Milwaukee Prof. Fire Fighters v. City of Milwaukee

• Decision Date: 01 December 1994
• Docket Number: 93-C-1040 and 93-C-1205.,No. 92-C-1378,93-C-0488,92-C-1378
• Parties: MILWAUKEE PROFESSIONAL FIRE FIGHTERS ASSOCIATION, LOCAL 215, IAFF, AFL-CIO, Plaintiff, v. CITY OF MILWAUKEE, et al., Defendants. MILWAUKEE POLICE ASSOCIATION LOCAL 21, IUPA, AFL-CIO, Plaintiff, v. CITY OF MILWAUKEE, et al., Defendants. MILWAUKEE POLICE SUPERVISORS' ORGANIZATION, Plaintiff, v. CITY OF MILWAUKEE, et al., Defendants. MILWAUKEE TEACHERS' EDUCATION ASSOCIATION, Plaintiff, v. MILWAUKEE BOARD OF SCHOOL DIRECTORS, et al., Defendants.
• Court: U.S. District Court — Eastern District of Wisconsin

869 F. Supp. 633

MILWAUKEE PROFESSIONAL FIRE FIGHTERS ASSOCIATION, LOCAL 215, IAFF, AFL-CIO, Plaintiff, v. CITY OF MILWAUKEE, et al., Defendants.

MILWAUKEE POLICE ASSOCIATION LOCAL 21, IUPA, AFL-CIO, Plaintiff, v. CITY OF MILWAUKEE, et al., Defendants.

MILWAUKEE POLICE SUPERVISORS' ORGANIZATION, Plaintiff, v. CITY OF MILWAUKEE, et al., Defendants.

MILWAUKEE TEACHERS' EDUCATION ASSOCIATION, Plaintiff, v. MILWAUKEE BOARD OF SCHOOL DIRECTORS, et al., Defendants.

Nos. 92-C-1378, 93-C-0488, 93-C-1040 and 93-C-1205.

United States District Court, E.D. Wisconsin.

December 1, 1994.

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Jeffrey P. Sweetland, Timothy E. Hawks, Shneidman, Myers, Dowling & Blumenfield, Milwaukee, WI, for Local 215 Milwaukee Professional Fire Fighters Ass'n, Local 215, IAFF, AFL-CIO.

Monica Rimai, Thomas E. Hayes, Milwaukee City Attys. Office, Milwaukee, WI, for Milwaukee and Milwaukee Employees' Retirement System.

DECISION AND ORDER

WARREN, Senior District Judge.

Before the Court are several motions concerning the validity of the duty disability benefits available to thousands of Milwaukee firefighters, police officers, paramedics and educators under the Age Discrimination in Employment Act ("ADEA"). The defendants, the City of Milwaukee and the City of Milwaukee Employees' Retirement System (collectively "the City"), have moved for judgment on the pleadings and for summary judgment. For the following reasons, these motions will be denied. The plaintiffs, the Milwaukee Professional Firefighters Association, the Milwaukee Police Association, the Milwaukee Police Supervisors' Organization, and the Milwaukee Teachers' Education Association (collectively "the Unions") have also moved for summary judgment. For the following reasons, this motion will be granted in part and denied in part.

I. BACKGROUND

At issue in this case is: (1) whether the plaintiffs have alleged a case or controversy subject to adjudication by this Court; and (2) the legality of the City's Charter Ordinance No. 920400, enacted on July 28, 1992 ("July 28th Ordinance") under the Older Workers Benefit Protection Act ("OWBPA"), P.L. 101-433, 104 Stat. 978 (1990), as it amends ADEA.

A. THE MILWAUKEE EMPLOYEES RETIREMENT SYSTEM

Chapter 36 of the Milwaukee City Charter ("the Charter") contains the Employees Retirement Act, which embodies the Employees' Retirement System ("ERS"). (Defendants' Proposed Findings of Fact 8). As employees of the City, members of the Unions are members of the Milwaukee ERS, which makes them eligible for certain retirement and disability benefits. Although the retirement system provides for many different employee benefits, only the Service Retirement Allowance ("SRA") and Duty Disability Retirement Allowance ("DDRA") are relevant to this lawsuit.

A SRA is available to retired City employees. Any member of the ERS may retire upon reaching the minimum retirement age. For police officers and firefighters, the minimum retirement age is 57; however, if the officer or firefighter has completed 25 years of creditable service in the system, he or she will be eligible to retire. (Charter § 36-05-1) For all other members of the system, the minimum retirement age is 60. (Charter § 36-05-1-b).

The amount of the SRA available to a City employee upon retirement is calculated based upon his or her years of service. For police officers and firefighters the SRA equals 2.25% of his or her final average salary times the number of years of creditable service up to 25 years of service and 2.4% of final average salary times any years of service thereafter. (Charter § 36-05-1-e-1). For other employees, the SRA is equal to 2% of the members final average salary times the total number of years of all creditable service. (Charter § 36-05-1-d).

Any employee who becomes permanently and totally incapacitated for duty as the result of an on-the-job injury may be eligible to receive a DDRA. (Charter § 36-05-3-a). For police officers and firefighters, a DDRA is equal to 75 percent of current annual salary at the time of injury. (Charter § 36-05-3-c-1-a). However, once an employee reaches the minimum service retirement age, the DDRA is calculated to equal whatever the SRA would be.

Duty disability retirement allowances provide substantially better benefits than service retirement allowances in most instances. For many employees without long periods of service, the actual amount of the benefit received will be greater under DDRA than under SRA. Several other factors add to the attractiveness of DDRA, including that: (1) the SRA is taxable while DDRA is not; (2) the SRA is fixed at the time of retirement while DDRA is continually increased; (3) the survivorship benefit for spouses of employees is substantially better under DDRA than SRA; and (4) the City pays a larger share of health insurance premiums under DDRA than under SRA. (Plaintiffs' Brief in Support of Motion for Summary Judgment at 12-13.)

Under this system, employment-related benefits varied based on the age of the employee because it forced older duty disabled workers to accept the lower SRA in lieu of the more attractive DDRA. (Charter § 36-05-3-b ("The duty disability retirement allowance shall equal the service retirement allowance if such member has attained the minimum service retirement age.")). For example, a 37 year old police officer injured in the line of duty would receive 15 years of duty disability pay. If that officer received that same injury at age 52 with 25 years of service, she would be placed immediately on the lower retirement benefit.

B. LEGAL CHANGES

In 1989, the United States Supreme Court upheld a benefit program with a provision similar to § 36-05-3-b in Public Employees Retirement System of Ohio v. Betts, 492 U.S. 158, 109 S.Ct. 2854, 106 L.Ed.2d 134 (1989). While acknowledging that the Ohio retirement system at issue did in fact discriminate in the distribution of benefits on the basis of age, the Court concluded that the system — which forced a duty-disabled employee over the normal retirement age to accept a smaller service retirement pension rather than the larger duty disability retirement benefit — was acceptable under the ADEA. Id. at 165, 109 S.Ct. at 2860. The Court relied on section 4(f)(2) of the ADEA which permitted age-based discrimination pursuant to the terms of a bona fide employee benefit plan, as long as the plan was not used as a "subterfuge" to evade the ADEA. Id. at 165-66, 109 S.Ct. at 2860-61.

In determining whether the plan was a "subterfuge," the Court rejected the interpretation used by the Circuit Courts, see, e.g. EEOC v. Mt. Lebanon, 842 F.2d 1480, 1489 (3d Cir.1988); Karlen v. City Colleges, 837 F.2d 314, 319 (7th Cir.1988) cert. denied sub nom Cook Cty. College Teachers Union Local 1600 v. Trustees of Community College, 486 U.S. 1044, 108 S.Ct. 2038, 100 L.Ed.2d 622 (1988); Cipriano v. Bd. of Education of North Tonawanda School Dist., 785 F.2d 51, 57-58 (2d Cir.1986), and embraced by the Equal Employment Opportunity Commission, see 29 CFR § 1625.10, and the Department of Labor, see 34 Fed.Reg. 9708, 9709 (1969) codified at 29 CFR § 860.120 (later redesignated as 29 CFR § 1625.10), all of which permitted employers to show a lack of "subterfuge" — and thereby validate discriminatory plans — by proving age-related cost considerations. Id. 492 U.S. at 169-75, 109 S.Ct. at 2862-66.

Instead, the Court interpreted "subterfuge" to mean a subjective intent by the employer to discriminate based on age. Id. at 171-75, 109 S.Ct. at 2863-66. Ultimately, the Court concluded that the ADEA was not meant to include a prohibition on age discrimination pursuant to a legitimate employee benefit plan, as long as the plan was not being intentionally used to discriminate against older individuals. According to the Court, "Congress left the employee benefit battle for another day." Id. at 177, 109 S.Ct. at 2867.

"Another day" arrived almost immediately. Congress took exception to the Supreme Court's interpretation of the ADEA and responded by amending the statute through the Older Workers Benefit Protection Act ("OWBPA"), P.L. 101-433, 104 Stat. 978 (1990). Congress declared that "as a result of the decision of the Supreme Court in Betts ... legislative action is necessary to restore the original intent in passing and amending ADEA ... which was to prohibit discrimination against older workers in all employee benefits except when age-based reductions in employee benefit plans are justified by significant cost considerations." OWBPA, § 101.

In amending the ADEA through OWBPA, Congress first made it clear that benefit plans were in fact subject to ADEA's prohibitions of age discrimination. Section 102 of the Act added a new subsection to the definitions section of ADEA which provided that "the term `compensation, terms, conditions or privileges of employment' encompasses all employee benefits, including such benefits provided pursuant to a bona fide employee benefit plan." OWBPA § 102. Secondly, section 103 of OWBPA amended section 4(f)(2) to permit age-based discrimination in employee-benefit plans only where "the actual amount of payment made or cost incurred on behalf of an older worker is no less than that made or incurred on behalf of a younger worker, as permissible under section 1625.10, title 29, Code of Federal Regulations." OWBPA § 103. Thus, under OWBPA, if the cost of providing a particular benefit to older workers exceeds the cost of providing the same benefit to younger workers, an employer may provide lesser benefits to the older workers, provided that it spends the same amount on benefits for all workers regardless of age. Therefore, where benefits plans do meet the criteria in § 4(f)(2), "benefit levels for older workers may be reduced to the extent necessary to achieve approximate equivalency in cost for older and younger workers." 29 C.F.R. § 1625.10(a)(1).

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