E.E.O.C. v. Westinghouse Elec. Corp.

• Decision Date: 31 January 1991
• Docket Number: No. 86-1226,86-1226
• Citation: 925 F.2d 619
• Parties: 54 Fair Empl.Prac.Cas. 1659, 55 Empl. Prac. Dec. P 40,541, 59 USLW 2526, 13 Employee Benefits Ca 1640 EQUAL EMPLOYMENT OPPORTUNITY COMMISSION v. WESTINGHOUSE ELECTRIC CORPORATION, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

Page 619

925 F.2d 619

54 Fair Empl.Prac.Cas. 1659,

55 Empl. Prac. Dec. P 40,541, 59 USLW 2526,

13 Employee Benefits Ca 1640

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION v. WESTINGHOUSE ELECTRIC CORPORATION, Appellant.

No. 86-1226.

United States Court of Appeals Third Circuit.

Argued Oct. 20, 1987.

Decided Feb. 2, 1989.

Certiorari Granted Oct. 2, 1989.

On Remand from the Supreme Court

of the United States Oct. 2, 1989.

Argued on Remand from the Supreme Court Jan. 16, 1990.

Panel Rehearing Granted Sept. 20, 1990.

Decided Jan. 31, 1991.

Jerome J. Shestack (argued on Jan. 16, 1990 and at panel rehearing on Oct. 9, 1990), Deena Jo Schneider, Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., Andrew M. Kramer, Patricia A. Dunn, Glen D. Nager, Jones, Day, Reavis & Pogue, Washington, D.C., Henry W. Ewalt, Westinghouse Elec. Corp., Pittsburgh, Pa., Moses Lasky, Lasky, Haas, Cohler, & Munter, P.C., San Francisco, Cal., for appellant.

Vella M. Fink (argued on Jan. 16, 1990), Carolyn L. Wheeler (argued at panel rehearing on Oct. 9, 1990), Donald R. Livingston,

Gwendolyn Young Reams, E.E.O.C., Washington, D.C., for appellee

Ann Elizabeth Reesman, McGuiness & Williams, Washington, D.C., for amicus curiae, Equal Employment Advisory Council on behalf of appellant.

Cathy Ventrell-Monsees, American Ass'n of Retired Persons, Washington, D.C., for amicus curiae, American Ass'n of Retired Persons on behalf of appellee.

Argued Oct. 20, 1987.

Before HIGGINBOTHAM, Chief Judge, and SCIRICA and GARTH, Circuit Judges.

Argued on Remand from the Supreme Court Jan. 16, 1990.

Before HIGGINBOTHAM, Chief Judge, and SCIRICA and GARTH, Circuit Judges.

Reargued Oct. 9, 1990.

Before HIGGINBOTHAM, Chief Judge, and BECKER and GARTH, Circuit Judges.

OPINION OF THE COURT

GARTH, Circuit Judge.

This appeal arises from an action by the Equal Employment Opportunity Commission ("EEOC") against Westinghouse Electric Corporation based on the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. Secs. 621-634 (1988), which prohibits employers from discriminating on the basis of age with respect to an employee's compensation or the terms, conditions, or privileges of employment. Id. Sec. 623(a)(1). Following a bench trial, the district court found that Westinghouse had willfully violated ADEA through the use of discriminatory severance plans that provided severance benefits solely to laid-off employees who were not otherwise eligible to retire. The district court enjoined Westinghouse from denying severance pay to retirement-eligible employees. E.E.O.C. v. Westinghouse Electric, 632 F.Supp. 343, 350 (E.D.Pa.1986). On appeal, we affirmed the district court's determination that the plans violated ADEA but we remanded to the district court for reevaluation of the finding that Westinghouse had acted willfully. E.E.O.C. v. Westinghouse Electric, 869 F.2d 696, 699 (3d Cir.1989) ("Westinghouse II "). ¹

On October 2, 1989, the Supreme Court vacated our decision and remanded this case to us for further consideration in light of Public Employees Retirement System of Ohio v. Betts, 492 U.S. 158, 109 S.Ct. 2854, 106 L.Ed.2d 134 (1989). Westinghouse Electric v. E.E.O.C., --- U.S. ----, 110 S.Ct. 37, 107 L.Ed.2d 7 (1989). Upon review, we held that our original decision could not stand in light of the standards announced in Betts. In panel opinions dated July 5, 1990, one pertaining to the Pennsylvania action, No. 86-1226, the other pertaining to EEOC's New Jersey action, No. 87-5174, we entered judgment in favor of Westinghouse on all EEOC claims. E.E.O.C. v. Westinghouse Electric, 907 F.2d 1354 (3d Cir.1990), vacated, E.E.O.C. v. Westinghouse Electric, 917 F.2d 124 (3d Cir.1990); E.E.O.C. v. Westinghouse Electric, 907 F.2d 1365 (3d Cir.1990), vacated, E.E.O.C. v. Westinghouse Electric, 917 F.2d 123 (3d Cir.1990). We held, inter alia, that EEOC had not established that the Westinghouse Severance Plans were a subterfuge that discriminated against older workers as to recall rights. ²

We vacated the July 5, 1990 panel opinions, as noted above, in response to EEOC's Petition for Rehearing, which was based on the ground that the fringe benefits of Westinghouse's 1979 benefit plan were designed to impact on nonfringe terms of employment in an intentionally discriminatory manner. ³ Accordingly, EEOC sought a remand for findings that provisions of Westinghouse's 1979 plan concerning severance pay were intended to affect adversely the nonfringe benefits of older employees so as to constitute a subterfuge on the part of Westinghouse to evade ADEA.

We granted panel rehearing, see E.E.O.C. v. Westinghouse Electric, Nos. 86-1226 and 87-5174, Order (3d Cir. September 20, 1990) (unpublished), and, on October 9, 1990, the present panel heard oral argument that focused on EEOC's petition and request for remand.

I.

The facts of this case are fully set forth in our initial 1989 panel opinion. Westinghouse II, 869 F.2d 696 (3d Cir.1989). In brief, the 1979 Westinghouse severance plan denied severance pay to laid-off employees who were eligible for retirement. We will not discuss the substantive provisions of Westinghouse's 1982 plan, which, together with the 1979 plan was originally at issue, inasmuch as EEOC, in its Petition for Rehearing, has explicitly limited our concerns to whether the 1979 plan was a subterfuge to evade the purposes of ADEA. See supra note 3 (citing EEOC Petition for Rehearing at 3 n. 2).

In Westinghouse II, we had held that both the 1979 and the 1982 plans discriminated on the basis of age in violation of ADEA, Sec. 4(a)(1), 29 U.S.C. Sec. 623(a)(1). 869 F.2d at 699. We concluded that the district court had not erred in finding that under each plan, retirement-eligible employees were treated less favorably than younger employees, and that this less favorable treatment was based on age. Id. at 705-09. Moreover, we held that the district court correctly determined that the plans were not part of an integrated company plan to prevent "double-dipping." Id. at 707. Thus, Westinghouse had failed to set forth a legitimate, nondiscriminatory justification for the disparate treatment of retirement-eligible employees.

In addition, we held that the plans were not exempt under Sec. 4(f)(2) of ADEA, 29 U.S.C. Sec. 623(f)(2). 869 F.2d at 711. Section 4(f)(2) exempts, from the otherwise applicable requirements of Sec. 4(a)(1), any bona fide employee benefit plan that is not a subterfuge to evade the purposes of ADEA so long as the plan does not require or permit involuntary retirement. ⁴ An employee benefit plan may qualify for exemption under Sec. 4(f)(2), either if it itself satisfies Sec. 4(f)(2), or if it is part of an integrated benefit scheme that satisfies Sec. 4(f)(2). We found that the plans could not qualify for the Sec. 4(f)(2) exemption because they were not based on age-related cost factors. Id. (citing E.E.O.C. v. City of Mt. Lebanon, 842 F.2d 1480, 1491 n. 9 (3d Cir.1988), and Westinghouse I, 725 F.2d at 224). We decided, in addition, that the severance plans were not part of an integrated employee benefit scheme because, we concluded, severance pay is a fringe benefit for which early retirement benefits cannot be a substitute. Id. at 710 (citing Westinghouse I, 725 F.2d at 225). Finally, we remanded for the district court to reconsider those factors on which it relied in concluding that Westinghouse had acted willfully. Id. at 714.

In Betts, the Supreme Court addressed the question whether the Sec. 4(f)(2) exemption applied to a disability retirement plan that was available only to employees who retired before reaching age sixty. The Court declined to decide the precise meaning of the phrase "any bona fide employee benefit plan, such as a retirement, pension, or insurance plan," found in Sec. 4(f)(2). 109 S.Ct. at 2865 n. 6. The Court held, however, that the statutory language does not limit the exemption to "plans in which all age-based reductions in benefits are justified by age-related cost considerations." Id. at 2864-65 (rejecting Westinghouse I, 725 F.2d at 224). Moreover, the Court decided that the EEOC regulation, which provides that a plan is "not a subterfuge" only if lesser benefits are justified by age-related cost factors, 29 C.F.R. Sec. 1625.10(d) (1988), was contrary to the plain language of the statute and invalid. 109 S.Ct. at 2863, 2865 (rejecting Mt. Lebanon, 842 F.2d at 1489).

The Court reached several conclusions regarding the precise meaning of "subterfuge" in Sec. 4(f)(2). First, it reaffirmed its holding in United Air Lines, Inc. v. McMann, 434 U.S. 192, 203, 98 S.Ct. 444, 450, 54 L.Ed.2d 402 (1977), that an employee plan adopted prior to the enactment of ADEA cannot be a subterfuge. 109 S.Ct. at 2861. The Court noted, however, that to the extent a post-ADEA provision of a plan "increased the age-based disparity caused by the pre-Act age limitation, McMann does not insulate it from challenge." Id. at 2862.

Second, the Court reiterated its statement in McMann that " 'subterfuge' means 'a scheme, plan, stratagem, or artifice of evasion,' which, in the context of Sec. 4(f)(2), connotes a specific 'intent ... to evade a statutory requirement.' " Id. at 2863 (quoting McMann, 434 U.S. at 203, 98 S.Ct. at 450).

Third, the Court noted that a post-Act plan cannot be a subterfuge unless "it discriminates in a manner forbidden by the substantive provisions of the Act." Id. 109 S.Ct. at 2865-66. Noting that any benefit plan that discriminates against older workers would violate Sec. 4(a)(1) (employers prohibited from discriminating on the basis of age with respect to compensation, terms, privileges of employment), the Court stated that both Sec. 4(a)(1) and Sec. 4(f)(2) could be given effect only if Sec. 4(f)(2) is viewed as exempting bona fide benefit plans that are not "a method of discriminating in other, nonfringe-benefit aspects of the employment relationship." Id. at 2866 (citing 29 U.S.C. Sec. 623(a)(1), (f)(2)). The...