Opinion Recap: Kentucky Retirement Systems v. EEOC

Below, recent Stanford graduate Alan Bakowski discusses one of Thursday’s decisions.

In its opinion in Kentucky Retirement Systems v. EEOC, the Supreme Court on Thursday ruled 5-4 that Kentucky’s disability retirement system does not violate the Age Discrimination in Employment Act (ADEA), even though age is an explicit factor in calculating benefits for at least some workers. Following a somewhat functional approach to the ADEA’s non-discrimination requirement, the Court concluded that Kentucky’s system was not “actually motivated” by bias against older workers but was instead organized around the “analytically distinct” concept of “pension status.” Thus, the Court held that when a retirement plan conditions pension eligibility on age but then discriminates on the basis of pension status, an ADEA plaintiff must show that the disparate treatment was “actually motivated” by age itself rather than pension status.

The majority opinion, written by Justice Breyer, relied heavily on the Court’s 1993 ruling in Hazen Paper Co. v. Biggins, which held that discrimination based on pension status would not violate the ADEA unless it was being used as a “proxy for age.” Applying Hazen Paper, the majority identified a “clear non-age-related rationale” for the disparities in Kentucky’s disability retirement plan: providing benefits for workers at the level they would have received had they become disabled after reaching eligibility for normal retirement benefits. The majority said the fact that older disabled workers may receive fewer imputed years of service than younger disabled workers results not from age discrimination in the plan itself, but rather because employers may lawfully condition pension eligibility on age. This is evident by looking at the pension scheme as a whole, which “the ADEA treats somewhat more flexibly and leniently in respect to age.”

The Court further noted that Kentucky’s system “does not rely on any of the stereotypical assumptions that the ADEA sought to eradicate.” Indeed, the Court said the plan makes no assumptions about the relative capacities of older or younger workers, and noted that, depending on how many years of service workers have accumulated, the plan is sometimes more generous to older workers than younger workers. One other factor cited by the majority was the high cost of remedying any potential age disparity, which it viewed as evidence that the disability benefit calculations were motivated primarily by financial considerations rather than by improper age bias. Pooling together all of these factors, the Court concluded that Kentucky’s disability retirement plan was did not use pension status as a “proxy for age” under Hazen Paper. The Court rejected the government’s arguments that the EEOC’s position was entitled to deference or that the Older Workers Benefit Protection Act (OWBPA) changed the standard applied in Hazen Paper.

The dissenting opinion, authored by Justice Kennedy and joined by Justices Scalia, Ginsburg, and Alito, preferred a more mechanical application of the ADEA. Finding Kentucky’s plan to be facially discriminatory, the dissenters chided the majority for “undercut[ting]” the basic framework of the ADEA, which prohibits disparate treatment unless some specific exemption or defense in the Act applies. The dissenters found the language in the OWBPA to clearly prohibit any age-based disparities in pension plans.

Moreover, the dissenters read Hazen Paper much more narrowly: “By interpreting Hazen Paper to say that a formal, facial, explicit, mandated, age-based differential does not suffice to establish a disparate-treatment violation (subject to statutory defenses and exemptions), [the majority] misconstrues the precedent upon which its entire theory of the case is built.” In the dissenters’ view, the majority’s approach will allow facially discriminatory age-based classifications unless the plaintiff can show they were “motivated” by age. Even under that standard, however, the dissent would have found Kentucky’s plan unlawful because the rationale cited in petitioners’ brief for giving older disabled workers fewer imputed years of service was that younger workers would need “more of a boost” to live comfortably in retirement since they had fewer years to accumulate savings. That assumption, said the dissenters, is the “very essence of age discrimination.”

The Court’s decision will make it much more difficult for plaintiffs to successfully challenge pension programs under the ADEA, since the “factors” enumerated by the majority will be present in many pension programs. The somewhat atypical 5-4 divide (with liberal and conservative Justices on both sides) seems to have been animated by disagreements about how strictly to interpret the text of the ADEA and former precedents. The majority adopted a flexible standard-based approach that sharply contrasts with the dissent’s rule-based approach. The decision is a victory for both Kentucky and the many amici states with similar public employee retirement systems.