Supreme Court rules Kentucky retirement system does not violate ADEA
The U.S. Supreme Court has ruled 5-4 that Kentucky's public retirement system does not violate the federal Age Discrimination in Employment Act (ADEA) by withholding disability retirement benefits from employees who have qualified for retirement based on either (1) age in combination with a lesser number of years of service, or (2) a greater number of years of service alone. The case arose because of the different ways the system handles workers who retire for disability reasons versus those who retire because they have served the requisite length of time, which in Kentucky is either 20 years of service or at age 55 with five years of employment. An employee of the Jefferson County, Ky., sheriff's department who was 61 years old when he sought disability retirement was told he could retire only under the regular retirement plan. He sued with the aid of the Equal Employment Opportunity Commission (EEOC), which argued that Kentucky's plan discriminated based on age in that it provided lesser benefits to certain older workers who sought to retire on disability. The U.S. Court of Appeals for Sixth Circuit (KY, MI, OH, TN) found the program discriminatory because age is a factor in the determination of benefits.
In an opinion by Justice Breyer, joined by Chief Justice Roberts and Justices Stevens, Souter, and Thomas, the Supreme Court reversed. The Court stated the issue as being "whether a plan that (1) lawfully makes age in part a condition of pension eligibility, and (2) treats workers differently in light of their pension status, (3) automatically discriminates because of age." Noting that its decision in Hazen Paper Co. v. Biggins, 507 U. S. 604 (1993), had established that age and pension status are "analytically distinct" concepts, the Court found that "several background circumstances eliminate the possibility that pension status … nonetheless serves as a 'proxy for age' in Kentucky's Plan." Specifically, every hazardous position worker had the same opportunity to avail himself of disability retirement benefits if he became disabled prior to the time he became eligible for normal retirement benefits. Moreover, Congress has approved programs that calculate disability benefits using a formula that factors in age, the Court noted. There was "a clear non-age-related rationale for the disparity" in the Kentucky plan, the Court found, emphasizing that disability retirement benefits and normal retirement benefits are calculated in an identical manner in every important respect except one, namely that the plan imputes the years of service needed to bring "the disabled worker's years of service to 20 or to the number of years that the individual would have worked had he worked to age 55." As a result, the Court found "[t]he disability rules clearly track Kentucky's normal retirement rules." Although the plan placed the older worker at a disadvantage in the present case, the Court pointed out that there are other cases where the plan would work to the older employee's advantage. In addition, Kentucky's system does not rely on "the sorts of stereotypical assumptions that the ADEA sought to eradicate," such as the stereotype about the work capacity of "older" workers relative to "younger" workers. In order to eliminate any disparate treatment, the state would have either to cut drastically the benefits given to disabled workers who are not yet pension eligible, or to increase the benefits available to disabled, pension-eligible workers, "while lacking any clear criteria for determining how many extra years to impute for those pension-eligible workers who already are 55 or older."
The Court rejected two additional arguments made by the EEOC. First, the fact that Congress amended the ADEA to broaden "the field of employer actions subject to antidiscrimination rules" and "narrowed the statutorily available justifications for age-related differences" was unpersuasive, because the Court's basis for finding the plan lawful did not rest upon any related justification; rather, the Court found that the discrimination was "not 'actually motivated' by age." Second, EEOC's interpretation in its regulation and its compliance manual was "not entitled to deference" because, on its face, the regulation "does little more than restate the terms of the statute itself," while the statement in the manual that "automatically reaches a contrary conclusion-a statement that the Manual itself makes little effort to justify-lacks the necessary 'power to persuade' us."
Justice Kennedy's dissent, joined by Justices Scalia, Ginsburg, and Alito, took issue with the majority on the grounds that under the ADEA "[d]isparate treatment on the basis of age is prohibited unless some exemption or defense provided in the [ADEA] applies." Even if Kentucky's plan was justified by a proper motive, the dissenters asserted, it still would fail because its "discriminatory classification rests upon a stereotypical assumption that itself violates the Act and the Court's own analytical framework." The fact that the plan rewards disabled employees who have not yet reached eligibility for normal retirement benefits by providing them with a bonus, "which accounts for the number of years the employee would have worked had he or she remained healthy until becoming eligible to receive normal retirement benefits," means that "whether intended or not, the result of these divergent benefits formulae is a system that, in some cases, compensates otherwise similarly situated individuals differently on the basis of age." The dissent also accused the majority of failing to spell out a clear rule of law in its policy arguments, of failing to find support for its position in the text of the statute, and of misapplying Hazen Paper.
Kentucky Retirement Systems v. EEOC, No. 06-1037 (U.S. Jun. 19, 2008)
[Editor's Note: Background on the case, including NSBA's amicus brief urging the Court to reverse the Sixth Circuit, is below. Lead authors on the brief were Shamus P. O'Meara and Mark R. Azman of Johnson & Condon, P.A. of Minneapolis, Minnesota, whose services were pro bono.]
NSBA School Law pages on Kentucky Retirement Systems v. EEOC