, 492 U.S. at_, 106 L. Ed. 2d at 157, 109 S. Ct. 2868. In Illinois, the legislative intent in enacting our statute was quite different. Section 1 — 102(A) of the HRA, quoted previously, expresses the legislative intent of the HRA which is to secure for all individuals within Illinois freedom from discrimination in employment because of age. (Ill. Rev. Stat. 1987, ch. 68, par. 1 — 102(A).) In fact, in one of the few cases involving the HRA to come before the final arbiter of Illinois statutes, the Illinois Supreme Court, the court held that the HRA does regulate retirement plans (Board of Trustees of Community College District No. 508 v. Human Rights Comm’n (1981), 88 Ill. 2d 22, 26, 429 N.E.2d 1207, 1210) in contrast to the Betts Court’s conclusion that the ADEA does not regulate retirement plans unless they are a subterfuge. While I do not premise my conclusion that B&W’s severance-pay plan is age discriminatory on the fact of the HRA’s coverage of retirement plans, the distinction between the two acts is, nonetheless, apparent. Additionally, while the ADEA and the HRA both incorporate the subterfuge standard, the HRA has the additional standard of “does not have the effect of unlawful discrimination.” (Ill. Rev. Stat. 1987, ch. 68, par. 2 — 104(5Xa).) Therefore, I conclude that the Betts decision is not persuasive in the resolution of the instant petition for review. After submitting my draft dissent to the majority, it undertook further analysis and included a more detailed reliance on the Federal Employee Retirement Income Security Act of 1974 (ERISA) (29 U.S.C. §1001 et seq. (1982)) and a discussion of Fort Halifax Packing Co. v. Coyne (1987), 482 U.S. 1, 96 L. Ed. 2d 1, 107 S. Ct. 2211. Regrettably, I conclude that the majority in the instant case is incorrect when it concludes that the facts of Fort Halifax are distinguishable from those in the instant case. The sole basis for. the instant majority’s distinction would appear to be that because the hourly employee’s union agreed to the severance-pay plan “B&W did establish, maintain, and operate an employee welfare benefit plan relating to severance benefits, albeit in anticipation of its plant closure.” (Babcock & Wilcox Co. v. Department of Human Rights (1989), 189 Ill. App. 3d 827, 841.) I could not disagree more. The action of the union is irrelevant. What could be less of a “plan” to “operate,” to paraphrase the Court in Fort Halifax, than disbursing a one-time lump sum severance payment? The Court in Fort Halifax said: “The Maine statute neither establishes, nor requires an employer to maintain, an employee benefit plan. The requirement of a one-time, lump-sum payment triggered by a single event requires no administrative scheme whatsoever to meet the employer’s obligation. The employer assumes no responsibility to pay benefits on a regular basis, and thus faces no periodic demands on its assets that create a need for financial coordination and control. Rather, the employer’s obligation is predicated on the occurrence of a single contingency that may never materialize. The employer may well never have to pay the severance benefits. To the extent that the obligation to do so arises, satisfaction of that duty involves only making a single set of payments to employees at the time the plant closes. To do little more than write a check hardly constitutes the operation of a benefit plan. Once this single event is over, the employer has no further responsibility. The theoretical possibility of a onetime obligation in the future simply creates no need for an ongoing administrative program for processing claims and paying benefits. * * * The foregoing makes clear both why ERISA is concerned with regulating benefit ‘plans,’ and why the Maine statute does not establish one. Only ‘plans’ involve administrative activity potentially subject to employer abuse. The obligation imposed by Maine generates no such activity. There is no occasion to determine whether a ‘plan’ is ‘operated’ in the interest of its beneficiaries, because nothing is ‘operated.’ No financial transactions take place that would be listed in an annual report, and no further information regarding the terms of the severance pay obligation is needed because the statute itself makes these terms clear. It would make no sense for pre-emption to clear the way for exclusive federal regulation, for there would be nothing to regulate. Under such circumstances, pre-emption would in no way serve the over-all purpose of ERISA.” (Emphasis in original.) (Fort Halifax Packing Co., 482 U.S. at 12, 16, 96 L. Ed. 2d at 11-12, 14,107 S. Ct. at 2218, 2220.) It would be hard to draft a more accurate description of the character of B&W’s severance-pay plan. On the basis of the United States Supreme Court’s rationale in Fort Halifax, B&W’s severance-pay plan does not qualify as a plan regulated by ERISA, and, therefore, the application of the Illinois Human Rights Act is not preempted by ERISA. I believe that the decision of the Illinois Human Rights Commission, finding that B&W’s severance-pay plan discriminated on the basis of age and thereby violated the HRA, was correct. I would affirm.