Robert Jankovitz etc v. Des Moines Independ , 421 F.3d 649 ( 2005 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 04-3401
___________
Robert Jankovitz; Vera M. *
Easler; Allaire Jutting; Marilyn *
Reese; Merritta Florence; *
Robert D. Sandquist, *
*
Plaintiffs-Appellees, *
* Appeal from the United States
v. * District Court for the
* Southern District of Iowa
Des Moines Independent *
Community School District, *
*
Defendant-Appellant. *
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Submitted: June 22, 2005
Filed: August 29, 2005
___________
Before ARNOLD, McMILLIAN and COLLOTON, Circuit Judges
___________
McMILLIAN, Circuit Judge.
The Des Moines Independent Community School District (“defendant”)
appeals from a final judgment entered in the United States District Court1 for the
Southern District of Iowa in favor of six current or former employees of defendant
1
The Honorable Ronald E. Longstaff, Chief United States District Judge for the
Southern District of Iowa.
(“plaintiffs”) on their age discrimination claims challenging defendant’s employee
retirement incentive plan, as amended effective May 15, 2001 (“amended ERIP”).
Jankovitz v. Des Moines Indep. Cmty. Sch. Dist., No. 4:03-CV-10296 (S. D. Iowa
Sept. 20, 2004) (judgment). For reversal, defendant argues that the district court
erred in holding as a matter of law that the amended ERIP violates the Age
Discrimination in Employment Act (ADEA), 29 U.S.C. § 621 et seq., and does not
fall within the safe harbor provision set forth in 29 U.S.C. § 623(f)(2)(B)(ii). Id. (July
28, 2004) (order disposing of cross-motions for summary judgment) (“slip op.”). For
the reasons stated below, we affirm.
Jurisdiction in the district court was proper based upon 28 U.S.C. §§ 1331,
1343. Jurisdiction on appeal is proper based upon 28 U.S.C. § 1291. The notice of
appeal was timely filed pursuant to Fed. R. App. P. 4(a).
Background
Before May 15, 2001, defendant offered its employees early retirement benefits
that included payment of health insurance premiums until the age of 65 and a one-
time cash payment equal to approximately thirty percent of the employee’s annual
salary. Effective May 15, 2001, defendant amended its early retirement benefits plan
so that eligible teachers could receive a lump sum payment based upon the number
of unused sick leave days accumulated as of the date of retirement. “Generally
speaking, after the amendment, plan benefits were based on a $200 credit for each
unused sick leave day.” Appellant’s Appendix at 10 (Defendant’s Statement of
Material Facts as to Which There is No Genuine Issue, ¶ 20).
On May 22, 2003, Robert Jankovitz filed the original complaint in this action,
alleging that the amended ERIP violated the ADEA and Iowa’s Wage Payment
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Collection Law, Iowa Code Chapter 91A.2 After the district court denied Jankovitz’s
motion to certify the matter as a class action, the complaint was amended to add five
individual plaintiffs: Vera Easler, Allaire Jutting, Marilyn Reese, Meritta Florence,
and Robert Sandquist.
According to the amended complaint, as of the end of the 2002-2003 school
year, plaintiffs had each been continuously employed by defendant for at least ten
years and at all relevant times were “employees” of defendant, as defined under the
amended ERIP. During the 2002-2003 school year, Jankovitz notified defendant of
his election to retire at the end of the school year and requested, upon retirement,
payment of early retirement benefits under the amended ERIP. Jankovitz’s request
was denied because he was over the age of 65. Although the remaining plaintiffs did
not formally request early retirement benefits under the amended ERIP, it is
undisputed that, at the end of the 2002-2003 school year, each plaintiff would have
been denied benefits under the amended ERIP because each was over the age of 65.3
In their prayer for relief, plaintiffs requested, among other things, that the district
court declare defendant’s amended ERIP in violation of the law for discriminating
against them on the basis of their age. Plaintiffs also sought an award of
compensatory damages based upon their unused sick leave at the time of retirement,
at a rate of $200 per day. See Appellant’s Appendix at 27-40 (amended complaint
with exhibits).
2
Defendant does not address this state law claim on appeal. Defendant
explains: “At the hearing in the District Court, plaintiffs’ counsel agreed that the
disposition of the ADEA claim would also control the disposition of plaintiffs’ Iowa
Code Chapter 91A claim. . . . Accordingly, defendant has only briefed the ADEA
issue since, again, its outcome is case determinative.” Brief for Appellant at 8 n.2.
3
The district court noted that, because defendant had conceded each plaintiff’s
age ineligibility under the amended ERIP, there was no dispute that each plaintiff had
standing to bring an age discrimination claim. Jankovitz v. Des Moines Indep. Cmty.
Sch. Dist., No. 4:03-CV-10296, slip op. at 3 n.1 (S. D. Iowa July 28, 2004).
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Defendant filed an answer to the amended complaint and a motion for summary
judgment. Defendant noted, among other things, that each plaintiff had the
opportunity between the ages of 55 and 65 to elect early retirement under the then-
current early retirement incentive plan. Regarding the lawfulness of its amended
ERIP, defendant maintained that it was entitled to judgment as a matter of law on its
affirmative defense under 29 U.S.C. § 623(f)(2)(B)(ii), which was added to the
ADEA by Congress’s enactment in 1990 of the Older Workers Benefits Protection
Act (OWBPA).4 That subsection provides:
It shall not be unlawful for an employer, employment agency, or labor
organization –
....
(2) to take any action otherwise prohibited under subsection (a),(b),(c),
or (e) of this section –
....
4
Congress enacted the Older Workers Benefits Protection Act (OWBPA) in
response to the Supreme Court’s decision in Pub. Employees Ret. Sys. v. Betts, 492
U.S. 158 (1989) (holding that the ADEA applies only to hiring, firing, wages,
salaries, and “other non-fringe-benefit terms and conditions of employment”), in
order to clarify that the ADEA applies to all employee benefits, including early
retirement benefits. See, e.g., Auerbach v. Bd. of Educ. of the Harborsfield Cent.
Sch. Dist., 136 F.3d 104, 112 (2d Cir. 1998) (“[The OWBPA] unmistakably overturns
the reasoning and holding of the Supreme Court in Betts and revives the ADEA’s
original purpose to eliminate arbitrary age discrimination in all facets of the
workplace, including employee benefits.”); EEOC v. Hickman Mills Consol. Sch.
Dist. No. 1, 99 F. Supp. 2d 1070, 1075 (W.D. Mo. 2000) (“Congress endorsed the
need for the OWBPA to be included under the ADEA to combat discrimination in
employee benefits.”).
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(B) to observe the terms of a bona fide employee benefit
plan–
....
(ii) that is a voluntary early retirement incentive plan
consistent with the relevant purpose or purposes of this
chapter.
29 U.S.C. § 623(f)(2)(B)(ii) (emphasis added).
Plaintiffs filed a cross-motion for summary judgment asserting that the
amended ERIP discriminated on the basis of age as a matter of law, notwithstanding
defendant’s affirmative defense based on § 623(f)(2)(B)(ii).
Upon review of the parties’ cross-motions for summary judgment, the district
court held that the amended ERIP violated the ADEA as a matter of law. Regarding
defendant’s affirmative defense based on § 623(f)(2)(B)(ii), the district court noted
that the statutory provision sets forth two requirements: (1) voluntariness and (2)
consistency with the purposes of the ADEA. The district court agreed with defendant
that the amended ERIP was voluntary within the meaning of § 623(f)(2)(B)(ii). The
district court concluded, however, that defendant could not establish the amended
ERIP’s consistency with the statute’s relevant purpose to prevent age discrimination.
Slip op. at 9.
The district court reasoned that the determination of whether a plan is
consistent with the purposes of the ADEA must be made on a case-by-case basis. In
the present case, two teachers employed by defendant with the same educational
background, the same number of accumulated sick days, and the exact same number
of years of employment with defendant could receive entirely different benefits upon
retirement based solely upon their age (if, for example, one were 64 years old and the
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other 66 years old at the time of their respective retirements). The district court
concluded: “This type of plan conflicts with the ADEA.” Id. at 10 (citing Auerbach
v. Bd. of Educ. of the Harborfields Cent. Sch. Dist., 136 F.3d 104, 114 (2d Cir.
1998)) (Auerbach) (“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.”). The district court further explained:
The problem lies with the fact that the Plan defines “early” in terms of
the employee’s age, rather than years of service or salary. What the Plan
fails to recognize is that one’s “ability to retire early is typically
dependent on a host of factors other than age: one’s years of service with
the employer, . . . savings, dependents, health, and so on.” . . . The Court
is confident [defendant] could still see a substantial cost savings by
limiting participation in the ERIP to those with less than a specified
number of years of service and/or salary level.
Slip op. at 11 (quoting Solon v. Gary Cmty. Sch. Corp., 180 F.3d 844, 853 (7th Cir.
1999) (Solon)).
The district court rejected defendant’s argument that the amended ERIP was
lawful because there was a potential for an employee’s early retirement benefits to
increase under the amended ERIP as the employee ages within his or her window of
eligibility. In response to that argument, the district court noted: “[t]he fact remains,
however, that . . . all benefits under the Plan are cut off at the age of 65.” Slip op. at
7. The district court also rejected defendant’s argument that plaintiffs’ age
discrimination claim failed for lack of evidence of a discriminatory intent. The
district court explained: “defendant drafted its ERIP to exclude all employees over
the age of 65 from participating in the Plan. Such a Plan necessarily results in
differences in treatment based on age, and is sufficient to create an inference of
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discriminatory intent.” Id. at 12 (citing Solon, 180 F.3d at 846-49, 852-53, 855).
After determining each plaintiff’s respective damages, the district court entered
judgment for plaintiffs. Defendant appealed.
Discussion
We review a grant of summary judgment de novo. The question before the
district court, and this court on appeal, is whether the record, when viewed in the light
most favorable to the non-moving party, shows that there is no genuine issue as to
any material fact and that the moving party is entitled to judgment as a matter of law.
See Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986);
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986). Where, as here, the
unresolved issues are primarily legal, rather than factual, summary judgment is
particularly appropriate. See Crain v. Board of Police Comm'rs, 920 F.2d 1402,
1405-06 (8th Cir. 1990).
The ADEA prohibits employers from discriminating against any individual on
the basis of age with respect to his or her “compensation, terms, conditions, or
privileges of employment,” which specifically encompass “all employee benefits.”
29 U.S.C. §§ 623(a), 630(l). In the present case, it is undisputed that an employee is
ineligible for early retirement benefits under the amended ERIP if he or she is over
the age of 65. Defendant’s amended ERIP is therefore discriminatory on its face.
Trans World Airlines, Inc. v. Thurston, 469 U.S. 111, 121 (1985) (Thurston) (where
availability of privilege of employment depends upon age, holding that the policy in
question is “discriminatory on its face.”). Under these circumstances, intent to
discriminate can be presumed. See, e.g., EEOC v. Hickman Mills Consolidated Sch.
Dist. No. 1, 99 F. Supp. 2d 1070, 1076 (W.D. Mo. 2000) (Hickman Mills) (where
benefit plan reduces benefits available based solely upon the age of the employee,
intent to discriminate can be presumed). Moreover, age discrimination can be
established with respect to employee benefits regardless of whether the employer was
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required to provide the benefits in question to its employees. See, e.g., Thurston, 469
U.S. at 120-21 (employer was not required to grant privilege at issue to its employees;
however, having elected to do so for some employees, employer could not deny the
same opportunity to others because of their age).
Defendant nevertheless argues that the amended ERIP does not violate the
ADEA because it is within the safe harbor provision of 29 U.S.C. § 623(f)(2)(B)(ii).
More specifically, defendant maintains that the district court erred in holding as a
matter of law that the amended ERIP does not satisfy the second requirement of
§ 623(f)(2)(B)(ii) – that it be consistent with the relevant purpose or purposes of the
ADEA. Defendant identifies as the ADEA’s relevant purpose: “to prohibit arbitrary
age discrimination in employment.” Brief for Appellant at 11. Defendant argues that
the amended ERIP is consistent with this stated purpose because it does not cause “a
‘discriminatory deprivation’ of an ‘otherwise available benefit’ to which the
employee should be entitled regardless of his or her decision to retire early.” Rather,
defendant contends, “the accumulated sick leave [benefit] is a true incentive offered
to give employees an opportunity to retire early.” Id. at 11-12.
Defendant relies upon Auerbach as “relevant authority supporting the legality
of the Des Moines School District’s plan.” Id. at 16. Defendant explains:
Congress specifically envisioned plans exactly like the Des Moines
School District’s plan. In other words, plans that would include a time-
related window (in the case of the Des Moines plan, ages fifty-five to
sixty-five) during which, upon reaching a specified age, employees are
offered a special incentive to retire. The Auerbach court went on to find
that the plan before it did not arbitrarily discriminate on the basis of age.
Id. at 15-16.
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Defendant continues: “As pointed out in Auerbach, . . . Congress explicitly
envisioned plans containing a time-related window where upon attaining a specified
age, employees are offered a special incentive to retire. Obviously, a ‘time-related
window’ must have both a lower and upper age limit.” Id. at 16 (citing Auerbach,
136 F.3d at 113).
Defendant also emphasizes that early retirement incentive plans have been
deemed inconsistent with the purpose of the ADEA in cases where the available
benefits decrease during an employee’s window of eligibility. See id. at 17-23
(citing, e.g., Karlen v. City Colleges of Chicago, 837 F.2d 314 (7th Cir.) (Karlen)
(early retirement incentive plan violates ADEA where benefits drop from eighty
percent of accumulated sick pay to forty-five percent of accumulated sick pay when
an employee reaches the age of 65), cert. denied, 486 U.S. 1044 (1988)). Defendant
notes that, by contrast in the present case, the amount of benefits available during the
window of eligibility under the amended ERIP may in fact increase during the
window of eligibility because the amount of benefits is based upon accrued sick
leave. For this additional reason, defendant suggests that the amended ERIP is lawful
under § 623(f)(2)(B)(ii).
As noted above, when Congress enacted the OWBPA, it did so in part to clarify
that the ADEA applies to all employee benefits, including early retirement benefits.
As defendant points out, Congress was mindful to set forth specific affirmative
defenses or safe harbor provisions, such as 29 U.S.C. § 623(f)(2)(B)(ii). Defendant
bears the burden of proving its statutory affirmative defense. See 29 U.S.C.
§ 623(f)(2) (“An employer . . . shall have the burden of proving that such actions are
lawful in any civil enforcement proceeding brought under this chapter.”).
We agree with defendant that the relevant purpose of the ADEA is to prohibit
arbitrary age discrimination in employment. See 29 U.S.C. § 621(b) (purpose of the
ADEA is “to promote employment of older persons based on their ability rather than
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age; to prohibit arbitrary age discrimination in employment; to help employers and
workers find ways of meeting problems arising from the impact of age on
employment”). Arbitrary age discrimination occurs when an employer denies or
reduces benefits based solely on an employee’s age. See, e.g., Hickman Mills, 99
F. Supp. 2d at 1075 (“[W]hile it is not unlawful to offer ERIPs, it is unlawful for an
employer to condition early retirement benefits or reduce early retirement benefits on
the employee’s age.”). That is precisely what defendant’s amended ERIP does.
Moreover, contrary to defendant’s argument, Auerbach does not support the
conclusion that the amended ERIP is consistent with the purposes of the ADEA.
Defendant’s amended ERIP materially differs from the early retirement incentive plan
that was at issue Auerbach. In Auerbach, eligibility for early retirement benefits was
not based solely upon age, but also depended upon specific service requirements.
Under the early retirement incentive plan in Auerbach,
a participating teacher must actually retire at the conclusion of the year
in which he or she first becomes eligible to retire (the optimum year) in
order to secure the $12,500 fixed sum payment and the accumulated sick
leave payment (together, the retirement incentive benefits). Teachers
older than 55, but who have not yet fulfilled the service requirements,
must retire in the year they complete the service requirements,
regardless of their actual age, to receive the retirement incentive
benefits. Conversely, a teacher who has already completed the service
requirements by the time he or she reaches age 55 must retire at the
conclusion of the school year during which he or she becomes 55 in
order to obtain these benefits. Otherwise, the benefits are forever lost.
136 F.3d at 107-08 (emphasis added).
In other words, while the early retirement incentive plan at issue in Auerbach
did involve a “time-related window,” it did not have as its upper limit a fixed age. By
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contrast, in the present case, the upper limit of eligibility under defendant’s amended
ERIP is the fixed age of 65.
Defendant’s argument based upon cases such as Karlen is also unpersuasive.
The basis for our conclusion that the amended ERIP is inconsistent with a purpose
of the ADEA is the fact that the amount of available early retirement benefits drops
to zero upon an employee’s attainment of the age of 65. That adverse change in
benefits is based solely upon age. In Karlen, and similar cases, early retirement
benefit plans have been held unlawful because decreases in available benefits are tied
to increases in age during the period of an employee’s eligibility. Such cases stand
for the proposition that adverse changes in employment benefits based solely upon
age are inconsistent with the purposes of the ADEA. Therefore, Karlen and similar
cases support our decision in the present case. See, e.g., Overlie v. Owatonna Indep.
Sch. Dist. No. 761, 341 F. Supp. 2d 1081, 1093 (D. Minn. 2004) (“The ERIP was not
consistent with the purposes of the ADEA, however, because it results in arbitrary age
discrimination. In particular, the ERIP offers incentive benefits that differ in amount
for eligible employees based solely on the retiree’s age.”).
Conclusion
In sum, we hold as a matter of law that defendant’s amended ERIP violates the
ADEA and does not fall within the safe harbor provision in 29 U.S.C.
§ 623(f)(2)(B)(ii).5 The judgment of the district court is affirmed.
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5
We need not address defendant’s second argument on appeal, asserting that
plaintiffs cannot alternatively establish liability under the ADEA on the basis that
defendant amended the ERIP after each plaintiff had already reached the age of 65.
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