724 F.2d 1390 (9th Cir. 1984), 83-1701, E.E.O.C. v. Borden's, Inc.

Docket Nº:CA No. 83-1701.
Citation:724 F.2d 1390
Party Name:5 Employee Benefits Ca 1122 EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff-Appellee, v. BORDEN'S, INC., a corporation, Defendant-Appellant, International Brotherhood of Teamsters, Chauffeurs and Warehousemen, Local 274, and International Union of Operative Engineers, Local 428, Defendants.
Case Date:January 31, 1984
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

Page 1390

724 F.2d 1390 (9th Cir. 1984)

5 Employee Benefits Ca 1122



BORDEN'S, INC., a corporation, Defendant-Appellant,

International Brotherhood of Teamsters, Chauffeurs and

Warehousemen, Local 274, and International Union

of Operative Engineers, Local 428, Defendants.

CA No. 83-1701.

United States Court of Appeals, Ninth Circuit

January 31, 1984

Argued and Submitted Nov. 16, 1983.

Page 1391

Dianna B. Johnston, Barbara Neilson, McGuiness & Williams, Washington, D.C., for plaintiff-appellee.

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

Appeal from the United States District Court for the District of Arizona.

Before GOODWIN, SCHROEDER and FARRIS, Circuit Judges.

FARRIS, Circuit Judge:


Borden closed its dairy plant in Phoenix, Arizona on December 31, 1979, and fired the employees, except for a few managers. Discharged employees received severance pay according to a policy executed in November, 1979, as an addendum to the collective bargaining agreements reached that year. Under the terms of the policy, employees eligible for retirement were not entitled

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to severance pay. Eligibility for retirement came at age 55 and after 10 years service with Borden. 1

Sixteen of the 48 employees at the Phoenix plant were age 55 or over. None of these sixteen received severance pay. Fifteen were disqualified because they were eligible for retirement, and the other because he had only worked at the plant for several months. Three other employees besides those age 55 were denied severance pay, for reasons not apparent from the record.

On January 7, 1981, the Equal Employment Opportunity Commission filed suit against Borden and the two labor unions that represented workers at the Phoenix plant. (The unions signed a consent decree with the EEOC and were dropped from the suit.) The Commission alleged that the denial of severance pay to employees eligible for retirement violated the Age Discrimination in Employment Act, 29 U.S.C. Sec. 621 et seq. On cross motions for summary judgment the United States District Court of Arizona, per Judge Cordova, held for the EEOC. The court found that the severance pay policy had a discriminatory impact on older workers and was not a "bona fide employee benefit plan" exempted from the Act's strictures by 29 U.S.C. Sec. 623(f)(2). 551 F.Supp. 1095 (D.Ariz.1982). Borden has appealed. The Equal Employment Advisory Council, an association of employers, has filed an amicus brief supporting Borden. We affirm.


This appeal presents two questions: 1) whether Borden's policy of denying severance pay to employees eligible for retirement discriminates on the basis of age; 2) whether Borden's severance pay policy qualifies for the "bona fide employee benefit plan" exception under the Age Discrimination in Employment Act, 29 U.S.C. Sec. 623(f)(2).


A. Standard of Review

The facts are not in dispute, though the parties characterize them differently. Neither party asserts that summary judgment was inappropriate. The district court interpreted the statute and applied it to stipulated facts. The standard of review is de novo. Turner v. Prod, 707 F.2d 1109, 1114 (9th Cir.1983). See also M/V American Queen v. San Diego Marine Construction Corp., 708 F.2d 1483, 1487 (9th Cir.1983): "In reviewing a grant of summary judgment, our task is identical to that of the trial court."

B. Age discrimination

1. Introduction

The Age Discrimination in Employment Act forbids an employer to "discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's age." 29 U.S.C. Sec. 623(a)(1). Plaintiffs alleging age discrimination can proceed under "disparate treatment" or "disparate impact" theories. Douglas v. Anderson, 656 F.2d 528, 531 & n. 1 (9th Cir.1981). The chief difference between them is that disparate treatment involves discriminatory intent, whereas intent need not be shown in a disparate impact case. International Brotherhood of Teamsters v. United States, 431 U.S. 324, 335 n. 15, 97 S.Ct. 1843, 1854 n. 15, 52 L.Ed.2d 396 (1977). Many disparate treatment cases, including McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973), concern a decision to hire, fire, or promote a particular job applicant or employee. Since these disputes usually focus on the employer's true motive, proof of discriminatory intent is crucial. By contrast, disparate impact cases typically involve an employment test or criterion or other general policy. Beginning with Griggs v. Duke Power Co., 401 U.S. 424, 431-2, 91 S.Ct. 849, 853-4, 28 L.Ed.2d 158 (1971), the Supreme Court has

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struck down employment policies that unduly harm the members of a protected group, regardless of the employer's intent. See also Albemarle Paper Co. v. Moody, 422 U.S. 405, 95 S.Ct. 2362, 45 L.Ed.2d 280 (1975); Dothard v. Rawlinson, 433 U.S. 321, 97 S.Ct. 2720, 53 L.Ed.2d 786 (1977); Connecticut v. Teal, 457 U.S. 440, 102 S.Ct. 2525, 73 L.Ed.2d 130 (1982).

The EEOC raised both sorts of claims. The district court rejected the disparate treatment argument, stated that "[p]laintiff's arguments are more properly considered under a disparate impact theory," 551 F.Supp. at 1098, and found that Borden had discriminated against its older workers. Id. at 1099. While we do not disagree with the district court's disparate impact analysis, we also hold that the EEOC is entitled to prevail under the disparate treatment theory.

2. Disparate treatment

Borden's severance pay policy denied a benefit to certain employees because they were age 55 or older. The discrimination was intentional in the sense that Borden purposefully drafted its severance pay policy to have this effect. We need look no further for the intent necessary to support a finding of discrimination under the disparate treatment theory. In so holding we adhere to our approach in Norris v. Arizona Governing Committee, 671 F.2d 330 (9th Cir.1982), aff'd. in relevant part, --- U.S. ----, 103 S.Ct. 3492, 77 L.Ed.2d 1236 (1983), a case that, like the present one, concerns employee benefits. There we stated that "facially discriminatory practices are intentional discrimination for the purposes of Title VII regardless of the subjective motivation [citations omitted]. Thus, because on their face the practices in question treat men and women differently, Norris need not prove Arizona's animus in adopting the plan." Id. at 334. Similarly, we do not require a showing of Borden's animus or ill will toward older people. See Gerdom v. Continental Airlines, Inc., 692 F.2d 602, 608 (9th Cir.1982) (en banc), cert. dismissed, --- U.S. ----, 103 S.Ct. 1534, 75 L.Ed.2d 954 (1983).

Borden and the amicus argue that the severance policy distinguished employees on the basis of their retirement status, and not solely because of age. But this fact does not suffice to defeat a claim of disparate treatment under the ADEA. We have twice held that an employer discriminates "because of" age whenever age is a "but for" cause of discrimination. Cancellier v. Federated Department Stores, 672 F.2d 1312, 1315-6 (9th Cir.), cert. denied, 459 U.S. 859, 103 S.Ct. 131, 74 L.Ed.2d 113 (1982); Kelly v. American Standard, Inc., 640 F.2d 974, 984 (9th Cir.1981). 2 Age was a "but for" cause or necessary condition for the denial of severance pay to Borden's retireable employees, since only employees 55 or older were eligible for retirement. Borden's distinction between age and retireability is especially hollow here, where 15 out of the 16 employees 55 or older had served the 10 years necessary to qualify them for retirement.

Borden and the amicus attempt to justify the severance policy by pointing out that each retiree will receive benefits in the form of insurance coverage and pension income that could be worth considerably more than the severance pay he would have received. Therefore, they argue, the severance plan has no adverse effect on retireable employees and does not discriminate against them. The district court rejected this argument:

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 .... The eleven fifty-five year old employees named in this suit were adversely

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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).

551 F.Supp. at 1098. We agree with the district court's clear and persuasive response. We write further to clarify the legal standard that leads us to reject the justification Borden offers for its policy. Many cases applying the disparate treatment theory, citing McDonnell Douglas Corp. v. Green, 411 U.S. at 802, 93 S.Ct. at 1824, require the employer to give a "legitimate, nondiscriminatory reason" for his or her behavior. See, e.g., Limongelli v. Postmaster General, 707 F.2d 368, 372 (9th Cir.1983); Sutton v. Atlantic Richfield Co., 646 F.2d 407, 411-12 (9th Cir.1981). Though we proceed under the theory of disparate treatment, we need not follow the literal language of McDonnell Douglas. "The method suggested in McDonnell Douglas ... was never intended to be rigid, mechanized, or ritualistic." Furnco Construction Corp. v. Waters, 438 U.S. 567, 577, 98 S.Ct. 2943, 2949, 57 L.Ed.2d 957 (1978). The proper standard for evaluating an employer's proposed justification depends on the facts and not only on whether the case is classified as one of disparate treatment or disparate impact. In McDonnell Douglas the Court was trying to isolate the predominant motive in a personnel decision involving several factors. Here we are...

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