# Appellants Brief — Public Employees Retirement System of Ohio v. Betts > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385012_0253%3A07 ## Record - **Collection:** Supreme Court brief - **Document type:** Appellants Brief - **Published:** January 1, 1989 - **Citation:** 492 U.S. 158 ## Text . . + | , | eR d 2 " zs ep 7 P " . \~ * i QUESTIONS PRESENTED 1. Must employee benefit plans which discriminate on the basis of age be justified by age-related cost considera- tions to qualify for exemption from the ADEA under § 4(f(2)? 2. May an employee benefit plan continue to discrimi- nate on the basis of age solely because the plan predates the passage of the ADEA?” 3. Ifemployee benefit plans which predate the ADEA are permitted to discriminate, do they lose their exemp- tion when substantial changes are made in the plan at a later date? TABLE OF CONTENTS Table of Contents Continued Page Page re ee i A. The islative Hi Of The 1978 Amend- TaBae OF AMTROOMITIRS. ... ccc ccc ccce iv ments A Clear Intent To Reject This STATEMENT oF THE CASE ............... séeamunnie 1 Court's Definition Of Subterfuge In McMann 24 SUMMARY OF ARGUMENT. ........... 66 oo cn nce 5 B. Congress Did Not Intend To “Grandfather” RID ccc cececeneceseceectneseidieeeee 8 Unlawful Practices In Perpetuity .......... 29 lL. Emptovers Wuo Deny Drsasiurry Benerrrs Ill. ReGarpiess Or Tue Errect Or Tue 1978 Sovecy On Tue Basts Or Ace Must SHow An Ace-Revcatep Cost Justification To apauare For Tue §$4(f2) Exception To Tue ; A. PERS Failed To Meet Its Burden Of Proof AMENDMENTS To THe ADEA On McMann Tue : cance emwentd PLAN Is Not Exempt UNDER 32 A. Depriving Betts Of PERS Disability Benefits Resulted In Her Involuntary Retirement In Violation Of §4(f)(2) ............c cc eee eens 32 B. The PERS Plan Is Not A Pre-ADEA Plan Because Of Significant Post-Act Modifications 34 CE 37 GE OGEEED covcecesceceneeenmeeenanan 8 B ~~ ive History Of § 4(f2) Of The ADEA Vee ts 4a ~4 Intent That Benefits To The Extent The Reduction Is Justified Age-Related Cost i [aaa u | The Employer To Discriminate ..... 10 77 4 E 3 Z ? Z Intent That The §4(fx2) Ex ion Be Lumited To Age- Based Cost Justi C. The PERS Disability Plan Violates EEOC Reg- ED cocccceccesceseeasenneaaa Is 1. The PERS Disability Plan Is In Clear Vio- lation OF 29C.F.R. $860,120 Dai). Is 2. The EEOC lations Have Guided y Years And Are Il. Tue 1978 Amenoments To Tue ADEA Reversep Tuts Courr’s Reasontne AND Dect- ston In McMann Tuat Pre-Existine Pians Were Not A Suesrerrvuce iv TABLE OF AUTHORITIES Cases Betts v. Hamilton Count — Retardation, 631 F.Supp. 1198 (S.D. Ohio 1986)................ 3, 4, Betts v. Hamilton ae a Montsi Retardation, 848 F.2d 692 (6th Cir. 1988)................. 4, 7, 9, 28, Brennan v. Taft Broadcasting Co., 500 F.2d 212 (5th Cir. 34 34 SPUN 0encssdncsensecdedcsednasentessescs 24, 25, 29 Celotex Corp. v. Catrett, 477 U.S. 317 (1986).......... Chevron, USA, Inc. v. National Resources Defense, Inc., 467 U.S. 837 ( EE Ob0t0ucdstedeuedsdoceskedeee Cipriano v. Board of Educ. of City School Dist., 785 F.2d EE SE nt dbnedce tiendecendédceesbscos Demby v. Schweiker, 671 F.2d 507 (D.C. Cir. 1981)... .. in, Sees Dry Goods Corp., 449 U.S. 590 EEOC v. Baltimore and Ohio R. Co., 632 F.2d 1107 (4th Dt El Pavcenchbcenbandiediandishbadkinbinaman ce EEOC vy. Cargill, Inc., 855 F.2d 682 (10th Cir. 1988).. 28, ween Coney of Orange, 837 F.2d 420 (9th Cir. ae * City of Mt. Lebanon, 842 F2d 1480 (3rd Cir. EEOC vy. prem ., 125 F.2d 211 (3rd Cir. 1983) cert. denied 469 U.S SUED ce Cueccbecesecees Federal Energy Admin. v. Algonquin SNG, Inc., 426 Pe ss5sinésoucianhendensecbvuveces General Electric v. Gilbert, 429 U.S. 125 (1976)...... 21. Griggs v. Duke Power Co., 401 U.S. 424 (1971)....... 19, Karlen v.City College of Chi 837 F2d 314 (7th Cir. 1988), cert denied, No. 87 71831 ieee bein eee McMann vy. United Airlines, 542 F.2d 217(4th Cir. 1976) Nat. Ass'n of Greeting Card Pub. v. U.S. Post. Ser., 462 Ses a6 éhenchbenccedcuheusccedeseans New News Shipbuilding & Dry Dock v. EEOC, 462 ).S. 669 ‘19830 PONERSRDEORUSHEOS SSO SOCCSeeees NLRB vy. Boeing Co., 412 U.S. 67 (1973).............. Phillips, Inc. v. Walling, 324 U.S. 490 (1945) ......... Piedmont & Northern R. Co. v. ICC., 286 U.S. 2991932) Sikora v. American Can Co., 622 F.2d 1116 (3rd Cir. 1980) eereeeoeeeeeeeeeeeoeeBeeseeoeeeeeeseeeeeseeeseeeseece Vv Table of Authorities Continued Page Smart v. Porter Paint Co., 630 F.2d 490 (7th Cir. 1980). 34 Trans World Airlines, Inc. v. Thurston, 469 U.S. 111 DP sttenencensssktinsseudennssssbiddenieen 8, 33 United Air Lines Inc. v. McMann, 434 U.S. 192 DP UAhiNG tle niendesbibibetnadbbakecines passim U.S. v. Bd. of Com'rs of Sheffield, Ala., 435 U.S. 110 REE ean eo CREE SR ep ene 15 U v. Tamiami Trail Tours, Inc., 531 F.2d 224 (5th Cir. TPicbcsadsddvesddiusanbabeesteakenudedkenoce 29 Western Airlines v. Criswell, 472 U.S. 400 (1985)...... 8, 29 Zinger v. Blanchette, 549 F.2d 901 (3rd Cir. 1977)...... 25 STATUTE Ee ee ene eee 22 Age Discrimination in Employment of 1967 (ADEA). passim ADEA § 2(b), 29 U.S.C. §621(b)................... l4 ADEA §4(f)(1)), 29 U.S.C. §623(f(1) «2.2... 29 ADEA § 4(f)(2), 29 U.S.C. § 623(f)(2)............ passim ADEA § 4(g), 29 U.S.C. § 623(g)................. 30,31 ADEA §4(i), 29 U.S.C. § 623(i)...............45. 22, 31 ADEA $7(e), 29 U.S.C. §626(e).. 2... 6. 22 ADEA §9, 29 U.S.C. $628.................00ee. 13, 21 Discrimination in E nt Amendment of 1978, Pub.L. 96-256, 92 Stat 189..................505- 15, 30 =e t Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001 et seq ....... 6.0.0.5. ll Tee a a enuee ll oe es cu eeaueebous 21 es IID sc cc ccccccccecesucecessveces 1,8 RE ES eT 1, 35 Ohio Rev. Code § 145.39. ........... 0c. cece ec eeeee 2, 8, 32 Se IED . vcccccccucseceoceseeheceess 2, 35 REGULATIONS 29 C.F.R. § 860.120, presently codified at 29 C.F.R. Dt C.F. R. $860). 120(f\ 1 iii), which was in effect when Betts was denied disability benefits, was first issued by the DOL June 21 1979 34 FR. 9709). This regulation was redesignated 29 C FR. * 1625. 10F\1 iii) by the EEOC in 1987 (52 FR. 23812, June 25, wee au. f\ 1 iii) was revised to include pe Rene on . A. i, — was redesignated 29 C.F_R. 19 tinuation of benefits for older workers but permits reduc- tion in the level of benefits. The alternative is to pay full benefits but for a reduced duration. The regulations also provides for other patterns of reduction if supported by cost data. The PERS disability plan fails to comply with any of the several methods provided by the regulations. Instead, the PERS plan denies disability benefits altogether for those disabled after age 60. This is in clear violation of § 860. 120(f)(1)(iii) which specifically prohibits cutting off benefits altogether because of age. 2. The EEOC Regulations Have Guided Employers For Twenty Years And Are Entitled To Great Deference. Consistent and contemporaneous construction of a stat- ute by the agency charged with its enforcement is entitled to great deference. NLRB v. Boeing Co., 412 U.S. 67, 74-75 (1973), Chevron, U.S.A., Inc. v. Natural Resources Defense Counsel, Inc., 467 U.S. 837 (1984); Griggs v. Duke Power Co., 401 U.S. 424, 433-434 (1971). “Moreover, such a contemporaneous construction deserves special deference when it has remained consistent over a long period of time.” EEOC v. Associated Dry Goods Corp., 449 U.S. 590, 600 n.17 (1980). Courts give extra authoritative weight to interpretative rules which are made contemporaneously with the enactment of the stat- ~ute, which have been followed consistently over a long period, or which were outstanding at the time of statutory reenactment. 2 K.Davis, Administrative Law Treatise § 7.14 (2d ed. 1979); Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944). For over 20 years the DOL/EEOC regula- tions have consistently held that employee benefit plans may reduce benefits to older employees only to the extent 20 the reductions can be justified by cost considerations and the regulations have survived reenactment of the Act. The regulations are entitled to deference because they were issued contemporaneously both with the Act and again with its Amendments. They have consistently artic- ulated the “equal benefit or equal cost” principle since first issued in 1969. Shortly after passage of the ADEA, the DOL issued 29 C.F.R. § 860.120 [34 F.R. 9709, June 21, 1969] which interpreted § 4(f)(2). The cost and benefit section, 29 C.F.R. §861.120(a), provided: “Thus, an employer is not required to provide older workers . . . the same pension, retirement or insur- ance benefits as he provides to younger workers, so long as any differential between them is in accor- dance with the terms of a bona fide benefit plan. For example, an employer may provide lesser amounts of insurance a under a group insurance plan to older workers than he does to younger workers, where the plan is not a subterfuge to evade the pur- poses of the Act. A retirement, pension, or insurance plan will be considered in compliance with the stat- ute where the actual amount of payment made, or cost incurred, in behalf of an older worker is equal to that made or incurred in behalf of a younger worker, even though the older worker may thereby receive a lesser amount of pension or retirement benefits, or insurance coverage.” (emphasis added) In 1978, when it amended the ADEA, Congress made it clear that the DOL should issue more comprehensive guidance with respect to § 4(f)(2), particularly because of the increase in number of older workers expected as a result of raising the coverage to age 70 and the prohibition of mandatory retirement. On September 22, 1978, the DOL published its pro- posed amendment to § 860.120 and invited public com- 21 ment [43 F.R. 43264]. After considering numerous written comments as well as testimony at a hearing on the proposed amendment to § 860.120, the DOL revised its original proposal and published its final regulation [44 F.R. 30658, May 25, 1979]. The regulation on long-term disability plans, § 860.120(f)(1)(iii), was consistent with the 1969 regulations in that it prohibited a complete cutoff of benefits because of age and permitted only reductions which could be justified by age-related costs. The regulations are also entitled to deference because Congress delegated to the DOL the authority to “to issue such rules and regulations as it may consider necessary or appropriate for carrying out this Act, and may establish such reasonable exemptions to and from any or all provi- sions of this Act as it may find necessary and proper in the public interest.” Pub.L. 90-202, §9, 81 Stat. 602 (29 U.S.C. §628). The power granted to the DOL was far more extensive than the authority to issue “procedural rules” which Congress granted to the EEOC under Title VII. 42 U.S.C. § 2000e-12. General Electric v. Gilbert 429 U.S. 125, 140-146 (1976). Moreover, even regulations issued under the limited authority of Title VII are entitled to great deference when issued contemporaneously with the Act. Griggs, supra. The regulations are further entitled to deference because Congress has amended the ADEA to change the effect of certain of these regulations while leaving untouched the long term disability regulations. In 1982, Congress disagreed with EEOC regulation § 860. 120- (f)(1)(ii),? pertaining to health care benefits and amended the ADEA “by requiring an employer to offer his employ- % § 860. 120(f)(1)(ii) was removed following the 1986 amendments to § 4(g), 29 U.S.C. § 623(g). (53 FR. 5791, Feb. 29, 1988). 22 ees age 40 or over but under age 70 the benefits offered the employer's heat. = “tee. tion 4(i), 29 U.S.C. § 6230). P.L. 97-248, 1982 U.S. Code Cong. & Ad. News 792-793. In 1986, Congress added § 4(i) b.L. 99-509, § 9201 to make it unlawful to reduce pen sion benefits because of age. The pension benefits a. ment was prompted by an announcement by the EEOC that it intended to rescind a subsection in 29 C.F_.R § 860. 120 which pertained to pension benefits and to issue a new interpretation. U.S. Code Cong. & Admin. News Legis. History 4023 (1982). Again, although Congress was well aware of the EEOC regulations relating to di ability plans, it made no changes in them paren: Finally, the regulations are entitled to because employers have relied upon aenal i extent obeyed them, for over twenty years. Section tle) of the ADEA, 29 U.S.C. §626(e), incorporates 29 U S.C § 259 of the Portal-to-Portal Act which states that em lo om are = = to liability if they acted in me i y written administrativ wes Strative regulation, ruling, or inter- C During the 1982 Senate hearings, the U.S. Chamber of — recognizing the importance of the EEOC reg- : ations in providing guidance to industry, went so far as a — re a the then current regulations | g to “bona fide employee benefit plans” ing them part of the ADEA itself. stating: — “The legislative history and t — sulletin] have Hm to be enecading ding v hel “ -. In easing compliance by business with an = of the 1978 amendments which could have —e _ disruptive to employee benefit srvenqumen 4 spite their salutary effect, they do not offer —s 23 tainty since the 1.B. is not incorporated in the ADEA.” Hearing to Eliminate Mandatory Retirement: Hearings on H.R. 6576 Before the Subcommittee on Em ployment Opportunities of the House Committee on Education and Labor, 97th Cong., 2nd Sess. 36 (1982) (Statement of Robert T. Thompson, Chamber of Commerce of the United States). Congress did not incorporate the regula- tions into the Act. Instead, in 1982, the committee again stated that it expected the DOL to establish regulations in keeping with the amendments. U.S.Code Cong. & Admin. News. Legis. History 793 (1982). Even, the Equal Employment Advisory Council (“EEAC”), an employer group which has filed an Amicus brief supporting PERS in this case, has advised employers to rely on these reg- ulations: “(sjince the 1978 Amendments to the ADEA extended ADEA protection to age 70, employers may no longer engage in the common practice of completely cutting off long-term disability benefits for all disabled employees and long-term coverage for all active employees at age 65. however, employers may lawfully reduce long-term disability benefits for older employees who are under 70 when such reduc- tions are cost justified.” (emphasis added)!” In summary, the regulations meet all of the tests for deference. They are consistent with the legislative his- tory, they were issued contemporaneously with the Act and its amendments, and employers have relied upon them for over 20 years. 10 AGE DISCRIMINATION IN EMPLOYMENT ACT: A Com- pliance and Litigation Manual for Lawyers and Personnel Practi- tioners p.339. Published by the Equal Employment Advisory Council (1982). 24 Il. THE 1978 AMENDMENTS TO THE ADEA OVERTURNED THIS COURT’S REASONING AND DECISION IN McMANN THAT PRE-EXISTING PLANS WERE NOT A SUBTERFUGE. PERS argues that its disability plan is beyond the reach of the ADEA solely because the plan was in existence when the ADEA was passed. [PERS Br. pp.16-21]. It relies upon this Court’s decision in McMann, which held that a conceded “bona fide employee benefit plan” estab- lished before passage of the ADEA which permitted involuntary retirement could not be a subterfuge to evade the Act. PERS argues that this Court's definition of “sub- terfuge” makes its disability plan exempt under § 4(f)(2) even though it would otherwise be in violation of the ADEA. In effect, PERS argues that in passing the ADEA, Congress intended to perpetuate all age-based benefits discrimination then in effect. A. The Legislative History Of The 1978 Amendments Shows A Clear Intent To Reject This Court’s Definition Of Sub- terfuge In McMann. The legislative history of the 1978 Amendments to the ADEA makes it abundantly clear that Congress not only overturned this Court's decision in McMann but rejected its definition of “subterfuge” as well. Congress specifically stated that plan provisions in effect prior to enactment of the ADEA were not exempt by virtue of the fact that the plan predated the Act. In 1977, when Congress was considering amendments to the ADEA, it was aware of the three mandatory retire- ment cases with conflicting reasoning and results; Bren- nan Vv. Taft Broadcasting Co. , 500 F.2d 212 (5th Cir. 1974), McMann v. United Airlines, 542 F.2d 217 (4th Cir. 1976) 25 and Zinger v. Blanchette, 549 F.2d 901 (3rd Cir. 1977).!! In Taft Broadcasting, the Fifth Circuit ruled that a retire- ment plan “effectuated far in advance of the enactment of the law” could not be a subterfuge for evasion of the Act. 500 F.2d at 215. In contrast the Fourth Circuit, in McManzn, ruled that forced retirement pursuant to a pre- Act plan would be considered a “subterfuge” to evade the purposes of the Act absent an employer's showing of a legitimate business purpose for the age-based action. 542 F.2d at 220. The Senate Report, accompanying the bill to amend § 4(f)(2), H.R. 5383, expressly rejected the Fifth Circuit's reasoning in Taft Broadcasting that a pre-existing plan could not be a subterfuge stating: “The /Taft] court found the language of the section unambiguous and refused to consider the legislative history. /t concluded, erroneously in the committee's view, that a plan could not be a subterfuge within the meaning of the section 4(f)(2) if it was operative before the effective date of the act. (emphasis added) S.Rep. No. 95-493, (Comm. on Human Resources) 95th Cong., lst Sess. 10 (1977), EEOC Legislative History 443. In 1977, both Houses passed H.R. 5383 to amend § 4(f)(2) to prohibit involuntary retirement and sent the bill to the Conference Committee to resolve differences in other parts of the bill. While the bill was still in the Conference Committee, this Court decided McMann, holding that a bona fide retirement plan could not con- 11H.R. Rep. No. 95-527, Part I, 95th Cong. Ist. Sess. 5 (1977), EEOC Legislative History 365 and S. Rep. 95-493, 95th Cong. Ist Sess. 10 (1977), Legislative History 443. 26 stitute a subterfuge to evade the Act if the plan predated the Act. The Conference Committee, in its report to both houses, disagreed with this Court’s reasoning in McMann. The Conference Report, which was voted on and approved by both Houses, stated that the amend- ments were intended to overturn McMann: “In McMann v. United Airlines, 98 S.Ct. 244 (1977), the Supreme Court held to the contrary, reversing a decision reached by the Fourth Circuit Court of Appeals, 542 F.2d 217 ((1976). The conferees specifically disagree with the Supreme Court's hold- ing and reasoning in that case. Plan provisions in effect prior to the date of enactment are not exempt under section 4(f)(2) by goo | the fact that they antedate the act or these amendments.” (emphasis supplied) H.R. Conf. Rept. No. 95-950, p. 8 (1978), U.S. Code Cong. & Admin. News p.529, EEOC Legislative History 519. Since the Conference Report represents the final state- ment agreed to by both houses of Congress, next to the statute itself, it is the most persuasive evidence of con- gressional intent. Demby v. Schweiker, 671 F.2d 507, 510 (D.C. Cir. 1981). See also, Nat. Ass'n of Greeting Card Pub. v. U.S. Post Ser., 462 U.S. 810, 832 n.28 (1983) (conference committee reports are entitled to great weight). Congress, in approving the Conference Commit- tee Report, made it abundantly clear that pre-existing plans were not to be exempt because they predated either the ADEA or the 1978 Amendments. On the day the House agreed to the conference report, Congressman Hawkins, one of che House Managers, reported to the House: 27 “The conferees specifically disagree with the Supreme Court's holding and reasoning in that case [McMann], particularly its conclusion that an employee benefit plan which discriminates on the basis of age is protected by section 4( f)(2) because it predates the enactment of the ADEA.” (emphasis added) 124 Cong. Rec. 7881 (Mar. 21, 1978), EEOC Legislative History 528. The Senate also expressed its disapproval of this Court’s decision in McMann. See remarks of Senator Javits, 124 Cong. Rec. 8218 (Mar. 23, 1978) EEOC Legis- lative History at 539 (“As stated in the conference report, the ‘conferees specifically disagree with the Supreme Court’s holding and reasoning in that case.’”) Following debate, the Senate agreed to the conference report on March 23, 1978, and the President signed the bill on April 6, 1978. PERS’ argument [PERS Br. pp. 16-23], that Congress intended only to overrule the result in McMann as to involuntary retirement, is without merit. In circum- stances similar to these, this Court has held invalid both the reasoning and the holding of a decision “overtuned” by Congress. In Newport News Shipbuilding & Dry Dock v. EEOC, 462 U.S. 669 (1983), the Court construed the Pregnancy Discrimination Act of 1978 which was passed for the express purpose of overturning the decision in General Electirc Co. v. Gilbert, 429 U.S. 125 (1975). In Newport News, the Court rejected the argument that Congress intended only to overrule Gilbert's result and held that “Congress . . . unambiguously expressed its disapproval of both the holding and the reasoning of the court in the Gilbert Decision, 462 U.S. at 678 (emphasis added). 28 Congress’ repudiation of the “holding and reasoning” of McMann is entitled to the same effect here. As the House and Senate Conference Committee Report recites in no uncertain terms, “(p]lan provisions in effect prior to the date of enactment are not exempt under § 4(f)(2) by virtue of the fact that they antedate the act or these amend- ments.” . The Sixth Circuit, below, held that Congress, in pass- ing the 1978 Amendments, repudiated this Court’s rea- soning in McMann. Betts, supra, 842 F.2d at 694 {[A-4]. The Ninth and Tenth Circuits have ruled to the contrary. Both circuits admitted that the legislative history of the 1978 Amendments demonstrates congressional intent to overturn McMann. They claim that Congress failed to accomplish that result, however, by not specifically draft- ue ecm of subterfuge that would remove protec- ion for pre-existing plans. EEOC v. County o 837 F.2d 420, 422 (9th Cir, 1988) and EEOC 2 Comite Inc., 855 F.2d 682, 686 (10th Cir. 1988). This argument disregards the fact that the DOL issued a specific defini- tion of subterfuge as applied to employee benefit plans in 1979. 29 C.F.R. §860.120(d) [44 F.R. 30658, May 25 1979]. The 1979 DOL definition of subterfuge, 29 C.F.R. § 860.120(d), which is still in effect today at 29 C.FR. § 1625. 10( d), requires that lower benefits for older work- ers be Justified by age-related cost considerations. See EEOC v. City of Lebanon, 842 F.2d 1480, 1488-90 (3rd Cir. 1988); Karlen v. City College of C hicago; 837 F.2d 314, 319 (7th Cir. 1988), cert denied, No. 87-1831. Relying on the 197s ADEA amendments, however, the DOL reg- ulations gave no protection to plans in effect prior to passage of the ADEA. Further, Congress, fully aware of the subterfuce regulation, has repeatedly amended the ADEA hut nas not amended that DOL definition of sub- terfuge. 29 This analysis of the two circuits also disregards the fact that when this Court decided McMann, both houses had already passed H.R. 5383 with similar wording as to § 4(f)(2) and the bill was in conference committee for reso- lution of differences in other sections. The conference managers, being limited to the matters in dispute, would have exceeded their authority had they revised § 4(f)(2) to include a definition of subterfuge. PERS suggests that the legislative history of the 1978 Amendments should be ignored since Congress did not specifically define subterfuge in the text of the 1978 Amendment. [PERS Br. p.22] The PERS position con- flicts with the analysis by this Court of a similar problem under § 4(f)(1) of the ADEA, 29 U.S.C. §623(f)(1) which establishes a bona fide occupational qualification (BFOQ) defense. See Western Airlines v. Criswell, 472 U.S. 400 (1985). Section 4(f)(1) of the ADEA had not been amended in the 1978 Amendments. Nonetheless, this Court reviewed the 1978 legislative history and noted that Con- gress had endorsed an approach to BFOQ issues developed by the Fifth Circuit in Usery v. Tamiami Trail Tours, Inc., 531 F.2d 224 (5th Cir. 1976). Id. at 415. Those same sources of legislative history relied upon by this Court in Criswell establish Betts’ position here: that Con- gress refuted the “reasoning” of the Fifth Circuit in Taft Broadcasting Co. and of the Supreme Court in McMann, and that it endorsed the decision of the Fourth Circuit in McMann, which held that all employee benefit plans, regardless of their temporal origin, must demonstrate a legitimate business purpose to satisfy the “subterfuge” standard of § 4(f)(2). B Congress Did Not Intend To “Grandfather” Unlawful Practices In Perpetuity If Congress failed to overturn the reasoning of McMann, as PERS argues, then plans existing at the 30 time Congress outlaws a practice are granted perpetual immunity, and only new employers or employers with new plans are required to obey the law. This is clearly contrary to the intent of Congress. The 1967 Committee Reports of both houses expressly state: “It is Important to note that [§ 4(f)(2)] applies to new and existing employee benefit plans, and to both the establish- ment and maintenance of such plans.”!2 See McMann 434 U.S. at 219 n. 13 (Marshall, J., dissenting). When Congress makes a practice illegal but wishes to “grandfather” existing practices, it does so explicitly and with an expiration date. This is precisely what Congress did in 1978 and 1986. In 1978, it provided that bargaining agreements would not be affected by the 1978 amendment to § 4(f)(2) until January 1, 1980 or the expiration date of the agreement, whichever first occurred. Pub. L. 95-256, 92 Stat. 189. Bargaining agreements were likewise “grandfathered” from compliance with the 1986 amend- ments to §4(g)(1) (group health plans) until January 1, 1990. Pub. L. 99-592. There is nothing in the remainder of the 1978, 1982, 1984 or 1986 amendments nor in their legislative history to indicate that empioyee benefit plans in existence at the time of the amendments effective dates were to be exempt other than as noted above. As noted above, in 1978, 1982, 1984 and 1986, Congress amended the ADEA to prohibit practices which pre- viously had been legal. In 1978, it amended Section 12: 29 U.S.C. $631 to prohibit discrimination against employees aged 65-69. Pub.L. 95-256, 92 Stat. 189, 190. In 1982, it ‘H.R. Rep. No. 805, 90th Cong. Ist Sess. p.4 (1967), EEOC Legislative History 74; S. Rep. Ne. 723, 90th Cong. Ist Sess. p. 4 (1967) EEOC Legislative History 105, U.S. Code Cong. & Admin. News. 1967, p. 2217. 31 added Section 4(g); 29 U.S.C. 623(g) to provide that employees age 45-69 were to be entitled to the same group health plan coverage as younger employees and in 1984 Section 4(g) was amended to extend the same coverage to spouses of employees age 65-69. Pub. L. 97-248, 96 Stat. 353 and Pub. L. 98-369, 98 Stat. 1063. In 1986, Congress amended the Act to remove the age 70 cap and to prohibit certain discriminatory pension plan practices. Section 4(i), 29 U.S.C. 623(i); $11, 29 U.S.C. §631, Pub.L. 99-592, 100 Stat. 3342 and Pub. L. 99-709, 100 Stat. 1973. If the McMann reasoning that pre-existing plans are exempt under § 4(f)(2) has not been overturned, as PERS claims, then not only are pre-1967 employee benefit plans free to discriminate but employee benefit plans existing when the 1978, 1982, 1984, and 1986 amendments were passed are exempt from those changes in the ADEA as well. Companies with pre-existing plans that would be permitted to discriminate would have a competitive edge over companies with newer plans who would have to com- ply with the ADEA. Furthermore, there would be no incentive to modify or improve their plans since pre- existing plans would then lose their exception. Congress clearly did not intend such absurd results. In 1978, it stated that “[p]lan provisions in effect prior to the date of enactment are not exempt under § 4(f)(2) by virtue of the fact they antedate the act or these [1978] amend- ments.” H.R. Conf. Rep. No. 950, p. 8 (1978), EEOC Legislative History 519. It is obvious that in enacting subsequent amendments in later years, Congress expected existing plans to conform. Other employers and benefit plan administrators across the country have been conforming pre-existing plans to these amendments and the EEOC regulations. PERS should be required to do so as well. 32 ll. REXRDLESS OF THE EFFECT OF THE 1978 AMEND- MENTS TO THE ADEA ON McMANN, THE PERS DISABILITY PLAN IS NOT EXEMPT UNDER § 4(f)(2). A. Depriving Betts of PERS Disability Benefits Resulted In Her Involuntary Retirement In Violation of § 4(f)(2). By denying Betts disability retirement benefits because of her age, PERS forced her into involuntary retirement. Under Ohio law, a person receiving disability benefits is still considered an employee with important reemploy- ment rights. A disability recipient is placed on a leave of absence for five years. The recipient has a guaranteed right to return to his job if he should recover within that period.'*A person on service retirement has no such guaranteed reemployment rights. Thus, forcing Betts into service retirement instead of granting her access to the disability plan terminated her from employment. On disability, Betts would still be an employee today, on leave of absence status, with mandatory reemployment rights should she recover. In 1978, Congress amended the ADEA to specifically prohibit involuntary retirement by adding to § 4(f)(2): “except that no such employee benefit plan. . . shall require or permit the involuntary retirement of any individual specified by section 631(a) of this title because of the age of such individual.” Section 2(a) of the ADEA Amendments of 1978, Pub. L. 95-256, 92 Stat. 189, 29 U.S.C. §623(f)(2). Thus, the 'SO.R.C. § 145.39 provides: “A disability retirant shall retain his membership status. Also, he shall be considered on leave of absence from his position of employment during his first five years on the retired list, notwithstanding any contrary provisions in this chapter.” 33 § 4(f)(2) defense is not available to PERS because the disability plan caused or permitted Betts involuntary retirement. This Court, in Trans World Airlines, Inc. v. Thurston, 469 U.S. 111 (1985), applied the 1978 amendment and held that by depriving TWA pilots over age 60 of the option of transferring to flight engineer, an option that was avail- able to younger pilots, the TWA seniority system forced involuntary retirement in violation of § 4(f)(2). Likewise, by depriving Betts of participation in the disability plan which included the right to return to her old job, an option that was available to younger employees, the PERS dis- ability plan forced her into retirement in violation of § 4(f)(2). See also, EEOC v. Westinghouse Corp. (West- inghouse I), 725 F.2d 211, 223 n.8 (3rd Cir. 1983), cert. denied 469 U.S. 820 (1984) (Denial of layoff benefits to employees age 55 or older which resulted in loss of recall rights might constitute involuntary early retirement). Writing in an Amicus, the California State Teachers’ Retirement System has cited to legislative history which suggests that the 1978 amendment to the Act was designed only to prevent the forced retirement of able- bodied workers, those who were otherwise able to per- form their duties. Congress wanted to make sure that the ADEA did not prevent employers from removing incom- petent workers from the job. That is not the issue here. June Betts does not challenge her termination from her status as a full-time employee. Rather, she contests her forced termination from employment status altogether, specifically from the leave of absence status she should | have had as a participant in the disability plan. She was fully qualified for a leave of absence under the PERS disability benefits plan which would have given her five years of reemployment rights. She was denied those ben- 34 efits because of her age, however, and forced to take service retirement. This type of forced retirement is pro- hibited by § 4(f)(2). As the District Court below recognized, “plaintiff was presented with a choice of early retirement or nothing (a livelihood or none)” and therefore “plaintiff was forced into retirement because of her age.” Betts, supra, 631 F.Supp. at 1205 [A-30]. The Sixth Circuit agreed, describ- ing the effect of the disability plan as “forcing length of service retirement.” Betts, supra, 848 F.2d at 694 [A-5]. B. The PERS Plan Is Not A Pre-ADEA Plan Because Of Significant Post-Act Modifications. PERS argues that because its plan was in existence years before the ADEA it is permitted to continue its discriminatory practices, citing this Court's decision in McMann. [PERS Br. pp.16-21]. As set out above, that argument is incorrect in light of congressional actions overturning McMann. Moreover, that argument has no relevancy to the facts in this case because the Ohio legis- lature made significant and relevant changes to the PERS disability and retirement plans in 1976 and 1981. While McMann held that a plan in existence prior to the passage of the ADEA could not be a subterfuge to evade the purposes of the Act, the clear implication was that significant changes to a plan after passage of the ADEA could be a subterfuge. The circuits are unanimous in agreeing that a Pre-ADEA plan that is modified after passage of the ADEA can be a subterfuge if the change is relevant.'4 The Sixth Circuit, below, did not reach this '4 See, Cipriano v. Board of Educ. of City School Dist., 785 F.2d 51, 58 (2nd Cir. 1986), Sikora v. American Can Co., 622 F.2d 1116, 1124 (3rd Cir. 1980), EEOC v. Baltimore and Ohio R. Co., 632 F.2d 1107, 1112 (4th Cir. 1980), Smart v. Porter Paint Co., 630 F.2d 490, 495 (7th Cir. 1980), EEOC v. Orange County, 837 F.2d 420, 423 (9th Cir. 1988), and EEOC vy. Cargill, 855 F2d 682, 686 n.4, (10th Cir. 1988). 35 issue because it ruled that Congress had overruled McMann. After ADEA became law in 1967, it was amended in 1974 to bring state and local governments under its ambit. Since 1974, PERS has made changes to the plans nearly every year, several of which have significantly disadvan- taged employees who become disabled after age 60. Prior to 1976, the calculations of benefits for disability retirement and service retirement were similar. [PERS Br. p.5). However, in 1976, the Ohio legislature amended § 145.36 to put a floor under disability benefits so that no one with 5 years service who became disabled would ever receive benefits of less than 30% of their Final Average Salary (FAS).'5 No similar floor was added to service retirement. When Betts became disabled she was denied this 30% minimum solely because she was 61 years old. She received $158.50 per month on service benefits as opposed to the $355.02 per month she would have received on disability benefits. There can be no doubt that the 1976 change to the PERS disability plan was relevant and significant. It is that very change that causes Betts to be paid nearly $200 per month less than workers with identical service years who became disabled before age 60. The second modification occurred in 1981 when the service retirement plan was amended to require 10 years of service credit in order for service retires to be eligible for group hospital and medical benefits.'® This 10 year service credit requirement did not apply to employees ‘5 Ohio Revised Code § 145.36 with the 1976 changes is printed in full on A-1 of Appellee'’s Motion to Affirm. ‘6 Ohio Revised Code § 145.58. The effective date of this change was delayed five years and did not adversely affect appellee. 36 eligible for disability benefits. Thus, the disabled, who are in greatest need of hospital and medical benefits, are denied these indispensable services because of their age if they become disabled after age 60 and have less than 10 years of service credit. The 1981 amendment to O.R.C. § 145.58 coupled with the age disqualification of the dis- ability plan combine to deprive disabled members of hos- pital and medical benefits solely on the basis of their age. These two changes following passage of the ADEA, deprive many public employees who become disabled after age 60 of the 30% minimum benefit and of hospital and medical benefits. If, in fact, the PERS disability plan was exempt because it was in existence when the ADEA was passed in 1967, this exception was lost when PERS made signifi- cant changes in 1976 and 1981 which adversely affect benefits for employees who became disabled after age 60. 37 CONCLUSION This Court should affirm the decision of the United States Court of Appeals for the Sixth Circuit. Respectfully submitted, RosBertT F. LAUFMAN Counsel of Record Laufman, Rauh & Gerhardstein 1409 Enquirer Building 617 Vine Street Cincinnati, Ohio 45202 (513) 621-9100 ALPHONSE A. GERHARDSTEIN Laufman, Rauh & Gerhardstein 1409 Enquirer Building 617 Vine Street Cincinnati, Ohio 45202 (513) 621-9100 Attorneys for Appellee --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385012_0253%3A07. Public record. Not legal advice.