Babcock & Wilcox Co. v. Department of Human Rights

• Decision Date: 13 October 1989
• Docket Number: No. 2-88-0735,2-88-0735
• Citation: 545 N.E.2d 799,189 Ill.App.3d 827
• Court: United States Appellate Court of Illinois
• Parties: , 137 Ill.Dec. 146, 62 Empl. Prac. Dec. P 42,392, 11 Employee Benefits Cas. 2090 BABCOCK & WILCOX COMPANY, Petitioner, v. THE DEPARTMENT OF HUMAN RIGHTS, The Human Rights Commission, et al., Respondents.

Page 799

545 N.E.2d 799

189 Ill.App.3d 827, 137 Ill.Dec. 146,

62 Empl. Prac. Dec. P 42,392,

11 Employee Benefits Cas. 2090

BABCOCK & WILCOX COMPANY, Petitioner, v. THE DEPARTMENT OF HUMAN RIGHTS, The Human Rights Commission et al., Respondents.

No. 2-88-0735.

Appellate Court of Illinois,

Second District.

Oct. 13, 1989.

Henry J. Close, Connolly, Oliver, Close & Worden, Rockford, William A. Ziegler (argued), Sullivan & Cromewell, New York City, for Babcock & Wilcox Co.

Office of General Counsel, Illinois Human Rights Com'n, Neil F. Hartigan, Atty. Gen., Deborah L. Ahlstrand (argued), Asst. Atty. Gen., Robert J. Ruiz, Sol. Gen., Chicago, for Illinois Human Rights Com'n, Dept. of Human Rights.

Carol H. Hallock, Samuel J. Castree, Jr. (argued), Williams & McCarthy, P.C., Rockford, for Edmund Henkelman, Oleta Britt, Elden Amans, Florence Maycraft, Dwight VanFleet, Gerald Stahl, James Breseman, Charles Rewerts, Godfrey Farrell, Thomas Ivy, John Downing, Arthur Helgerson, and Walter Pierce.

Smith, Hallock & Talley, Rockford, for John Berglund, Margaret Dreesen, and John Campbell.

Justice NASH delivered the opinion of the court:

This case was initiated by a complaint filed with the Illinois Human Rights Commission (the Commission) by the Department of Human Rights (the Department) on behalf of certain former employees of petitioner, the Babcock & Wilcox Company (B & W). The complaint charged that B & W violated section 2-102(A) of the Illinois Human Rights Act (Ill.Rev.Stat.1987, ch. 68, par. 2-102(A)) (Human Rights Act) by maintaining and implementing a severance pay policy which denied severance pay to complainants because they were eligible to retire on pensions, which was alleged to be an impermissible age-related criterion. The Department moved for partial summary judgment before the Commission, and B & W sought dismissal of the complaints. B & W now appeals from the order and decision of the Commission which granted the Department's motion for summary judgment, contending that (1) ineligibility for a termination allowance based on immediate eligibility for retirement benefits was not impermissible age discrimination because age was not the differentiating factor and there was no intent of the employer to discriminate because of age; (2) that the challenged action is exempt from the prohibitions of the Human Rights Act because it was taken pursuant to a retirement system that is not used as a subterfuge for and does not have the effect of unlawful discrimination; and (3) the claims of those complainants who were hourly employees were waived by a contract entered into between B & W and their collective bargaining representatives, the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) and its Local 528 (the Union). We reverse.

The individual complainants each filed charges with the Department alleging that B & W violated the Illinois Human Rights Act when it denied them severance pay on the ground they were eligible to retire and receive pensions. The Department filed a complaint with the Commission pursuant to section 7-102 of the Human Rights Act (Ill.Rev.Stat.1987, ch. 68, par. 7-102(F)) which alleged, and B & W's answer admitted, that complainants Roland Berglund, Margaret Dreesen, and John Campbell were each salaried employees of B & W, over the age of 40, with more than 15 years of service with B & W at the time it ceased its Illinois operations on October 31, 1983; the remaining complainants were B & W hourly employees between the ages of 40 and 70 at the time of their separation from B & W's employ and were production workers subject to the terms of a contract entered into on March 22, 1983, between B & W, UAW, and the Union, which provided for a separation allowance to employees meeting the eligibility requirements contained therein. The complaint further alleged that, but for B & W's claimed age-discriminatory separation allowance policy, and other acts of discrimination, the complainants would have been eligible for a separation allowance.

The Department moved for partial summary judgment, and B & W filed an affidavit in opposition to that motion and in support of its cross-motion for summary judgment. While B & W's counteraffidavit is part of the record on appeal, its cross-motion for summary judgment is not. The Department's motion and B & W's counteraffidavit show that in 1963 B & W acquired its Rockford, Illinois, facilities and its operations there were part of its Automated Machine Division (AMD). AMD performed nuclear core structural work and produced automated machines in the Rockford facilities. In the spring of 1981, the nuclear core structural work was transferred from AMD to another B & W group, and in 1982, the Rockford plant was transferred to Acme Precision Products (Acme), an unaffiliated company. Acme continued the automated machine activities formerly conducted by B & W, employing some former B & W salaried employees associated with the automated machine activities. Litigation respecting B & W's denial of termination benefits to those employees was resolved in Arnold v. Babcock & Wilcox Co. (1987), 154 Ill.App.3d 863, 107 Ill.Dec. 554, 507 N.E.2d 218, aff'd (1988), 123 Ill.2d 67, 121 Ill.Dec. 253, 525 N.E.2d 59.

B & W subsequently leased space from Acme at the Rockford plant for the purpose of performing its nuclear core structural work and all complainants continued their employment with B & W for that purpose until about October 31, 1983, when B & W ceased its Rockford operation. All of the complainants were denied a termination allowance by B & W.

Hourly Employees

On March 22, 1983, UAW and the Union entered into a contract with B & W on behalf of the hourly employees in contemplation of the plant closing, which provided that an active employee "who is not eligible for a normal, early, special early or disability retirement under the Service Benefit Pension Plan" would be entitled to a separation allowance based on years of service. A minimum of three years' seniority was necessary to be eligible for the allowance, and the agreement provided that the separation allowance would be paid in a lump sum and would not be considered as a payment in lieu of wages.

Generally, any person who was an hourly employee on December 31, 1975, became a member of the Company Service Benefit Pension Plan, and any person becoming an hourly employee thereafter became a member of the plan upon the latter of the date the employee completed one year of continuous service or reached age 25. An employee's membership in the plan ceased upon termination of his employment unless such termination was by reason of retirement. Eligibility for normal, early, and special early retirement was as follows:

"1. Normal Retirement: a member who is 65 years of age on the retirement date. Benefits equal a specified monthly amount for each year of credited service.

2. Early Retirement: a member who has at least 15 years of service and is age 55 or older on the retirement. Benefits are computed in accordance with the normal retirement provisions contained in the plan but are reduced by 4/10 of 1% for each month by which the member has not attained age 62 at the time of retirement.

3. Special Early Retirement: a member who has at least 10 years of service and age 62 or older on the retirement date.

4. Disability Retirement: a member who has at least 10 years of service and has a permanent and total disability on the retirement date. If the pension commenced prior to age 55, the maximum pension was the equivalent actuarial value to the maximum pension payable at age 55."

All of the hourly employee complainants were ages 55 through 64 except for Thomas Ivy, who was 65 years old, and, pursuant to the terms of the plant closing agreement, these employees were denied a termination allowance because they were eligible to retire. The collective bargaining agreement which was in effect from March 28, 1980, through October 31, 1983, has no provision for a separation allowance, and neither that contract nor the service benefit pension plan states that an hourly employee who is eligible for a retirement pension will not be eligible for a separation allowance.

Salaried Employees

At the time B & W ceased its Rockford operations, its policy and procedure No. 1414-A1 regarding termination benefits for salaried employees provided that the termination pay awarded was to assist financially those permanently terminated salaried employees during their reemployment adjustment period. Policy and procedure No. 1414-A1 provides that termination allowances were not available if a salaried employee was immediately eligible to retire pursuant to the employee retirement plan (the retirement plan). A salaried employee over 45 years of age was eligible for the termination allowance if he had one or more years of service; all salaried employees with five or more years of service were eligible regardless of age. A copy of policy and procedure No. 1414-A1 was available for employee inspection in the personnel department and had been in effect since at least 1960.

Membership in the salaried employees' retirement plan was generally the same as that under the hourly employees' pension plan and, like that plan, a salaried employee's membership ended upon termination of employment. Salaried employees were eligible for retirement benefits as follows:

"1. Normal Retirement: a member who is 65 years of age on the retirement date. The minimum annual pension payable to a member who has completed 15 or more years of credited service is $1,500; the minimum pension payable to a member with less than 15 years of service is equal to $1,500 multiplied by the ratio that years of credited service bears to 15.

2. Early Retirement: a member who has at least 15 years of service and age 50 or older on the retirement date. Benefits are computed in accordance with the normal retirement provisions...