Metz v. Transit Mix, Inc.

• Decision Date: 28 August 1987
• Docket Number: No. 86-2261,86-2261
• Citation: 828 F.2d 1202
• Parties: 44 Fair Empl.Prac.Cas. 1339, 44 Empl. Prac. Dec. P 37,458, 56 USLW 2155 Wayne R. METZ, Plaintiff-Appellant, v. TRANSIT MIX, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1202

828 F.2d 1202

44 Fair Empl.Prac.Cas. 1339,

44 Empl. Prac. Dec. P 37,458, 56 USLW 2155

Wayne R. METZ, Plaintiff-Appellant, v. TRANSIT MIX, INC., Defendant-Appellee.

No. 86-2261.

United States Court of Appeals Seventh Circuit.

Argued Jan. 16, 1987.

Decided Aug. 28, 1987.

Ivan Bodensteiner, Valparaiso, Ind., for plaintiff-appellant.

Jere L. Humphrey, Kizer, Neu, Joyce Wyland Humphrey, Wagner & Gifford, Plymouth, Ind., for defendant-appellee.

Before BAUER, Chief Judge, and CUDAHY and EASTERBROOK, Circuit Judges.

CUDAHY, Circuit Judge.

The plaintiff Wayne Metz, age fifty-four, was discharged by his employer, defendant Transit Mix, Inc., after twenty-seven years of employment with the company. He alleges that he was fired in violation of the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C.A. Secs. 621-634 (West 1985 & Supp.1987). Following a bench trial, the district court entered judgment for Transit Mix, 646 F.Supp. 286 (N.D.Ind.1986). For the reasons that follow, we reverse.

I.

Transit Mix is in the business of selling concrete to construction contractors. Metz worked for Transit Mix as manager of its plant in Knox, Indiana, a satellite of Transit Mix's principal office and larger plant in Plymouth, Indiana. During the three years prior to Metz's discharge, Transit Mix experienced financial problems which the district court attributed to the decline in the local construction business. In November 1983, Will Lawrence, the president of Transit Mix, notified Metz that due to Transit Mix's poor sales, the Knox plant would be closed for the winter starting in December and Metz would be laid off. At that time, Lawrence had not decided whether he would close the Knox facility permanently or only for the winter.

In February 1984, Lawrence sent the assistant manager of the Plymouth plant, Donald Burzloff, to Knox to inspect the plant and make any necessary repairs. Burzloff obtained permission to take orders from the plant's regular customers while he was there. Burzloff later requested that he be allowed to manage the Knox facility. Lawrence approved this request and in April 1984 discharged Metz.

At the time of his layoff in December 1983, Metz had an annual salary of $26,000, or about $15.75 an hour. He was among the highest paid of Transit Mix employees and, having worked for Transit Mix for twenty-seven years, was the second most senior employee there. ¹ Metz's relatively high salary was a direct result of his many years of employment by Transit Mix; Lawrence testified at trial that Metz was given a raise each year, including years when Transit Mix was losing money. ² Burzloff was forty-three and had worked for Transit Mix for seventeen years when he replaced the fifty-four-year-old Metz as manager. Burzloff's salary as manager was about $8.05 an hour.

II.

The ADEA prohibits employers from discriminating against employees on the basis of age. 29 U.S.C. Sec. 623(a). ³ Its objective in part is to promote employment of older workers on the basis of their abilities rather than their age. 29 U.S.C. Sec. 621. The statute does not, however, prevent an employer from terminating an older worker based on reasonable factors other than age. 29 U.S.C. Sec. 623(f)(1). When, as in the present case, a plaintiff is proceeding on a disparate treatment analysis, the plaintiff may recover only if the defendant in discharging the plaintiff was motivated by a discriminatory animus; that is, the plaintiff may recover only if his or her age was a determining factor in the employer's decision. ⁴

Proving intentional discrimination is often difficult, so a plaintiff may do so by presenting either direct or indirect evidence of discrimination. Graefenhain v. Pabst Brewing Co., 827 F.2d 13, 17 (7th Cir.1987); Bechold v. IGW Sys., Inc., 817 F.2d 1282, 1284 (7th Cir.1987); LaMontagne v. American Convenience Prods., Inc., 750 F.2d 1405, 1409 (7th Cir.1984). In order to permit recovery for an ADEA claim through indirect means, this circuit has adopted a variation of the burden-shifting analysis set forth by the Supreme Court in the Title VII context for establishing a prima facie case of employment discrimination. See McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973). As applied to an ADEA claim, this analysis requires that a plaintiff show that he or she: 1) belongs to the protected class (age forty or older); 2) was qualified for his or her position; 3) was terminated; and 4) was replaced by a younger person. After the plaintiff has established a prima facie case, the defendant employer then has the burden of presenting evidence that the plaintiff's discharge was a result of "some legitimate, nondiscriminatory reason." If the defendant meets this burden of production, the burden shifts to the plaintiff to prove that the reasons proffered by the employer for the discharge were merely a pretext for discrimination. Id. at 802-05, 93 S.Ct. at 1824-25; Graefenhain, 827 F.2d at 17-18; Bechold, 817 F.2d at 1284; LaMontagne, 750 F.2d at 1409. Throughout the trial, the burden remains with the plaintiff to prove there was discrimination, rather than with the employer to prove the absence of discrimination. LaMontagne, 750 F.2d at 1409.

The district court found that Metz had established a prima facie case of age discrimination. The court further found that a determining factor in Transit Mix's decision to replace Metz with Burzloff was a desire to save the higher cost of Metz's salary and that this factor "bore a relationship to Mr. Metz's age." 646 F.Supp. at 293. ⁵ The court held, however, that this was not age discrimination in violation of the ADEA because it was based on an assessment of the cost of employing an individual employee, namely, Metz, rather than an impermissible assessment of the costs of employing Transit Mix's older employees as a group. The sole issue on appeal is whether the salary savings that can be realized by replacing a single employee in the ADEA age-protected range with a younger, lower-salaried employee constitutes a permissible, nondiscriminatory justification for the replacement.

III.

Congress enacted the ADEA in response to the problems that the older worker faces in the job market, including the obstacles that the long-term employee encounters when he or she is suddenly without work. See generally Report of Secretary of Labor to Congress, The Older American Worker: Age Discrimination in Employment 11-17 (1965), reprinted in EEOC, Legislative History of the Age Discrimination in Employment Act, 16, 28-34 (1981). These difficulties have been attributed in large part to the worker's development of firm-specific skills not easily transferable to a different job setting. National Commission for Employment Policy, 9th Annual Report, Rep. No. 17, Older Workers: Prospects, Problems and Policies 4 (1985). Therefore, while the older employee's higher salary reflects the value of improved skills and the increased productivity that results, it is also indicative of one of the very problems the ADEA was intended to address: the likelihood that the employee will be less employable in other settings. ⁶

The ADEA has consistently been interpreted by the administrative agencies charged with its enforcement and the courts to prohibit an employer from replacing higher paid employees with lower paid employees in order to save money. The Equal Employment Opportunity Commission guidelines expressly provide that "A differentiation based on the average cost of employing older employees as a group is unlawful except with respect to employee benefit plans which qualify for the section 4(f)(2) exception to the Act." 29 C.F.R. Sec. 1625.7(f) (1986). This position is consistent with that adopted by the Department of Labor when it administered the ADEA:

It should also be made clear that a general assertion that the average cost of employing older workers as a group is higher than the average cost of employing younger workers as a group will not be recognized as a differentiation under the terms and provisions of the Act, unless one of the other statutory exceptions applies. To classify or group employees on the basis of age for the purpose of comparing costs, or for any other purpose, necessarily rests on the assumption that the age factor alone may be used to justify a differentiation--an assumption plainly contrary to the terms of the Act and the purpose of Congress in enacting it. Differentials so based would serve only to perpetuate and promote the very discrimination at which the Act is directed.

29 C.F.R. Sec. 860.103(h) (1979) (emphasis added). Courts have also emphatically rejected business practices in which "the plain intent and effect ... was to eliminate older workers who had built up, through years of satisfactory service, higher salaries than their younger counterparts." Leftwich v. Harris-Stowe State College, 702 F.2d 686, 691 (8th Cir.1983); see also EEOC v. Chrysler Corp., 733 F.2d 1183 (6th Cir.1984); Dace v. ACF Indus., Inc., 722 F.2d 374 (8th Cir.1983), aff'd on rehearing, 728 F.2d 976 (1984); Geller v. Markham, 635 F.2d 1027 (2d Cir.1980), cert. denied, 451 U.S. 945, 101 S.Ct. 2028, 68 L.Ed.2d 332 (1981). See generally 1 H. Eglit, Age Discrimination Sec. 16.32 (1985).

Neither the district court nor Transit Mix on appeal takes issue with this interpretation of the ADEA in the context of policies that eliminate older employees as a group based on their higher salaries. Rather, they argue for a distinction based on whether the employer's employment action, motivated by a desire to save costs, affects a group of employees or an individual employee. The district court held that while the former would be impermissible age discrimination, the latter is a legitimate, nondiscriminatory reason for replacing an employee. The court cited a treatise for support as follows: ⁷

"The relatively higher cost of employing older workers as a group is generally rejected as an...