Hockey Firing Raises Age Discrimination Issue

Posted on July 15, 2009 by Brian Hall

Generally, the firing of a professional sports team's general manager is not going to raise my interest as an employment lawyer, but the comments made by the owner of the Chicago Blackhawks after Dale Tallon was fired certainly piqued my interest. Those hockey fans in the audience may know that Tallon's firing came shortly after the NHLPA filed a grievance claiming that he failed to send out timely qualifying offers to players that were restricted free agents. Rather than risking those players becoming unrestricted free agents, Tallon quickly signed them to long term contracts that probably aggravates the team's salary cap issues in the near term and ultimately may cost the team more money.

In an effort likely designed to deflect attention from this blunder, Rocky Wirtz, the Blackhawks owner, is quoted by MSNBC.com as follows regarding Tallon's replacement: Asked what Bowman, who's in his ninth year with the Blackhawks, brings to the job that Tallon didn't, Wirtz said: "He's 36, Dale is 58. We always want younger people. What he brings is a system in place to get better," Uh oh.

Fortunately for the Blackhawks as it relates to Tallon's situation, the recent Supreme Court decision in Gross v. FBL Financial Services probably saves them from a potential claim of age discrimination. As reported previously, Gross holds that a plaintiff bringing an ADEA disparate-treatment claim must prove, by a preponderance of the evidence, that age was the “but-for” cause of the challenged adverse employment action. Here, John McDonough, the Blackhawks president who appears to have been the driving force behind the termination, acknowledged that Tallon probably would not have been fired if not for the free agent incident. For future reference, however, the Blackhawks may want to keep tabs on Congress, which already has announced that it will hold hearings directed at overturning the Gross decision.

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United States Supreme Court Holds That Collective Bargaining Agreements May Require Union Members to Arbitrate Discrimination Claims

Posted on April 6, 2009 by Peg Koesel

On April 1, 2009, in a 5-4 decision, the United States Supreme Court clarified an issue of confusion among lower courts when it held that “a collective-bargaining agreement that clearly and unmistakably requires a union member to arbitrate ADEA claims is enforceable as a matter of federal law.” 

The case, 14 Penn Plaza, LLC v. Pyett, No. 07-581, 556 U.S. ___ (2009), is a marked departure from established precedent in some jurisdictions and welcome news for employers who often prefer to present their cases to an arbitrator, rather than a jury. 

 

Until 14 Penn Plaza, the Supreme Court’s direction regarding the enforceability of a provision in a collective bargaining agreement that required a union member to arbitrate a statutory discrimination claim was not clear. In an earlier decision discussing whether an employee could be compelled to arbitrate a statutory discrimination claim, Alexander v. Gardner-Denver, 415 U.S. 36 (1974), the Court found that the provision at issue did not expressly require arbitration of a member’s statutory rights, so the employee could not be precluded from bringing statutory claims in a judicial forum.

 

Later, in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991), the Court held that an individual’s agreement to arbitrate his ADEA claim was enforceable because the arbitration provision in that agreement clearly and unmistakably included arbitration of statutory claims.   

The plaintiffs-employees in 14 Penn Plaza, three of the building’s night watchmen, were members of Local 32BJ of the Service Employees International Union. As members of the union, they were subject to a collective bargaining agreement that expressly made claims under Title VII, the ADEA, and the ADA subject to binding arbitration under the contract’s grievance and dispute resolution procedures. 

 

14 Penn Plaza LLC owned the building where the night watchman worked. In August 2003, the night watchmen’s direct employer, a service and cleaning contractor, engaged another contractor to provide security guards to staff the building lobby and entrances and reassigned the night watchman to jobs as night porters and light-duty cleaners. The union and 14 Penn Plaza agreed to this change.

 

The union then filed grievances on behalf of the night watchmen contending that the company failed to equitably rotate overtime, that the reassignment violated seniority rules, and that by reassigning them, the building owner violated the contract’s ban on age discrimination. The union requested that the grievances be arbitrated under the contract. After the first hearing, the union withdrew the age discrimination claim from arbitration but continued to arbitrate the remaining claims. 

 

While arbitration on their remaining claims continued, the night watchmen filed a charge of discrimination with the EEOC. After the EEOC issued a dismissal and notice of the right to sue, the night watchmen filed suit alleging that their reassignment violated the ADEA and other state and local laws barring age discrimination. 

 

14 Penn Plaza asked the district court to compel the night watchmen to arbitrate their claims, but the district court denied the motion. The Second Circuit Court of Appeals agreed because under Second Circuit precedent “even a clear and unmistakable union-negotiated waiver of the right to litigate” certain statutory claims is unenforceable.

 

Writing for the majority at the Supreme Court, Justice Thomas pointed out that fashioning a dispute resolution mechanism to require arbitration of employment-discrimination claims is no different than other decisions made by the parties in designing the grievance process; it is a term or condition of employment that is a mandatory subject of bargaining. “As in any contractual negotiation, a union may agree to the inclusion of an arbitration provision in a collective-bargaining agreement in return for other concessions from the employers. Courts generally may not interfere with this bargained-for exchange.”

 

The Court further explained that an agreement to arbitrate an ADEA claim is not a waiver of a “substantive right” as that term is used in the ADEA. Although an individual employee must knowingly and voluntarily waive a right or claim under the ADEA, an agreement to arbitrate ADEA claims is not a waiver of a “substantive right” as that term is used in the ADEA. If the waiver provision of the ADEA “included the prospective waiver of the right to bring an ADEA claim in court, even a waiver signed by an individual would be invalid.”

 

Although the 14 Penn Plaza decision presents employers with an opportunity for quicker and more cost-effective resolution of discrimination claims, it left open the question of what happens when the union withdraws from or refuses to proceed with an individual’s statutory claims. As Justice Souter noted in his dissent, “the majority opinion may have little effect, for it explicitly reserves the question whether a CBA’s waiver of a judicial forum is enforceable when the union controls access to and presentation of employee’s claims in arbitration, . . . which is ‘usually the case.’” 
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Supreme Court OKs Employer Use of Age as a Factor In Pension Plans

Posted on June 27, 2008 by Jamie LaPlante

In Kentucky Retirement Systems v. EEOC, No. 06-1037, 2008 WL 2445078 (U.S. June 19, 2008), the Supreme Court recently held that “where an employer adopts a pension plan that includes age as a factor” (in determining eligibility for retirement with pension benefits), and the employer subsequently “treats employees differently based on pension status,” the plan does not automatically violate the Age Discrimination in Employment Act (ADEA). Rather, the Court held that the plaintiff challenging such a policy must show that the differential treatment was “actually motivated” by age. In a 5-4 decision — with a rather strange alignment of the justices — the majority, which consisted of Justices Breyer (who authored the opinion), Stevens, Souter, and Thomas and Chief Justice Roberts, reversed the Sixth Circuit’s en banc ruling striking down the pension plan as facially discriminatory.

[This post serves as a follow up to my earlier posts on March 26, 2008 and January 2, 2008 regarding the decision in Erie County Retirees Association v. County of Erie by the Third Circuit upholding the EEOC’s rule allowing employers to coordinate retiree healthcare benefits with Medicare benefits, effectively resulting in equal total benefits between younger retirees and older Medicare-eligible retirees but unequal amounts spent on the two groups’ benefits because a portion of the Medicare-eligible retirees’ payments come from Medicare.]

Under Kentucky’s retirement system for state employees in “hazardous positions” — law enforcement, firefighters, paramedics, and correctional facility workers — an employee could become eligible for “normal retirement” in one of two ways: (1) after 20 years of service or (2) at age 55 after five years of service. The pension benefits are calculated by multiplying years of service by 2 ½% and multiplying that number by pre-retirement pay. The plan also allows for workers in hazardous positions to retire if they become disabled. Under “disability retirement,” the worker is credited with “imputed” years of service equal to the years necessary for the employee to become retirement-eligible under either method. However, no employee may receive more imputed years than the employee’s actual years of service. And no imputed years are awarded for workers who become disabled after becoming retirement-eligible.

The particular employee in this case, Charles Lickteig, was a worker who became disabled at age 61 with 18 years of service. He was retirement-eligible at age 55. Thus, when his benefits were calculated, Mr. Lickteig received no imputed additional years of service. He argued that a similarly-situated employee in his 40s with 18 years of service would have received two additional imputed years of service under the plan, and thus, the plan was discriminatory on the basis of age. The EEOC agreed and brought an age discrimination lawsuit. The District Court held that the EEOC failed to establish age discrimination. A panel of the Sixth Circuit agreed, but the Sixth Circuit, on rehearing en banc, held that the plan violated the ADEA and reversed the decision. The Supreme Court agreed to hear the case because of its widespread impact on pension plans across the country.

Focusing on its prior decision in Hazen Paper Co. v. Biggins, 507 U.S. 604 (1993), the Supreme Court held that a dismissal based on pension status was not a dismissal because of age (in violation of the ADEA). In Hazen Paper, the Court had held that, even though years of service (and consequently pension status) typically is linked to age, the two concepts were “analytically distinct.” In Hazen Paper, in contrast to this case, pension status was solely based on years of service. The Court in Kentucky Retirement Systems expanded upon Hazen Paper holding that, even where pension status is a function of both age and years of service, discriminating on the basis of pension status does not automatically equal discrimination on the basis of age unless the difference in treatment is “actually motivated” by age to violate the ADEA.

What does this decision mean for public and private employers going forward? Basically, it means that public workers in Kentucky and states with similar pension plans can continue to rely on the promise of disability retirement benefits if they become disabled. It also means that public and private employers who feared their plans were implicated by the Kentucky Retirements Systems case — a number estimated at 2,700 employers and 25 million affected workers — do not have to cut benefits, increase employer contributions, or otherwise restructure their plans to bring them into compliance with the ADEA. The decision, when coupled with the Supreme Court’s recent decision not to review the Third Circuit’s decision in Erie County Retirees Association, also suggests that, at least in the pension context, the Supreme Court seems inclined to rely more on the underlying purpose of the ADEA rather than strict compliance with the statutory text. This decision also gives employers more leeway in setting up pension plans and makes it easier for employers to allow early (age-based) retirement, in addition to traditional retirement based on years of service alone. It does not, however, mean that the ADEA can be ignored in the pension context. The Court is clear that plans and eligibility decisions based on age-based animus will be struck down.
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New EEOC Rule Makes an Exemption to Erie Decision and Allows Coordination of Healthcare Benefits for Retirees with Medicare

Posted on January 2, 2008 by Jamie LaPlante

On December 26, the EEOC announced a new rule that makes it easier for employers to help retirees maintain adequate healthcare benefits.  In particular, employers that provide retiree healthcare benefits may coordinate those benefits with Medicare benefits without engaging in age discrimination based on the difference in ages between younger non-Medicare-eligible retirees and older Medicare-eligible retirees.

In today’s employment landscape, fewer employers provide retiree benefits.  This forces many retired employees to rely solely on Medicare benefits to cover increasing healthcare costs—at best, a difficult situation.  As a result, many employers are searching for viable ways to continue to provide healthcare benefits to retirees.  The most common and cost-effective way for companies to do so is for employers to coordinate employer-provided benefits with benefits provided by Medicare.  This is accomplished by:

  1. supplementing the benefits provided by Medicare up to a specified level of coverage;
  2. offering benefits after retirement but only until the retiree becomes Medicare-eligible; or
  3. some combination of the two.

Although these approaches seem reasonable, courts questioned their legality under the Age Discrimination in Employment Act.  In Erie County Retirees Association v. County of Erie, a controversial decision issued in 2000 by the U.S. Court of Appeals for the Third Circuit, the practice of treating Medicare-eligible retirees differently than younger retirees was found to violate the ADEA.  In that case, the court held that the health insurance benefits provided to Medicare-eligible retirees and younger retirees must cost the employer the same amount.  Not surprisingly, most retiree healthcare plans violated the ADEA because employers typically spend significantly less on retiree benefits when those benefits only supplement Medicare’s coverage.  Faced with the prospect of spending more money for retiree benefits, many employers considered reducing or eliminating retiree healthcare benefits for both Medicare-eligible and younger retirees.

Perhaps recognizing the dilemma posed to employers that try to do right by their retirees, the Third Circuit recently provided an out: The court ruled that, notwithstanding the Erie decision and objections by the American Association of Retired Persons (AARP), the EEOC has the authority under the ADEA to enact regulatory exceptions to the ADEA's provisions.  Accordingly, the EEOC’s new rule provides an exemption from the ADEA for the longstanding employer practice of coordinating retiree benefits with Medicare coverage.  Employers and labor groups alike support the new rule.

AARP appealed  to the United States Supreme Court the Third Circuit's decision regarding whether the EEOC has authority to create the exception to the ADEA.  It seems unlikely that the Supreme Court will agree to hear this appeal.  If it does and decides in favor of AARP (this is unlikely), the rule's new exception to ADEA will not take effect.

The Supreme Court, however, has heard oral argument in a related case that will likely impact this area.  In Kentucky Retirement System v. EEOC, the Supreme Court considered "whether any use of age as a factor in a retirement plan is 'arbitrary' and thus renders the plan facially discriminatory in violation of the Age Discrimination in Employment Act."  The case involves disability retirement benefits and normal retirement benefits in which service years or a combination of age and service years determines eligibility for both, and thus, age is an indirect factor in determining eligibility.  The Supreme Court will decide if this plan violates the ADEA.  This may or may not impact the decision in Erie.

Bottom line for employers: The ADEA no longer poses an obstacle for employers that wish to treat retirees equitably by supplementing Medicare benefits for Medicare-eligible retirees and providing greater benefits for non-Medicare-eligible retirees.

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