Betts v. Hamilton County Bd. of Mental Retardation and Developmental Disabilities

Citation848 F.2d 692
Decision Date03 June 1988
Docket NumberNos. 86-3676,86-4034,s. 86-3676
Parties46 Fair Empl.Prac.Cas. 1608, 46 Empl. Prac. Dec. P 38,023, 56 USLW 2711, 9 Employee Benefits Ca 2503 June M. BETTS, Plaintiff-Appellee, v. HAMILTON COUNTY BOARD OF MENTAL RETARDATION AND DEVELOPMENTAL DISABILITIES (86-3676) and Ohio Public Employees Retirement System of Ohio, (86-3676/4034), Defendants-Appellants.
CourtUnited States Courts of Appeals. United States Court of Appeals (6th Circuit)

Andrew I. Sutter, argued, Nancy J. Miller, Asst. Attys. Gen., Columbus, Ohio, for Ohio Public Employees Retirement System.

Arthur M. Ney, Jr., Thomas E. Deye, argued, Asst. Pros. Attys., Cincinnati, Ohio, for Hamilton County Bd. of Mental Retardation and Developmental Disabilities.

Robert F. Laufman, argued, Cincinnati, Ohio, for Betts.

Alfred Miller, Steven S. Honigman, Peter N. Greenwald, Nancy K. Eisner, New York City, American Ass'n. of Retired Persons, amicus curiae, for appellee.

Susan E. Rees, argued, EEOC, Gwen Young Reams, Washington, D.C., Johnny J. Butler, Mark S. Flynn, amicus EEOC, for appellee.

Before MERRITT, MARTIN and WELLFORD, Circuit Judges.

BOYCE F. MARTIN, Jr., Circuit Judge.

Defendants Hamilton County Board of Mental Retardation and Developmental Disabilities and Public Employees Retirement System of Ohio appeal from an order granting June Betts' motion for summary judgment and declaratory judgment in this age discrimination case.

Betts worked for the Mental Retardation Department of Hamilton County and was covered by the state retirement system and the Age Discrimination in Employment Act, 29 U.S.C. Secs. 621-34. Her work degenerated because of medical problems until she became disabled at age sixty-one. After negotiations, she was given the choice of two alternatives: an unpaid medical leave or length of service retirement. She was not offered disability retirement as a third choice. She was not allowed to have a disability pension because of a provision in Ohio's pension law preventing persons over sixty from receiving disability pensions and allowing them only to receive regular age retirement pensions. 1 Betts accepted length of service retirement and now receives $158.50 per month in benefits. A similarly situated younger employee would have been entitled to a disability benefit of $355.02 per month.

In granting Betts' motion for summary judgment, the district court held that the plan violated the Act. The district court found that the plan was discriminatory on its face and in its effect and did not qualify for the bona fide employee benefits plan exception to the Act. Specifically, the district court concluded that the plan did not qualify under the exception because it is not the type of plan covered by the exception and because the defendants did not act in observance of the plan when they forced Betts into retirement because of her age.

Under 29 U.S.C. Sec. 623(a)(1), an employer may not use age as a basis on which to discriminate against an employee in the compensation, terms, conditions, or privileges of employment. When there is direct evidence that a benefit plan discriminates on the basis of age, the plan is unlawful unless it falls within the bona fide employee benefit plan exception of 29 U.S.C. Sec. 623(f)(2). In 1978, Congress further limited this exception by providing that plans that fall within the exception are nevertheless unlawful if they permit or require the involuntary retirement of an individual because of age. 2 In amending section 623(f)(2), Congress expressly repudiated the Supreme Court's decision and reasoning in United Airlines v. McMann, 434 U.S. 192, 98 S.Ct. 444, 54 L.Ed.2d 402 (1977), which held that a bona fide benefit plan that treated older employees differently and predated the Act need not be justified by any business purpose. H.R.Conf.Rep. No. 95-950, 95th Cong., 2d Sess. 8, reprinted in 1978 U.S.Code Cong. & Admin.News 504, 529. In light of this legislative intent, the district court noted that the "critical factor in [the] determination of whether defendants' plan is the type of plan exempted is whether it is based upon age-related cost factors, as set forth in the regulatory interpretation of that section." 631 F.Supp. 1198, 1204 (S.D.Ohio 1986). See 29 C.F.R. 860.120(a)(1); 29 C.F.R. 860.120(f)(1)(iii). 3 We agree. Under the Act, an age-based benefit plan which denies disability retirement to older employees in favor of forcing length of service retirement is unlawful unless it can be justified by a substantial business purpose. As the Seventh Circuit recently declared, "where, as in the present case, the employer uses age--not cost, or years of service, or salary--as the basis for varying retirement benefits, he had better be able to prove a close correlation between age and cost if he wants to shelter in the safe harbor of [29 U.S.C. Sec. 623(f)(2) ]." Karlen v. City Colleges of Chicago, 837 F.2d 314, 319 (7th Cir.1988). Accord Equal Employment Opportunity Commission v. City of Mt. Lebanon, Pennsylvania, 842 F.2d 1480, 1493 (3d Cir.1988), ("By adding Sec. 623(f)(2), Congress intended to relieve employers of the burden of providing equal benefits to all employees only when the cost of providing lower benefits to older workers is approximately equal to the cost of providing greater benefits to younger workers.").

In her motion for summary judgment, Betts argued that the plan could not be justified by any business purpose. Under the disability plan, two employees with the same number of service years and the same final salary are treated indentically unless one of the two employees is 60 or older. Betts argued that there was no economic justification for providing the younger employee with disability benefits while denying disability benefits to the older employee. To the contrary, Betts suggested that this arrangement is likely to cost the employer more because the employee who becomes disabled at a younger age should draw more in benefits over the course of his lifetime than the employee who becomes disabled at 60 or older.

Despite having every opportunity, the defendants declined to introduce any cost figures or other economic justification for the different treatment of employees over sixty. Consequently, the district court reached its conclusion that "the benefit package ... is not justified by significant cost considerations" without the benefit of having the issue fully briefed by both parties. The defendants now argue that, at a minimum, this court should remand the case to allow them to put evidence before the district court concerning age-related cost considerations. The defendants do not contend that the district court prevented them from presenting evidence of cost considerations. Cf. Cipriano v. Board of Education of City School District, 785 F.2d 51 (2d Cir.1986). In fact, the record indicates that, despite Betts' arguments that the plan cannot be justified by cost considerations, the defendants made no effort to submit any evidence on the subject. Consequently, we have no choice but to affirm the district court's entry of summary judgment in favor of Betts; a non-moving party who, in the face of a motion for summary judgment, makes no effort to satisfy his burden of production is not entitled to a second opportunity to satisfy his burden once the motion has been granted.

Finally, we find that the district court did not abuse its descretion in awarding attorney's fees.

The judgment of the district court is affirmed.

WELLFORD, Circuit Judge, dissenting.

This is a difficult case in which plaintiff desires to obtain disability benefits which would give her a greater amount than would retirement benefits which she contends she was forced to seek. Betts was physically incapable of continuing public employment at age 61, and had only five years of active service with her employer at the time of retirement. She contends that the practice of defendants and their plan which carries out an Ohio statutory requirement violates the Age Discrimination in Employment Act (ADEA) (29 U.S.C. Sec. 621 et seq.).

The defendants maintain that the plaintiff voluntarily retired due to her diabetic condition, and thus has no basis for her action asserting age discrimination. They also contend that Betts chose to retire instead of undergoing a medical examination, the result of which may have given the parties other options less favorable to Betts than forced retirement. Defendants also maintain they are carrying out the terms of a bona fide employee benefit or retirement plan which is exempt from ADEA requirements. (29 U.S.C. Sec. 623(f)(2)). Defendants assert, in addition, that if plaintiff were, in effect, discriminated against under the present law and regulations, defendants' practice under the plan in question pre-existed ADEA and is lawful. To put it another way, discrimination, if any, was due to length of service rather than age and was thus not in contravention of ADEA. PERS, moreover, contends that it is not an "employer" within the meaning of ADEA, and thus should not, in any event, be liable for imposition of plaintiff's attorney fees. I agree with the contentions of the defendants and, therefore, dissent from the view of other members of the panel.

The district court concluded that the plan was discriminatory on the basis of age, although in some respects it appeared to be justified. The district court also found that the claimed exemption from ADEA sought by the defendants did not apply. The Equal Employment Opportunity Commission has intervened and was permitted to participate by brief and by argument. It supports the position of the plaintiff. Defendants challenge the regulatory interpretation relied upon by the district court, 29 C.F.R. 860.120(a)(1) (1979) 1, in its decision published at 631 F.Supp. 1198 (N.D.Ohio 1986). The district court discussed this regulatory interpretation in considering "the critical factor in our determination of whether defendants'...

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