Kentucky Retirement Systems v. EEOC

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Authorship: Alan Bakowski

Contents

[edit] Briefs and Documents

Docket: 06-1037

Argument Transcript

Merits Briefs

Amicus briefs

Certiorari filings

[edit] Pre-Argument Articles

[edit] Argument Preview

[edit] Background

This case centers around Kentucky’s disability retirement plan, which provides benefits to state employees who become disabled before they become eligible for normal retirement – a milestone requiring an employee to either (a) put in twenty years of service or (b) reach age 55 with at least five years of service. Because the disability plan awards benefits based in part on how close a disabled worker is to reaching normal retirement (with the aim of providing the worker with the same retirement benefits he would have had if he continued to work until eligible for normal retirement), the plan affects older workers differently than younger workers. This case originated when the EEOC brought a claim on behalf of Charles Lickteig, a 61-year-old employee of the Jefferson County Sheriff’s Department who claimed disability after nearly 18 years of service. Because he was over age 55 and thus eligible for normal retirement, he received normal retirement benefits based on his nearly 18 years of service; had he been under age 55 and thus not eligible for retirement, he would have received higher disability retirement benefits based on an imputed 20 years of service. The question presented is whether the use of age as a potential factor in the distribution of retirement benefits to disabled workers establishes a prima facie case of discrimination in violation of the Age Discrimination in Employment Act (ADEA).

[edit] Petitioners’ Brief

Petitioners Kentucky Retirement Systems, the Commonwealth of Kentucky, and the Jefferson County Sheriff’s Department present two principal arguments in their brief. First, they claim that Kentucky’s disability plan does not violate the ADEA because it differentiates on the basis of employees’ eligibility for normal retirement benefits, rather than on the basis of their age.

Specifically, they explain, Kentucky’s disability retirement plan is structured as a “safety net” for workers who are unable to rely on normal retirement benefits. Relying on Hazen Paper Co. v. Biggins (1993), petitioners argue that “organizing a plan around eligibility for retirement is not the same as organizing a plan around age.” Because it is permissible under the ADEA to base retirement eligibility on age, petitioners claim that the use of age as a potential factor in disability benefits does not make the plan facially discriminatory. They also argue from policy that the plan is rational because it provides more benefits for younger disabled workers who, because they have had less time to accumulate wealth for retirement, need more of a boost than older workers.

Petitioners turn to statutory interpretation for their second principal argument: only retirement plans which use age in an arbitrary manner can be considered discriminatory under the ADEA. By contrast, petitioners contend, Kentucky’s plan rationally uses age only with respect to normal retirement benefits, which benefits most older workers. Petitioners allege that the ADEA was intended to fight “arbitrary” age discrimination based on inaccurate stereotypes about age. In that respect, they argue, the ADEA is unlike Title VII, under which any classification based on sex or race is considered facially discriminatory. Instead, a retirement plan is only facially discriminatory under the ADEA if it is arbitrary on its face. Consideration of age in a disability benefits plan cannot be arbitrary, petitioners contend, because it is a necessary component of any complement to a retirement system.

[edit] Respondent’s Brief

Respondent EEOC argues that Kentucky’s disability retirement plan is facially discriminatory under the ADEA because it uses age-based criteria to pay benefits in a way that disadvantages some older disabled workers. Disagreeing with petitioners’ view that the ADEA targets only purposeful discrimination based on ageist stereotypes, the EEOC contends that any explicit consideration of age constitutes facial discrimination. Unless an employer is covered by one of the ADEA’s specific exceptions (such as for voluntary early retirement incentive plans) or defenses (such as cost-justification), use of age as a factor in determining benefits is a violation.

The EEOC also argues that Kentucky’s use of age in calculating disability benefits is arbitrary. The state’s proposed justification for disparate treatment – viz., that younger disabled workers “need more of a boost” – is based on “stereotypical assumptions of the kind the ADEA seeks to eradicate.” The EEOC argues that the state’s inability to provide non-stereotypical justifications for using age as a criterion underscores why employers must have the burden of defending facially discriminatory practices. The EEOC further argues that Congress reiterated this understanding when it passed the Older Workers Benefit Protection Act (OWBPA) to amend the ADEA, enacted as a response to the Court’s 1989 decision in Public Employees Retirement System v. Betts. Finally, the EEOC argues that the Court should defer to EEOC regulations and guidance, which view benefit plans such as Kentucky’s as discriminatory.

[edit] Amicus Briefs

Four amicus briefs have been filed in support of petitioners. Amici include 13 states and several government associations such as the National League of Cities and the National School Boards Association. These amici largely re-argue the merits and suggest that a ruling for the EEOC could jeopardize many public employee retirement systems across the country.

One amicus brief has been filed in support of respondent EEOC by AARP and the National Employment Lawyers Association. They mostly reiterate the points raised in the EEOC’s brief and argue that liability under the ADEA does not depend on evidence that age-based discrimination is motivated by inaccurate or stigmatizing stereotypes.

[edit] Oral Argument Recap

The Justices asked a lot of questions of both sides’ counsel during oral argument. Many of those questions were about the facts of Kentucky’s disability retirement plan and how exactly it uses age as a factor for providing benefits. But the Justices were also concerned about the impact that a ruling in favor of the EEOC would have on disability pension plans across the country.

Petitioners’ counsel began by emphasizing that under Kentucky’s plan, age is only one factor in deciding whether a worker is eligible for disability retirement benefits. He was quickly interrupted by Justice Breyer, who asked a series of questions about why Kentucky’s plan imputed years of service to some disabled workers under 55 but not those over 55. Counsel answered by saying that workers over 55 are eligible for retirement benefits and thus not in a similar position as younger disabled workers. But this prompted Justice Kennedy to observe that Kentucky’s plan “does make an explicit determination based on age as to some people,” and he asked why that doesn’t make the plan facially discriminatory. Counsel’s response was that the plan makes determinations based on “pension status,” not age, which Justice Scalia chimed in to say was “one step removed” from age discrimination.

Justice Ginsburg asked petitioners’ counsel whether the ADEA bans all discrimination based on age or only “arbitrary” discrimination. Counsel argued that the use of the word “arbitrary” in the statute’s preamble and the legislative history suggest that the ADEA should not be construed as rigidly as Title VII’s antidiscrimination provisions, but Justice Ginsburg seemed unconvinced.

Petitioners’ counsel then fielded several questions about whether disability benefits were distinct from normal retirement benefits and how they fit into the overall retirement system. Counsel argued that the disability retirement plan is designed to “fill the gap” for those not eligible for normal retirement. But Justice Breyer seemed skeptical, asking counsel why Kentucky didn’t simply avoid any potential ADEA claims by imputing years of service to all disabled workers, including those already eligible for normal retirement. Counsel responded by saying that it wouldn’t be economically feasible to do that without lowering benefits for everyone.

Chief Justice Roberts then asked, “So the effect of this litigation is that policemen or firefighters who are injured and become disabled now get lower benefits for disability?” “Much lower,” counsel answered. Justice Breyer said he thought that result was “just terrible,” and one that Congress probably didn’t intend. How, he asked, could the Court avoid interpreting the statute that way? Counsel responded that the Court could reach such a result by holding that age is not the determining factor for calculating benefits. But Justice Kennedy wasn’t buying it. “Suppose I can’t make that assumption or adopt that premise. Is there another basis on which to reach the result?” Counsel responded by arguing that the EEOC’s suit should be considered an as-applied challenge rather than a facial challenge, so the Court could consider whether there are reasonable reasons to use age as a factor. Furthermore, counsel argued, Kentucky was not motivated by age discrimination in developing its plan.

Respondent EEOC’s counsel began by arguing that Kentucky’s retirement plan uses age to determine benefits in a way that disadvantages older workers, but he was quickly interrupted by Justice Stevens, who asked several questions about whether disability retirement was any different from regular retirement. Shortly thereafter, Justices Scalia and Alito asked why Kentucky can’t condition benefits on a combination of years of service, age, and disability. Counsel’s answer was that the state can’t use age as a proxy in determining how many years of service they should impute to a disabled employee.

Justice Breyer pressed the government about the effect of “using absolutely mechanical rules” in defining age discrimination under the ADEA. Justices Souter and Ginsburg followed by asking how the state could craft a sensible disability policy that would be age-neutral. Counsel suggested that an equal number of years could be imputed to all disabled workers. Although the use of age in Kentucky’s plan may not seem discriminatory in the traditional sense, counsel argued, the ADEA does not permit any discrimination against older workers. Justice Breyer asked whether the Court should construe the ADEA to reach only stereotypical age discrimination, but counsel answered that Congress intended the ADEA to be construed the same way Title VII had been interpreted.

Overall, a majority of the Court seemed convinced that Kentucky’s plan does discriminate on the basis of age. But the Justices’ concerns about ruling for the EEOC were also apparent in their questioning. At times, the Court’s liberal members seemed to be searching for a way to uphold disability retirement plans such as Kentucky’s without stretching the meaning of the Age Discrimination in Employment Act. It is unclear whether they found one.

[edit] Opinion Analysis

In its opinion in Kentucky Retirement Systems v. EEOC, the Supreme Court on Thursday ruled 5-4 that Kentucky’s disability retirement system does not violate the Age Discrimination in Employment Act (ADEA), even though age is an explicit factor in calculating benefits for at least some workers. Following a somewhat functional approach to the ADEA’s non-discrimination requirement, the Court concluded that Kentucky’s system was not “actually motivated” by bias against older workers but was instead organized around the “analytically distinct” concept of “pension status.” Thus, the Court held that when a retirement plan conditions pension eligibility on age but then discriminates on the basis of pension status, an ADEA plaintiff must show that the disparate treatment was “actually motivated” by age itself rather than pension status.


The majority opinion, written by Justice Breyer, relied heavily on the Court’s 1993 ruling in Hazen Paper Co. v. Biggins, which held that discrimination based on pension status would not violate the ADEA unless it was being used as a “proxy for age.” Applying Hazen Paper, the majority identified a “clear non-age-related rationale” for the disparities in Kentucky’s disability retirement plan: providing benefits for workers at the level they would have received had they become disabled after reaching eligibility for normal retirement benefits. The majority said the fact that older disabled workers may receive fewer imputed years of service than younger disabled workers results not from age discrimination in the plan itself, but rather because employers may lawfully condition pension eligibility on age. This is evident by looking at the pension scheme as a whole, which “the ADEA treats somewhat more flexibly and leniently in respect to age.”


The Court further noted that Kentucky’s system “does not rely on any of the stereotypical assumptions that the ADEA sought to eradicate.” Indeed, the Court said the plan makes no assumptions about the relative capacities of older or younger workers, and noted that, depending on how many years of service workers have accumulated, the plan is sometimes more generous to older workers than younger workers. One other factor cited by the majority was the high cost of remedying any potential age disparity, which it viewed as evidence that the disability benefit calculations were motivated primarily by financial considerations rather than by improper age bias. Pooling together all of these factors, the Court concluded that Kentucky’s disability retirement plan was did not use pension status as a “proxy for age” under Hazen Paper. The Court rejected the government’s arguments that the EEOC’s position was entitled to deference or that the Older Workers Benefit Protection Act (OWBPA) changed the standard applied in Hazen Paper.


The dissenting opinion, authored by Justice Kennedy and joined by Justices Scalia, Ginsburg, and Alito, preferred a more mechanical application of the ADEA. Finding Kentucky’s plan to be facially discriminatory, the dissenters chided the majority for “undercut[ting]” the basic framework of the ADEA, which prohibits disparate treatment unless some specific exemption or defense in the Act applies. The dissenters found the language in the OWBPA to clearly prohibit any age-based disparities in pension plans.

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