Karlen v. City Colleges of Chicago

• Decision Date: 25 March 1988
• Docket Number: No. 87-1051,87-1051
• Citation: 837 F.2d 314
• Parties: 45 Fair Empl.Prac.Cas. 1420, 45 Empl. Prac. Dec. P 37,710, 56 USLW 2451, 44 Ed. Law Rep. 26, 9 Employee Benefits Ca 1513 Harvey KARLEN, Arnold Kuhn, and Loretta Carsello, Plaintiffs-Appellants, v. CITY COLLEGES OF CHICAGO, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 314

837 F.2d 314

45 Fair Empl.Prac.Cas. 1420,

45 Empl. Prac. Dec. P 37,710, 56 USLW 2451,

44 Ed. Law Rep. 26, 9 Employee Benefits Ca 1513

Harvey KARLEN, Arnold Kuhn, and Loretta Carsello Plaintiffs-Appellants, v. CITY COLLEGES OF CHICAGO, et al., Defendants-Appellees.

No. 87-1051.

United States Court of Appeals Seventh Circuit.

Argued Nov. 6, 1987.

Decided Jan. 12, 1988.

Rehearings and Rehearings En Banc Denied March 25, 1988.

Stephen G. Seliger, Stephen G. Seliger, Ltd., Chicago, Ill., for plaintiffs-appellants.

Richard E. Girard, Murray & Girard, Ltd., Gilbert Feldman, Cornfield & Feldman, Chicago, Ill., for defendants-appellees.

Before POSNER and COFFEY, Circuit Judges, and NOLAND, Senior District Judge. ^*

POSNER, Circuit Judge.

Three professors brought suit under the Age Discrimination in Employment Act, 29 U.S.C. Sec. 626, complaining that the Early Retirement Program of the City Colleges of Chicago, adopted in 1982 as part of a collective bargaining agreement with a local union of the American Federation of Teachers, discriminates against persons over 65. All three plaintiffs were between 65 and 69 when they brought the suit. Two had retired--one at 65, the other at 67. The third, who had been 64 when the Early Retirement Program was adopted, was still employed by the Colleges when the district judge granted summary judgment for the defendants and dismissed the case.

In 1980, two years before the Age Discrimination in Employment Act lifted the minimum mandatory retirement age for college and university teachers from 65 to 70, the Illinois legislature passed a statute making 70 the mandatory retirement age for employees in Illinois. At the time, the City Colleges had a mandatory retirement age of 65 for faculty members. The Colleges contended that the new statute did not apply to them, so they declined to comply with it, precipitating a suit that they lost when the Supreme Court of Illinois decided in 1981 that the statute did apply to them. Even before the decision the Colleges had been concerned with the high average age of the faculty members in many of their departments--the interaction of the tenure system with declining enrollments and budgets had resulted in there being few openings for new teachers--and had been trying to devise an early-retirement program. Four months after the supreme court's decision, the City Colleges began drafting the Early Retirement Program at issue in this case. In trying to "sell" the Program, the Chancellor of the City Colleges explained that its main purpose was "to realize financial savings by replacing older faculty members earning a higher salary with younger faculty members at the lower end of the salary schedule." Such replacement would not only save money but also promote the "infusion of new views, ... because you couldn't force oldtimers to go out and get more courses in the more recent things in their own field." There was also talk of bringing in "new blood" (an expression that we suspect will soon disappear from the employers' lexicon as awareness of the menace of age discrimination litigation seeps through the employer community), and, as part of this process, of making room for women and members of minority groups; most tenured faculty members were white and male.

The Early Retirement Program is open to any faculty member between 55 and 69 years of age who has been continuously employed full-time for at least ten years. The size of the pension that a faculty member who takes early retirement is entitled to is a function of his highest four years' salary plus his years of service. About this aspect of the Program the plaintiffs have no complaint--for the excellent reason that the size of the pension is keyed not to age but, as we have said, to salary and length of service. The plaintiffs complain about two other features of the Program, which are keyed to age. The first relates to accumulated sick pay. A faculty member who is between the ages of 55 and 58 when he takes early retirement is entitled to receive, in addition to his pension, a lump sum equal to 50 percent of his accumulated sick pay, valued at his base salary rate in his final year of service. The percentage rises to 60 percent for 59-year-olds and 80 percent for 60- to 64-year-olds, then plunges to 45 percent for 65- to 70-year-olds. Retirement is mandatory at 70. Not until 1994 does the Age Discrimination in Employment Act eliminate mandatory retirement for academic employees. See Act of Oct. 31, 1986, Pub.L. 99-592, Sec. 6(b) (repealing 29 U.S.C. Sec. 631(d) as of Dec. 31, 1993).

The second feature of the Early Retirement Program of which the plaintiffs complain is that while faculty members who retire between the ages of 55 and 64 continue to be covered by the Colleges' group insurance policy (which includes life, health, dental, vision, homeowner's, and automobile insurance) until they reach the age of 70, those who retire at age 65 or later cease, upon retirement, to be covered. Although they can continue to buy this insurance at the rates in the Colleges' policy, they are out the premiums, which covered employees do not pay.

The combined effect of the two challenged features of the Early Retirement Program on these plaintiffs is substantial. One of the plaintiffs would have received an extra $23,857 in sick-pay distribution had he retired at 64; and a faculty member who retires at 65 rather than 64 has to pay $22,430 in insurance premiums to retain his coverage until 70. However, the net loss in retirement benefits is lower than the sum of these figures. The later one retires, the higher one's salary is apt to be in one's last four years of service and the greater one's length of service; hence one's pension will be higher. And--though this is a small factor--unused sick leave not credited to the lump-sum distribution is credited to years of service, which also pushes up one's pension. Moreover, the distribution of sick pay, though it represents a smaller percentage of his accumulated sick leave for the employee retiring later, is computed at the employee's last salary, which is likely to be higher the longer he stays.

But the relevance of these points is obscure. If an employer had no mandatory retirement age but took away employees' free parking spaces when they reached 65, this would be age discrimination even if, as a matter of fact, the total remuneration the next year of employees who didn't take the hint but kept on working rose by more than the value of the parking space that they had lost. And in any event a person who keeps working beyond his preferred retirement age in order to make up the dip in retirement benefits at age 65 is incurring a considerable opportunity cost, whether in leisure forgone or in a forgone opportunity to work for another employer at a salary that would be on top of the retirement benefits from his previous employment. Even if this factor is ignored, it is by no means clear--it is in fact unlikely--that the increment in pension from another year at work would make up for almost a $50,000 drop in retirement benefits. Certainly for purposes of evaluating a motion for summary judgment, the district judge was required to assume that a faculty member who decides not to retire at age 64 incurs a considerable penalty. How large the penalty is would normally be a matter for determination at the damages stage of litigation.

The question of the proper treatment of early-retirement programs is the most difficult question under the Age Discrimination in Employment Act. The purpose of such programs often is to ease out older employees, whether because they cost the employer more in salary or fringe benefits, or have gone stale, or are blocking advancement for the ambitious young. Often, therefore, the discussions leading up to the adoption of such programs will generate evidence of age discrimination. Yet the discrimination seems to be in favor of rather than against older employees, by giving them an additional option and one prized by many older employees. Nor can it seriously be argued that the concept of early retirement for workers over a specified age stigmatizes such workers, as would a program designed to change not the age but the racial composition of the work force by allowing blacks but not whites to retire early. Entitlement to early retirement is a valued perquisite of age--an additional option available only to the older worker and only slightly tarnished by the knowledge that sometimes employers offer it because they want to ease out older workers. These considerations led us to hold recently that a worker who elects early retirement cannot turn around and sue his employer unless he can show that he was forced to take early retirement by an explicit or implicit threat to fire (or otherwise punish) him because of his age if he did not. Henn v. National Geographic Society, 819 F.2d 824 (7th Cir.1987).

This case requires us to consider what at first glance may seem a completely different aspect of early retirement: the complaint not of the worker who elected early retirement but of the worker who, having declined it, believes he is being punished for his decision. Actually these two situations are the same. Whether a worker takes early retirement because he fears he will be discriminated against on account of his age if he does not, or refuses to take early retirement and indeed is then discriminated against on account of his age, his rights under the Age Discrimination in Employment Act have been violated.

There is, however, a real and not merely formal difference between this case and Henn. In Henn, all employees over 55 were offered a severance bonus equal to a full-year's salary if they retired within two months after the offer was made. There was no discrimination within the group eligible for early retirement; the amount of an employee's early-retirement benefits was not keyed to his age. Of course, everyone in the...