Alford v. City of Lubbock, Tex.

• Citation: 664 F.2d 1263
• Decision Date: 04 January 1982
• Docket Number: No. 80-1192,80-1192
• Parties: 27 Fair Empl.Prac.Cas. 1075, 27 Empl. Prac. Dec. P 32,386, 2 Employee Benefits Ca 2249 Truett ALFORD, et al., Plaintiffs-Appellees, v. CITY OF LUBBOCK, TEXAS and Texas Municipal Retirement System, Defendants-Appellants. . Unit A *
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1263

664 F.2d 1263

27 Fair Empl.Prac.Cas. 1075,

27 Empl. Prac. Dec. P 32,386,

2 Employee Benefits Ca 2249

Truett ALFORD, et al., Plaintiffs-Appellees, v. CITY OF LUBBOCK, TEXAS and Texas Municipal Retirement System, Defendants-Appellants.

No. 80-1192.

United States Court of Appeals, Fifth Circuit.

Unit A ^*

Jan. 4, 1982.

James P. Brewster, Asst. City Atty., John C. Ross, City Atty., David W. Reagan, Asst. City Atty., Lubbock, Tex., for city of Lubbock.

Gaynor Kendall, Austin, Tex., for Texas Municipal Retirement System.

Thomas J. Griffith, Ralph H. Brock, Lubbock, Tex., for plaintiffs-appellees.

Appeals from the United States District Court for the Northern District of Texas.

Before INGRAHAM, POLITZ and WILLIAMS, Circuit Judges.

JERRE S. WILLIAMS, Circuit Judge:

Appellant City of Lubbock, Texas (City) elected in 1950 to participate in a retirement and pension program created by the Texas Legislature and administered by an agency of the State of Texas, appellant Texas Municipal Retirement System (TMRS). The TMRS retirement plan, Tex.Rev.Civ.Stat.Ann. art. 6243h, § VII(1)(a) (Vernon 1970 & Supp. 1980-1981), provides that a covered employee is eligible for service retirement once the employee has attained the age of sixty and has completed fifteen years of service. Most Texas cities, prior to changes in federal age discrimination law, ¹ required their employees to retire at the end of the month in which they reached age sixty-five. Not wishing to administer contributions from and, eventually, refunds to employees who could not expect to meet the fifteen-year service requirement, TMRS prior to 1979 excluded from membership any employee hired after his fiftieth birthday. ² 1949 Tex.Gen.Laws, ch. 24, § III(2)(b) at 27. In addition to its voluntary participation in TMRS, the City has followed a separate policy of compensating in cash all employees who retire under the TMRS program for up to ninety days of unused sick leave.

On December 31, 1977, the last day of the year in which they reached sixty-five, appellees Truett Alford and Walter Nierlich were involuntarily retired from their jobs with the City. Because each man had been over age fifty when hired, neither was eligible for membership in TMRS and neither received any pension benefits. Moreover, the City refused to pay them for their unused sick leave even though both had accumulated more than ninety days. Alford had worked for the City twelve years and ten months at the time of his retirement. Nierlich, however, had hired on at age fifty in November of 1962 and thus had been employed by the City fifteen years and one month at the time of his involuntary retirement. Since 1965, the City has followed the rather unusual practice of retiring employees at the end of the calendar year, rather than at the end of the month, in which the employee turns sixty-five. ³ Thus, it has long been possible that an employee hired just after his fiftieth birthday could work over fifteen years and yet not be eligible for retirement under TMRS. This explains why appellant Nierlich worked over fifteen years but was not in the retirement system.

Alford and Nierlich brought suit in federal district court against the City and TMRS, alleging that the defendants' actions in retiring them with no pension benefits and refusing them cash compensation for their accumulated sick leave violated the equal protection clause of the Fourteenth Amendment and the Age Discrimination in Employment Act (ADEA), 29 U.S.C. §§ 621-634. They also asserted pendent jurisdiction over claims arising under article 1, section 3 of the Texas Constitution and under Tex.Rev.Civ.Stat.Ann. art. 6252-14 (Vernon 1970). ⁴

The district court held that the exclusion of Alford and Nierlich from the TMRS pension plan had not violated the ADEA, but nevertheless had denied appellants the equal protection of the laws under both the federal and state constitutions. Alford v. City of Lubbock, 484 F.Supp. 1001, 1005-07 (N.D.Tex.1979). It ordered the City and TMRS to pay appellees their pension benefits as if they had been members of TMRS since their hiring, on the condition that the two former employees make contributions equal to those they would have made had they belonged to the plan from the beginning. Id. at 1007. The district court also held that the City's denial of cash compensation for accrued sick leave violated the ADEA and ordered the City to pay both Alford and Nierlich ninety days of accumulated sick leave with interest. Id. at 1005. On appeal, the City and the TMRS challenge the district court's decision that the involuntary retirement of appellants with no pension benefits constituted a denial of equal protection. They also maintain that their refusal to pay older workers not eligible for a TMRS pension for accrued sick leave does not violate the ADEA.

I. EXCLUSION FROM THE TMRS PENSION PLAN

A. The Equal Protection Clause.

Alford and Nierlich alleged that their exclusion from the City's TMRS pension plan denied them the equal protection of the laws as guaranteed by the Fourteenth Amendment to the Constitution of the United States. As the district court correctly pointed out, 484 F.Supp. at 1005-06, exclusion of the City employees from a pension program devised by a state legislature, administered by a state administrative agency, and adopted by a political subdivision of the state as part of its employee benefit scheme certainly constitutes the state involvement required to draw our scrutiny under the Fourteenth Amendment. See Burton v. Wilmington Parking Authority, 365 U.S. 715, 721-22, 81 S.Ct. 856, 860, 6 L.Ed.2d 45 (1961).

We also agree with the district court's determination that the proper standard under which we must review an allegation of age discrimination under the equal protection clause is the "rational basis" test. Massachusetts Board of Retirement v. Murgia, 427 U.S. 307, 312, 96 S.Ct. 2562, 2566, 49 L.Ed.2d 520 (1976). Accordingly, we must determine whether the Texas Legislature's exclusion of employees over age fifty from the TMRS is rationally related to a legitimate, articulated state purpose. E. g., San Antonio Independent School District v. Rodriguez, 411 U.S. 1, 17, 93 S.Ct. 1278, 1288, 36 L.Ed.2d 16 (1973); Seoane v. Ortho Pharmaceuticals, Inc., 660 F.2d 146 at 150 (5th Cir. 1981). As the Supreme Court characterized this type of inquiry in Murgia, however, it "employs a relatively relaxed standard reflecting the Court's awareness that the drawing of lines that create distinctions is peculiarly a legislative task and an unavoidable one. Perfection in making the necessary classifications is neither possible nor necessary." 427 U.S. at 314, 96 S.Ct. at 2567. With this admonition in mind, we conclude that the district court erred in holding that the TMRS program denied Alford and Nierlich the equal protection of the laws.

The City and TMRS adduced at trial, and have reiterated in this appeal, several reasons for the exclusion of employees hired after the age of fifty. First, they submit that participation in a pension plan by employees who have put in only a few years of service produces monthly payments so small as to be virtually meaningless. Second, they insist that the fifteen-year service requirement ensures that the pension program will serve as an incentive to younger employees and a reward to those of long standing. Third, they suggest that the administrative costs of including older newly-hired workers are prohibitive, especially when weighed against small monthly benefits resulting from such short-term deductions, and can only dissipate the funds available for providing fringe benefits to employees with long service. Finally, they remind us that the legislature is the appropriate body to draw the line between those employees who are to be rewarded for their lengthy tenure and those who are to be deemed as having not labored long enough.

As the district court noted in refuting this last contention, the social policies adopted by state legislatures remain subject to judicial scrutiny under the rational basis standard. 484 F.Supp. at 1007 (citing Murgia, supra, 427 U.S. at 312, 96 S.Ct. at 2566). We find, however, that the actions of the Texas Legislature in this instance are commensurate with our standard of limited review. "State legislatures are presumed to have acted within their constitutional power despite the fact that, in practice, their laws result in some inequality. A statutory discrimination will not be set aside if any state of facts may be conceived to justify it." McGowen v. Maryland, 366 U.S. 420, 425-26, 81 S.Ct. 1101, 1105, 6 L.Ed.2d 393 (1961).

The City and TMRS introduced persuasive testimony at trial to show that pension plans prescribing a term of years in service as a prerequisite to participation are a commonly accepted inducement for steady employment. Even without such evidence, we reasonably may suppose that the prospect of earning membership in a matched-funds benefits program, the participatory right vesting only after fifteen years of service, may not only attract capable employees but also may encourage them to remain. Having remained for the required fifteen years, the senior employee is rewarded with a fully vested interest in a mounting schedule of benefits culminating in a secure retirement. It must be remembered that the TMRS plan does not discriminate against older employees as a class; they are, in fact, its principal beneficiaries. Rather, it excludes only the newly-hired older worker who, the Legislature has determined, does not require the added incentive nor, having spent much of his working career elsewhere, merit the added reward.

Alford and Nierlich have argued cogently that the hardships imposed upon them by this plan are not essential to the state's aims. They have cast doubt upon the argument that a fifteen-year vesting requirement fosters continuity in employment by introducing evidence to show that the...