EEOC v. Borden's, Inc.

• Citation: 551 F. Supp. 1095
• Decision Date: 07 December 1982
• Docket Number: No. Civ 81-19 PHX VAC.,Civ 81-19 PHX VAC.
• Parties: EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff, v. BORDEN'S, INC., Defendant.
• Court: U.S. District Court — District of Arizona

551 F. Supp. 1095

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff, v. BORDEN'S, INC., Defendant.

No. Civ 81-19 PHX VAC.

United States District Court, D. Arizona.

December 7, 1982.

Francisco J. Flores, Jr., Ismael Alvarez, Ronald M. Andersen, E.E.O.C., Phoenix, Ariz., for plaintiff.

William R. Neale, Columbus, Ohio, for defendant.

OPINION

CORDOVA, District Judge.

This action was brought by the Equal Employment Opportunity Commission (EEOC) against Borden's, Inc., a New Jersey corporation, for an alleged violation of the Age Discrimination in Employment Act (ADEA), 29 U.S.C. Sec. 621 et seq. The case is now before the court on cross motions for summary judgment submitted upon a stipulation of facts and attached exhibits A through K.

The undisputed facts show that defendant Borden's closed its Phoenix, Arizona, dairy operation on December 31, 1979. The result of the closing was that all of the Dairy employees, excepting a few management personnel, were terminated. Effective July 27, 1979, prior to the dairy closing, Borden's had entered into a renewal of the collective bargaining agreements with the two unions¹ representing the dairy employees. By addenda executed in November, 1979, these agreements provided for severance pay in the event of closure. The severance pay formula therein created excluded all employees who were eligible for normal or early retirement². To be eligible for retirement an employee had to have at least ten years of continuous service with Borden's and be at least fifty-five years of age. There were fourteen such employees excluded from receiving severance pay (eleven named in the original complaint and three plaintiff sought to add by untimely amendment)³. The record does not disclose that there were any employees over the age of fifty-five who did receive severance pay (exhibit G).

The issue before the court is whether Borden's denial of severance pay to those employees eligible for retirement constitutes an impermissible age based discrimination in violation of the ADEA. For the reasons given below, the court finds that it was.

29 U.S.C. Sec. 623(a)(1) provides:

It shall be unlawful for an employer —

(1) to fail or refuse to hire or to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's age; ...

Plaintiff EEOC claims Borden's severance pay policy violated this section. Plaintiff relies on either of the alternative theories that the policy represents discriminatory treatment of fifty-five year old employees, or that, if the policy is considered neutral on its face, it had a disparate impact on the fifty-five year old employees. Defendant Borden's argues that there was no violation because eligibility for retirement, not age, was the determining factor in the decision to deny severance pay. Borden's also claims that the severance pay policy was part of a bona fide employee benefit plan and is therefore exempt from the ADEA by virtue of 29 U.S.C. Sec. 623(f)(2).

DISCRIMINATORY TREATMENT

Plaintiff contends that Borden's severance pay policy constitutes discriminatory treatment because the intent of the policy was to deny fifty-five year old employees severance pay. The only evidence of intent offered by the plaintiff, however, is an inference drawn from the result of defendant's policy. As the defendant points out, whether an employee received severance pay was determined by the employee's eligibility for retirement rather than the employee's age. Hypothetically, a fifty-five year old employee not eligible for retirement would receive severance pay. On its face then, defendant's severance pay policy is neutral. Therefore, the court finds that the facts do not establish plaintiff's claim of discriminatory treatment. Plaintiff's arguments are more properly considered under the disparate impact theory.

DISPARATE IMPACT

As with discrimination claims brought under Title VII, ADEA violations may be established under either a discriminatory treatment or disparate impact theory⁴. Douglas v. Anderson, 656 F.2d 528 (9th Cir.1981); Geller v. Markham, 635 F.2d 1027 (2nd Cir.1980). In International Bro. of Teamsters v. United States, 431 U.S. 324, 97 S.Ct. 1843, 52 L.Ed.2d 396 (1977), the Supreme Court explained the distinction between the two theories:

Claims of disparate treatment may be distinguished from claims that stress `disparate impact.' The latter involve employment practices that are facially neutral in their treatment of different groups but that in fact fall more harshly on one group than another and cannot be justified by business necessity... Proof of discriminatory motive, we have held, is not required under a disparate impact theory. Compare, e.g., Griggs v. Duke Power Co., 401 U.S. 424, 430-432, 91 S.Ct. 849, 853-854, 28 L.Ed.2d 158, with McDonnell Douglas v. Green, 411 U.S. 792, 802-806, 93 S.Ct. 1817, 1824-1826, 36 L.Ed.2d 668. See generally B. Schlei & P. Grossman, Employment Discrimination Law 1-12 (1976); Blumrosen, Strangers in Paradise: Griggs v. Duke Power Co. and the Concept of Employment Discrimination, 71 Mich.L.Rev. 59 (1972). Either theory may, of course, be applied to a particular set of facts. 97 S.Ct. at 1855 n. 15

Defendant claims age was not the determining factor because under the severance pay policy, hypothetically, an employee fifty-five years of age who was not eligible for retirement would receive severance pay. This hypothetical possibility, however, remains just that: hypothetical. The evidence before the court (exhibit G) reveals that there were no fifty-five year old employees who in fact did receive severance pay. This goes to the essence of a disparate impact claim, i.e., that a facially neutral policy falls more harshly on one group than another. The court finds that to be the case here.

Basically, Borden's does not challenge the proposition that the impact of the severance pay policy fell more heavily on fifty-five year old employees. Instead, it is argued that the impact was not adverse. The primary thrust of Borden's defense is that those fifty-five year old employees who did not receive severance pay received something of greater value in its stead, retirement benefits. While there is little doubt that the retirement benefits are of greater value than the severance pay, Borden's attempts to characterize the situation as a choice between severance pay and retirement benefits is not supported by the evidence. Conversely, the evidence supports EEOC's claim that those employees eligible for retirement had vested rights to those benefits regardless of the existence of a severance pay policy. The eleven fifty-five year old employees named in this suit were adversely affected because they were forced to give up a newly created benefit given to other employees (severance pay) in exchange for benefits they already had (retirement).

Under the disparate impact theory, once the plaintiff establishes an adverse disparate impact on a protected class, here employees over fifty-five, the employer may defend by showing that the challenged employment practice is justified by business necessity or need. International Bro. of Teamsters v. United States, 431 U.S. 324, 97 S.Ct. 1843, 52 L.Ed.2d 396 (1977); Geller v. Markham, 635 F.2d 1027 (2nd Cir.1980). Defendant Borden's has adduced no evidence of business necessity. As was the case in Nashville Gas Co. v. Satty, 434 U.S. 136, 143, 98 S.Ct. 347, 352, 54 L.Ed.2d 356 (1977), a Title VII case where the Court said:

But we agree with the District Court in this case that since there was no proof of any business necessity adduced with respect to the policy in question, that court was entitled to `assume no justification exists.'

The defendant has articulated a nondiscriminatory reason for the challenged policy, i.e., to provide severance benefits to those terminated employees who were not otherwise provided for by retirement. While this reason might be a defense to a discriminatory treatment claim, Douglas v. Anderson, 656 F.2d 528 (9th Cir.1981), nondiscriminatory purpose is not the same as showing a business necessity. Such a defense (nondiscriminatory purpose) may show there was no improper motive, but as indicated by the Supreme Court in Teamsters, supra, improper motive is not an element of disparate impact claim.

The court finds that Borden's severance pay policy did have an adverse disparate impact on those employees over fifty-five years of age. The court also finds that there was no business necessity for this policy.

EXCEPTION TO THE ADEA

Defendant makes the claim that its severance pay policy is exempt from the ADEA as provided in 29 U.S.C. Sec. 623(f)(2), which in pertinent part provides:

It shall not be unlawful for an employer, ...

(2) to observe the terms of a bona fide seniority system or any bona fide employee benefit plan such as a retirement, pension, or insurance plan, which is not a subterfuge to evade the purposes of this act...

It was held in EEOC v. Home Ins. Co., 672 F.2d 252 (2nd Cir.1982), that:

the employer has the burden of proving that its age based actions fall within the exception provided by § 4(f)(2) 29 U.S.C. § 623(f)(2). EEOC v. Eastern Airlines, Inc., 645 F.2d 69 (5th Cir.1981) ... The § 4(f)

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