Equal Employment Opportunity Commission v. Baltimore and Ohio R. Co., s. 79-1210
| Decision Date | 23 September 1980 |
| Docket Number | 79-1211,Nos. 79-1210,s. 79-1210 |
| Citation | 632 F.2d 1107 |
| Parties | 23 Fair Empl.Prac.Cas. 1381, 24 Empl. Prac. Dec. P 31,249 EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Appellant, v. The BALTIMORE AND OHIO RAILROAD COMPANY and The Chesapeake and Ohio Railway Company, Appellees, Equal Employment Advisory Council, Amicus Curiae. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Appellee, v. The BALTIMORE AND OHIO RAILROAD COMPANY and The Chesapeake and Ohio Railway Company, Appellants, Equal Employment Advisory Council, Amicus Curiae. |
| Court | U.S. Court of Appeals — Fourth Circuit |
Thomas J. Allen, U. S. Dept. of Labor, Washington, D. C. (Marshall H. Harris, Regional Sol., Philadelphia, Pa., Carin Ann Clauss, Sol. of Labor, Donald S. Shires, Associate Sol., Lois G. Williams, U. S. Dept. of Labor, Washington, D. C., on brief), for appellant/cross-appellee.
N. Thompson Powers, Washington, D. C. (Ronald S. Cooper, Morgan D. Hodgson, Steptoe & Johnson, Washington, D.C., Joseph B. Geyer, Baltimore, Md., on brief), for appellees/cross-appellants.
Robert E. Williams, Douglas S. McDowell, Monte B. Lake, McGuiness & Williams, Washington, D. C., on brief, as amicus curiae.
Before BUTZNER, HALL and SPROUSE, Circuit Judges.
This is an appeal by the Secretary of Labor, 1 United States Department of Labor (Secretary), from a judgment of the district court in favor of the defendants, Baltimore and Ohio Railroad Company (B & O) and The Chesapeake and Ohio Railway Company (C & O), whose management has been consolidated since 1963 (hereinafter collectively railroad companies or companies). The Secretary brought the action contending the railroad companies violated the Age Discrimination in Employment Act of 1967, 29 U.S.C. §§ 621 et seq. (ADEA or the Act), by involuntarily terminating 142 employees based on their age-related entitlement to a pension and by amending the railroad companies' pension plans in 1972 to lower compulsory retirement age for other employees from age 65 to age 62. The district court, after a bench trial, found prima facie violations of the Act. It held, however, that the companies' actions were a permissible exception under the Act and found for the defendant railroad companies. The Secretary appeals the finding of an exception and the companies cross-appeal the court's finding of prima facie violations. We agree there were prima facie violations of the Act but reverse the court's holding in favor of the companies as to the exception.
In 1971 a nationwide coal strike by the United Mine Workers Union precipitated a financial crisis for the companies, although their financial positions had declined uniformly for some years prior to that. As a step in resolving the financial crisis, the railroad companies determined, among other things, to reduce the size of the work force. First reduced was the number of employees subject to the collective bargaining agreements. The legality of that action is not involved in this appeal. The number of workers not subject to collective bargaining agreements was then reduced.
One hundred forty-two employees from the latter group were selected for involuntary retirement because they qualified for pension benefits. Their eligibility under both the C & O and B & O pension plans was based solely on age and years of service. They were retired commencing in October, 1971. At the time of termination they were either ages 60 to 62 with at least twenty years of service or ages 62 to 65 with at least ten years of service.
Management considered and rejected several alternatives to reducing the work force by the age-based method, including the possibility of terminating the youngest employees or the employees with least seniority. It is not clear why these alternatives were rejected. At one point in the testimony the companies' Senior Vice-President indicated that some younger people had skills with new technology which could not be developed by older people. The railroad companies did not attempt to rank their employees by performance, since such an attempt was not considered practical. The railroad companies next amended both their pension plans in 1972 to provide for involuntary retirement at age 62 to be effective in 1974.
The Secretary contends that the selection of the 142 employees for forced retirement by age category violated section 4(a)(1) of the ADEA, 29 U.S.C. § 623(a)(1). He argues that the railroad companies again violated the age discrimination prohibition by amending their pension plans to require retirement at age 62. The district court found prima facie violations of the Act but found the railroad companies' actions justified under § 4(f)(2) of the Act. This subsection then permitted involuntary retirement based on age if done to observe the terms of a bona fide pension or retirement plan. We agree the companies' actions were prima facie violations of the Act. We do not agree that the forced retirements were based on the railroad companies' pension plans.
Relevant subsections of section 4 of the ADEA provide:
It shall be unlawful for an employer-
(1) to fail or refuse to hire or to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's age ....
4(f) ()
It shall not be unlawful for an employer . . .
(2) to observe the terms of a bona fide seniority system or any bona fide employee benefit plan such as a retirement, pension, or insurance plan, which is not a subterfuge to evade the purposes of this Act, except that no such employee benefit plan shall excuse the failure to hire any individual . . . .
An employer is prima facie guilty of discrimination if its actions are based in part on employees' ages. Loeb v. Textron, Inc., 600 F.2d 1003 (1st Cir. 1979). It is, of course, necessary that age be a determinative factor, but not the sole determining factor. Loeb, 600 F.2d at 1019; Mary Carroll Smith v. University of North Carolina at Chapel Hill, John H. Schutz; Ruel W. Tyson, Jr., 632 F.2d 316 (4th Cir. 1980).
The undisputed facts in this case show that the 142 employees were selected for forced retirement because of their age and time in service. The railroad companies' economic crisis precipitated the necessity for reducing their work force. That factor, however, provided no incentive for the layoff or retirement of this particular group: "but for" their age, they would not have been selected for retirement. This establishes a prima facie violation of the Act. Loeb, 600 F.2d at 1019. This reasoning applies with even greater force to the action of the companies reducing the mandatory retirement age from 65 to 62.
The C & O plan authorizes compulsory retirement at the normal retirement age of 65. 2 The B & O pension plan contained no provision concerning normal or "compulsory" retirement. 3
Although there were no provisions in either company's plan for compulsory or involuntary retirement prior to age 65, there was uncontradicted evidence that the railroad companies had, in the past, involuntarily terminated some such employees and granted them pension benefits in accordance with the terms of the plans. Mr. Clarke, the Vice-President of the railroad companies in charge of the law department, testified that past terminations were based on He reiterated, "(t)he company has that right irrespective of the plan." The President of the railroad companies and other officials gave similar testimony as to management rights.
The Secretary, by showing the involuntary retirement of the 142 individual employees because of their age and pension entitlement, proved a prima facie case of age discrimination under the Act. Loeb, supra; Mary Carroll Smith, supra; Price v. Maryland Casualty Co., 561 F.2d 609 (5th Cir. 1977). It then became the railroad companies' burden to successfully provide a 4(f)(2) defense. They were required to show: (1) that the involuntary retirement was to observe the terms of a (2) bona fide pension plan and that (3) the plan is not a subterfuge to evade the purposes of the Act.
Neither the C & O nor the B & O pension plans contained provisions allowing the companies to involuntarily retire employees under the age of 65. The C & O plan provides that the "normal" retirement age is 65. The B & O plan is silent in this respect, but "Highlights", published in connection with the plan, indicates that the normal retirement age is also 65 for that plan. It would be extremely difficult, therefore, to conclude that the railroad companies involuntarily retired the involved employees prior to age 65 by observing the terms of a bona fide pension plan.
The railroad companies concede there is no explicit language in the plans indicating a company prerogative to involuntarily retire employees. They contend, however, that the railroad companies' right to do so has become an unwritten part of the plans by the past practice of unilaterally terminating employees and providing them pensions if they were eligible at the time of termination. There is nothing in the record, however, showing either the reasons for, or the frequency of, the various terminations. The President of the railroad companies, the Vice-President in charge of the legal department, and other officials categorically assert that such right of involuntary termination is an inherent right of management having nothing to do with the pension plans.
The record contains no specific examples of these terminations, but it can be assumed they were for...
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