Arizona Governing Committee For Tax Deferred Annuity and Deferred Compensation Plans v. Norris

• Decision Date: 06 July 1983
• Docket Number: No. 82-52,82-52
• Parties: ARIZONA GOVERNING COMMITTEE FOR TAX DEFERRED ANNUITY AND DEFERRED COMPENSATION PLANS, etc., et al., Petitioners, v. Nathalie NORRIS, etc
• Court: U.S. Supreme Court

463 U.S. 1073

103 S.Ct. 3492

77 L.Ed.2d 1236

ARIZONA GOVERNING COMMITTEE FOR TAX DEFERRED ANNUITY AND DEFERRED COMPENSATION PLANS, etc., et al., Petitioners,

v Nathalie NORRIS, etc.

No. 82-52.

July 6, 1983.

PER CURIAM.

Petitioners in this case administer a deferred compensation plan for employees of the State of Arizona. The respondent class consists of all female employees who are enrolled in the plan or will enroll in the plan in the future. Certiorari was granted to decide whether Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e et seq., prohibits an employer from offering its employees the option of receiving retirement benefits from one of several companies selected by the employer, all of which pay a woman lower monthly retirement benefits than a man who has made the same contributions; and whether, if so, the relief awarded by the District Court was proper. The Court holds that this practice does constitute discrimination on the basis of sex in violation of Title VII, and that all retirement benefits derived from contributions made after the decision today must be cal-

culated without regard to the sex of the beneficiary. This position is expressed in Parts I, II, and III of the opinion of Justice MARSHALL, post, Pp. 1076-1091, which are joined by Justice BRENNAN, Justice WHITE, Justice STEVENS, and Justice O'CONNOR. The Court further holds that benefits derived from contributions made prior to this decision may be calculated as provided by the existing terms of the Arizona plan. This position is expressed in Part III of the opinion of Justice POWELL, post, p. 1105, which is joined by THE CHIEF JUSTICE, Justice BLACKMUN, Justice REHNQUIST, and Justice O'CONNOR. Accordingly, the judgment of the Court of Appeals is affirmed in part, reversed in part, and the case is remanded for further proceedings consistent with this opinion. The Clerk is directed to issue the judgment August 1, 1983.

It is so ordered.

Justice MARSHALL, with whom Justice BRENNAN, Justice WHITE, Justice STEVENS, and Justice O'CONNOR join as to Parts I, II, and III, concurring in the judgment in part, and with whom Justice BRENNAN, Justice WHITE, and Justice STEVENS join as to Part IV.

In Los Angeles Dept. of Water & Power v. Manhart, 435 U.S. 702, 98 S.Ct. 1370, 55 L.Ed.2d 657 (1978), this Court held that Title VII of the Civil Rights Act of 1964 prohibits an employer from requiring women to make larger contributions in order to obtain the same monthly pension benefits as men. The question presented by this case is whether Title VII also prohibits an employer from offering its employees the option of receiving retirement benefits from one of several companies selected by the employer, all of which pay a woman lower monthly benefits than a man who has made the same contributions.

I

A.

Since 1974 the State of Arizona has offered its employees the opportunity to enroll in a deferred compensation plan ad-

ministered by the Arizona Governing Committee for Tax Deferred Annuity and Deferred Compensation Plans (Governing Committee). Ariz.Rev.Stat.Ann. § 38-871 et seq.; Ariz.Regs. 2-9-01 et seq. Employees who participate in the plan may thereby postpone the receipt of a portion of their wages until retirement. By doing so, they postpone paying federal income tax on the amounts deferred until after retirement, when they receive those amounts and any earnings thereon.¹

After inviting private companies to submit bids outlining the investment opportunities that they were willing to offer State employees, the State selected several companies to participate in its deferred compensation plan. Many of the companies selected offer three basic retirement options: (1) a single lump-sum payment upon retirement, (2) periodic payments of a fixed sum for a fixed period of time, and (3) monthly annuity payments for the remainder of the employee's life. When an employee decides to take part in the deferred compensation plan, he must designate the company in which he wishes to invest his deferred wages. Employees must choose one of the companies selected by the State to participate in the plan; they are not free to invest their deferred compensation in any other way. At the time an employee enrolls in the plan, he may also select one of the payout options offered by the company that he has chosen, but when he reaches retirement age he is free to switch to one of the company's other options. If at retirement the employee decides to receive a lump-sum payment, he may also purchase any of the options then being offered by the other companies participating in the plan. Many employees find an annuity contract to be the most attractive option, since receipt of a lump sum upon retirement requires payment of taxes on

the entire sum in one year, and the choice of a fixed sum for a fixed period requires an employee to speculate as to how long he will live.

Once an employee chooses the company in which he wishes to invest and decides the amount of compensation to be deferred each month, the State is responsible for withholding the appropriate sums from the employee's wages and channelling those sums to the company designated by the employee. The State bears the cost of making the necessary payroll deductions and of giving employees time off to attend group meetings to learn about the plan, but it does not contribute any monies to supplement the employees' deferred wages.

For an employee who elects to receive a monthly annuity following retirement, the amount of the employee's monthly benefits depends upon the amount of compensation that the employee deferred (and any earnings thereon), the employee's age at retirement, and the employee's sex. All of the companies selected by the State to participate in the plan use sex-based mortality tables to calculate monthly retirement benefits. App. 12. Under these tables a man receives larger monthly payments than a woman who deferred the same amount of compensation and retired at the same age, because the tables classify annuitants on the basis of sex and women on average live longer than men.² Sex is the only factor that the tables use to classify individuals of the same age; the tables do not incorporate other factors correlating with longevity such as smoking habits, alcohol consumption, weight, medical history, or family history. App. 13.

As of August 18, 1978, 1,675 of the State's approximately 35,000 employees were participating in the deferred compensation plan. Of these 1,675 participating employees, 681 were women, and 572 women had elected some form of future annuity option. As of the same date, 10 women participating in the plan had retired, and four of those 10 had chosen a life-time annuity. App. 6.

B

On May 3, 1975, respondent Nathalie Norris, an employee in the Arizona Department of Economic Security, elected to participate in the plan. She requested that her deferred compensation be invested in the Lincoln National Life Insurance Company's fixed annuity contract. Shortly thereafter Arizona approved respondent's request and began withholding $199.50 from her salary each month.

On April 25, 1978, after exhausting administrative remedies, respondent brought suit in the United States District Court for the District of Arizona against the State, the Governing Committee, and several individual members of the Committee. Respondent alleged that the defendants were violating § 703(a) of Title VII of the Civil Rights Act of 1964, 78 Stat. 255, as amended, 42 U.S.C. § 2000e-2(a), by administering an annuity plan that discriminates on the basis of sex. Respondent requested that the District Court certify a class under Fed.Rules Civ.Proc. 23(b)(2) consisting of all female employees of the State of Arizona "who are enrolled or will in the future enroll in the State Deferred Compensation Plan." Complaint ¶ V.

On March 13, 1980, the District Court certified a class action and granted summary judgment for the plaintiff class,³ holding that the State's plan violates Title VII.⁴ 486 F.

Supp. 645. The court directed petitioners to cease using sex-based actuarial tables and to pay retired female employees benefits equal to those paid to similarly situated men.⁵ The United States Court of Appeals for the Ninth Circuit affirmed, with one judge dissenting. 671 F.2d 330 (1982). We granted certiorari to decide whether the Arizona plan violates Title VII and whether, if so, the relief ordered by the District Court was proper. --- U.S. ----, 103 S.Ct. 205, 74 L.Ed.2d 164 (1982).

II

We consider first whether petitioners would have violated Title VII if they had run the entire deferred compensation plan themselves, without the participation of any insurance companies. Title VII makes it an unlawful employment practice "to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's race, color, religion, sex or national origin." 42 U.S.C. § 2000e-2(a)(1). There is no question that the opportunity to participate in a deferred compensation plan constitutes a "conditio[n] or privileg[e] of employment," ⁶ and that retirement benefits constitute a form of "compensation." ⁷ The issue we must decide is whether it is discrimination "because of . . . sex" to pay a retired woman lower monthly benefits than a man who deferred the same amount of compensation.

In Los Angeles Dept. of Water & Power v. Manhart, 435 U.S. 702, 98 S.Ct. 1370, 55 L.Ed.2d 657 (1978), we held that an employer had violated Title VII by requiring its female employees to make larger contributions to a pension fund than male employees in order to obtain the same monthly benefits upon retirement. Noting that Title VII's "focus on the individual is unambiguous," id., at 708, 98 S.Ct., at 1375, we emphasized that the statute prohibits an employer from treating some employees less favorably than others because of their race, religion, sex, or national origin. Id....