Equal Emp't Opportunity Comm'n v. Balt. Cnty.

• Decision Date: 31 March 2014
• Docket Number: No. 13–1106.,13–1106.
• Citation: 747 F.3d 267
• Court: U.S. Court of Appeals — Fourth Circuit
• Parties: EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff–Appellee, v. BALTIMORE COUNTY, Defendant–Appellant, and American Federation Of State, County & Municipal Employees Local # 921; Baltimore County Federation of Public Employees, FMT, AFT, AFL–CIO; Baltimore County Sheriff's office Fraternal Order of Police/Lodge Number 25; Baltimore County Lodge No. 4 Fraternal Order of Police Incorporated; Baltimore County Federation of Public Health Nurses; Baltimore County Professional Fire Fighters Association International Association Fire Fighters Local 1311–AFL–CIO, Defendants.

747 F.3d 267

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff–Appellee,

v. BALTIMORE COUNTY, Defendant–Appellant,andAmerican Federation Of State, County & Municipal Employees Local # 921; Baltimore County Federation of Public Employees, FMT, AFT, AFL–CIO; Baltimore County Sheriff's office Fraternal Order of Police/Lodge Number 25; Baltimore County Lodge No. 4 Fraternal Order of Police Incorporated; Baltimore County Federation of Public Health Nurses; Baltimore County Professional Fire Fighters Association International Association Fire Fighters Local 1311–AFL–CIO, Defendants.

No. 13–1106.

United States Court of Appeals, Fourth Circuit.

Argued: Jan. 30, 2014.

Decided: March 31, 2014.

ARGUED:James Joseph Nolan, Jr., Baltimore County Office of Law, Towson, Maryland, for Appellant. Paul D. Ramshaw, U.S. Equal Employment Opportunity Commission, Washington, D.C., for Appellee. ON BRIEF:Michael E. Field, Baltimore County Office of Law, Towson, Maryland, for Appellant. P. David Lopez, Lorraine C. Davis, Daniel T. Vail, Office of General Counsel, U.S. Equal Employment Opportunity Commission, Washington, D.C., for Appellee.

Before GREGORY, SHEDD, and KEENAN, Circuit Judges.

Affirmed by published opinion. Judge KEENAN wrote the opinion, in which Judge GREGORY and Judge SHEDD joined.

BARBARA MILANO KEENAN, Circuit Judge:

In this interlocutory appeal, we consider whether an employee retirement benefit plan (the plan) maintained by Baltimore County, Maryland (the County) unlawfully discriminated against older County employees based on their age, in violation of the Age Discrimination in Employment Act (ADEA), 29 U.S.C. §§ 621 through 634. The challenged plan provision involved the different rates of employee contribution to the plan, which required that older employees pay a greater percentage of their salaries based on their ages at the time they enrolled in the plan.

The district court initially determined that the plan did not violate the ADEA, holding that the disparate rates were based on permissible financial objectives involving the number of years an employee would work before reaching “retirement age.” In the first appeal of this matter, we concluded that the district court failed to consider a critical component of the plan regarding retirement eligibility, namely, that an employee's years of service could qualify the employee to retire irrespective of the employee's age. Thus, we vacated the judgment and remanded the case for further consideration.

On remand following the first appeal, the district court concluded that the plan violated the ADEA, and awarded partial summary judgment in favor of the Equal Employment Opportunity Commission (EEOC) on the issue of the County's liability. The County filed this interlocutory appeal. Upon our review, we hold that the district court correctly determined that the County's plan violated the ADEA, because the plan's employee contribution rates were determined by age, rather than by any permissible factor. We further conclude that the ADEA's “safe harbor provision” applicable to early retirement benefit plans does not shield the County from liability for the alleged discrimination. ¹Accordingly, we affirm the district court's award of summary judgment on the issue of liability, and remand the case for consideration of damages.

I.

In 1945, the County established a mandatory Employee Retirement System (the plan) for all “general” County employees.² At that time, the plan provided that employees were eligible to retire and to receive pension benefits at age 65, regardless of the length of their employment.

The County did not fully fund the plan but instead required that employees contribute a certain fixed percentage of their annual salaries over the course of their employment (employee contribution rates or the rates). The employee contribution rates were established based on calculations developed by Buck Consultants (Buck), an actuarial firm employed by the County.

The County directed Buck to calculate rates to ensure that employees' contributions, as well as earnings on those contributions, would fund about one-half of employees' pension benefits. The County's contributions to the plan and related earnings would fund the remaining one-half of the pension benefits.

To achieve these objectives and to ensure that all employees received the same level of pension benefits, Buck based its calculations for employee contribution rates on the number of years that an employee would contribute to the plan before being eligible to retire at age 65. Buck also considered numerous actuarial factors, including anticipated percentage increases in salaries, probable lengths of employees' careers, the potential interest rates on earnings, mortality rates, and the likelihood of employees' withdrawal from the plan before retirement.

Using the retirement age of 65, Buck ultimately concluded that older employees who enrolled in the plan should contribute a higher percentage of their salaries, because their contributions would earn interest for fewer years than the younger employees' contributions. The County adopted Buck's recommended rates and determined that “[t]he rate of contribution of the employee shall be determined by the employee's age at the time the employee actually joins” the plan. Balt. Cnty. Code § 5–1–203(1) (2006). Thus, under the County's decision, the older that an employee was at the time of enrollment, the higher the rate that the employee was required to contribute. ³

The County modified the plan several times since its inception in 1945. In 1959, the County expanded the plan to include employees who worked in fire and police departments and permitted those employees to retire at age 60, or after 30 years of service regardless of age. By 1973, the County had reduced the “retirement age” for general County employees from 65 to 60. The County also added an alternative term of retirement eligibility that permitted general employees to retire after 30 years of service irrespective of their age. Correctional officers later became eligible to retire after only 20 years of service, regardless of age, or at age 65 with 5 years of service. The plan referred to all these pension benefits as “normal service retirement benefits.”

In 1990, the County expanded the plan to permit “early retirement” for general employees. Under this provision, employees who were at least 55 years old and who had completed 20 years of service could retire, but would receive a reduced amount of pension benefits.

Despite the many changes to the plan over the years regarding retirement eligibility, the employee contribution rates were amended only one time during the relevant period between 1945 and 2007. The sole adjustment to the rates occurred in 1977, when the rates were lowered slightly based on expected increases to the rate of return on invested contributions. This reduction did not alter the fact that rates were based on an employee's age at the time of plan enrollment and were higher for older employees. For example, after 1977, employees who enrolled in the plan at age 20 contributed 4.42% of their annual salaries, while employees who enrolled in the plan at age 40 and 50 contributed 5.57% and 7.23% of their annual salaries, respectively.

In 1999 and 2000, two County correctional officers, Wayne A. Lee and Richard J. Bosse, Sr., aged 51 and 64, respectively, filed charges of discrimination with the EEOC alleging that the County's plan and disparate contribution rates discriminated against them based on their ages. The EEOC conducted an investigation and, after the parties were unable to reach a conciliation agreement, the EEOC filed the present action in the district court in September 2007.

The EEOC filed its complaint against the County on behalf of Lee, Bosse, and a class of similarly situated County employees, who were in the protected age group of 40 years of age and older when they enrolled in the plan.⁴ The EEOC alleged that the plan discriminated against these employees in violation of the ADEA by requiring them to pay higher contribution rates than those paid by younger employees. The EEOC requested injunctive relief and reimbursement of “back” wages for affected employees. In response, the County denied that the plan violated the ADEA.

After conducting discovery, the parties filed cross-motions for summary judgment. In January 2009, the district court granted summary judgment to the County. EEOC v. Baltimore Cnty., 593 F.Supp.2d 797 (D.Md.2009). Relying on the Supreme Court's holding in Kentucky Retirement Systems v. EEOC, 554 U.S. 135, 128 S.Ct. 2361, 171 L.Ed.2d 322 (2008), the district court concluded that the plan's employee contribution rates were not motivated by age, but by the number of years remaining until an employee reached retirement age. 593 F.Supp.2d at 802. Because the County intended to make “relatively equal contributions on behalf of all plan members” and “older new-hires ha[d] less time to accrue earnings on their contributions,” the court concluded that age-based rates were permissible based on the financial consideration of “the time value of money.” Id. at 801–02.

On appeal, we vacated the district court's judgment. See EEOC v. Baltimore Cnty., 385 Fed.Appx. 322 (4th Cir.2010)(unpublished opinion). We held that the district court's decision focused only on age-based retirement eligibility, and failed to consider the plan's separate provision for service-based eligibility irrespective of age. Id. at 325. We explained the significance of this omission by providing the following example. If two correctional officers, ages 20 and 40, enrolled in the plan at the same time, both employees would become eligible for retirement after 20 years of service, irrespective of their ages when completing the years-of-service requirement. Id. Yet, the 40–year–old in this situation would be required to contribute 5.57% of his annual salary while the 20–year–old...