Statement of Nancy Dean Edmonds Senior Trial Attorney EEOC Indianapolis District Office

Meeting of July 15, 2009 – Age Discrimination in the 21st Century-Barriers to the Employment of Older Workers

Good Morning Chairman Ishimaru, Vice Chair Griffin, and Commissioner Barker. My name is Nancy Dean Edmonds, Senior Trial Attorney in the EEOC Indianapolis District Office. Thank you for inviting me here to participate in this important hearing about age discrimination. I have submitted a fuller version of my remarks for the record.

I'm here to talk about the Commission's ultimately failed attempt in EEOC v. Kentucky Retirement System to challenge the provision of lesser benefits for older police officers, firefighters, and other state and county workers who became disabled or who are injured at work, and to introduce Dennis Halfhill, one of the workers affected by the outcome of the case. Mr. Halfhill worked as a Sheriff's deputy in Kenton County, Kentucky for eight years until he was injured in the line of duty at age 56 and was forced to retire as a result of that injury. However, under the state's plan, Mr. Halfhill was denied the option to take disability retirement because he was over age 55. Instead he had to settle for a far smaller retirement benefit under the regular retirement plan based on his eight years with the department. Also, since he had to take regular retirement, he was not eligible, as injured officers under age 55 were, to continue working in a non-hazardous position while receiving hazardous disability benefits.

To understand why the Commission believed that the Kentucky disability retirement program was unlawful, I need to explain briefly how the plan worked. Hazardous duty employees, like Mr. Halfhill, are eligible for normal retirement at any age with 20 years of service or at age 55 if they have at least five years of service. Under Kentucky's Disability Retirement Plan, employees who become disabled before they have worked 20 years are eligible for disability retirement if they are less than 55 years old and they are then credited with extra or "imputed" years of service. By contrast, those who become disabled with less than 20 years of service but after they are eligible for normal retirement by virtue of age (55) receive a benefit based only upon the number of years that they have actually worked. ¹ The state said they structured the plan that way to make sure that people who became disabled had income, even if they were not yet eligible to retire. At first blush, that sounded reasonable.

Upon closer scrutiny, however, the Indianapolis District Office concluded that the plan design was neither fair nor lawful. Because eligibility for normal retirement is based in part on on age, younger workers with the same number of years of service will often get more years of service added on when they become disabled. Therefore, the younger disabled worker gets a higher monthly pension - often 100% higher - than an older disabled co-worker with the same salary and years of service.² Since the cost of health insurance is based on years of service, whether actual or imputed, younger workers also get health insurance at a reduced (or no) cost when compared to older workers with the same actual seniority. In other words, had a 47 year old co-worker, who also had 8 years of service, been in the patrol car with Mr. Halfhill on the day of the accident and been similarly injured, the co-worker would have received a monthly pension double the amount of Mr. Halfhill's pension and more affordable health benefits.³

It should be noted that officers who are totally and permanently injured in the line of duty and are under age 55 get additional benefits. First, they are guaranteed a minimum pension of at least 25% of their final monthly pay even if they've only worked for a few months. They also receive family health insurance benefits at no cost, and are entitled to payments in the amount of 10% of their final rate of pay for each dependent child. Astonishingly, however, because they're not eligible for disability retirement, officers who are over age 55 when injured are not eligible for these injured-in-the-line-of-duty benefits.

The Commission brought suit on behalf of a class of older workers, alleging that the plan was facially discriminatory because it used age to limit eligibility for enhanced benefits.⁴ Ultimately, the Sixth Circuit, reversing its prior precedent and agreeing with every other court to have considered the issue, held that a plan that uses age as a factor in calculating a benefit is facially discriminatory and will violate the ADEA unless a defense applies; a plaintiff need not show additional proof that age motivated the decision.

Despite the uniform precedent supporting the Sixth Circuit, the Supreme Court nevertheless granted Kentucky's petition for certiorari and, in a 5-4 decision, held that the plan did not violate the ADEA.⁵ It acknowledged that a facially discriminatory policy typically implicates the ADEA without requiring any additional showing of intent but held that where benefits are tied to a pension plan, even one that use age as an explicit factor in determining eligibility, the plaintiff must show additional evidence of intent to discriminate.⁶

The Supreme Court's decision rejected contrary Commission Guidance which stated that (1) benefits are not equal where a plan reduces or eliminates benefits based on a criterion that is explicitly defined (in whole or in part) by age, and (2) "[b]asing disability retirement benefits on the number of years a disabled employee would have worked until normal retirement age by definition gives more constructive years of service to younger than to older employees" and violates the Act.⁷

The Supreme Court's decision creates new hurdles for ADEA enforcement. As you will hear later, several recent court decisions have now expanded the Supreme Court's holding beyond the disability retirement context.

With that background, I will turn this over to Mr. Halfhill, who agreed to testify in hopes of calling attention to what he believes is a fundamental unfairness in the law. His story is but one of the many workers in Kentucky who now must live on less benefits, simply because they were older when their injuries forced them to leave the workplace.

Footnotes

¹ At the time the EEOC filed suit in August 1999, Kentucky's statute explicitly stated that hazardous workers who reached normal retirement age of 55 (or non-hazardous workers who reached normal retirement age of 65) were not eligible for disability retirement benefits regardless of their circumstances. After the EEOC filed suit, Kentucky made a cosmetic change to its exclusion from disability retirement – expressing the exclusion in terms of eligibility for normal retirement rather than in terms of age.

² Although age is not a factor that reduces benefits in every case, in every case in which age is a factor it operates to the detriment of the older worker.

³ A worker with 8 years of service is eligible for health insurance benefits at 75% of the cost. A worker who has 8 years of service plus 8 years of imputed service is eligible for health insurance benefits at 25% of the cost.

⁴ Note that our class included both hazardous duty and non-hazardous duty people. The disability plan worked in the same way for both; the only difference was that normal retirement for non-hazardous-duty personnel was 27 years of service at any age or age 65 after 5 years of service. So if a non-hazardous duty 55 year old and a 65 year old who each had 10 years of service, the same salary, and were injured on the same day, the 55 year old would receive a monthly pension twice as large as that of the 65 year old.

⁵Kentucky Retirement Systems v. EEOC, 128 S. Ct. 2361 (2008). The Court majority was influenced by, among other things, its conclusion that it would be difficult for Kentucky to achieve its "legitimate objective," [of giving benefits to disabled people] in any other way. In fact, however, there are many ways the state could achieve its goal at equal cost. To name just a few of several options, it could make pension eligibility a function of tenure, not age, it could give a slightly smaller add-on to each disabled person, or it could used a means test, denying extra benefits to those who have already earned adequate pension benefits from Kentucky and prior employers.

⁶ Responding to the majority's policy justifications for upholding the plan - that the objective of the Plan is to give disability benefits to police officers or firefighters "disabled in the heroic performance of [their] duty" and "[n]o one seeking to help disabled workers in the way that Kentucky's rules seek to help those workers would care whether Kentucky's normal system turned eligibility in part upon age . . .," the dissent observed that those justifications overlooked the fact that "a 61-year-old officer . . . who is disabled in the same heroic action [as a younger worker] receives, in many instances, a lower payment and for one reason alone: [age]."

⁷ EEOC Compliance Manual, Vol. II, Ch. 3, "Employee Benefits," at part IV.D (2001), available at http://www.eeoc.gov/policy/docs/benefits.html.