Amicus Curiae Brief — Westinghouse Electric Corp. v. Equal Employment Opportunity Commission

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MSEEH F. SPANIOL, JR.

CLERK

No. 88-1770

IN THE

Supreme Court of the Wuited States

OCTOBER TERM, 1988

WESTINGHOUSE ELECTRIC CORPORATION,

S Petitioner,

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION,

Respondent.

On Petition for Writ of Certiorari to the

United States Court of Appeals

for the Third Circuit

BRIEF AMICUS CURIAE OF THE

AMERICAN MEAT INSTITUTE

IN SUPPORT OF PETITIONER

ROBERT G. HIBBERT

MONTE B. LAKE *

DOMINIC T. BODENSTEINER

HERON, BURCHETTE, RUCKERT

& ROTHWELL

1025 Thomas Jefferson St., N.W.

Suite 700

Washington, D.C. 20007

(202) 337-7700

Attorneys for Amicus Curiae

the American Meat Institute

* Counsel of Record

WILSON - EPES PRINTING Co., INC. - 789-O096 - WASHINGTON, D.C. 20001

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QUESTIONS PRESENTED

1. Where an employer has long maintained a collec-

tively bargained program of benefits for former em-

pleyees, which treats older employees more favorably

than younger employees, nay a court dissect the total

program into parts and hold that one part, isolated from

the remainder, discriminates against older employees un-

der section 4(a)(1) of the Age Discrimination in Em-

ployment Act of 1967 (ADEA).

2. Whether a plan that exists and pays benefits fails

to qualify as a “bona fide employee benefit plan” within

the meaning of section 4(f) (2) of the ADEA, because it

lacks age-related cost factors; this same question is now

pending before the Court in Public Employees Retirement

System v. Betts, No. 88-389.

3. Whether an employer whose conduct at the time was

not contrary to the law as then pronounced and applied

by other federal courts may be held in “willful” violation

of the ADEA.

(i)

TABLE OF CONTENTS

Page

pe PN be 3 > a v

INTEREST OF AMICUS CURIAE ......000000000000. ou... 1

Pema eeeeee es OF Bett CASE. ......2........2.......cccecescornsssss 2

REASONS FOR GRANTING THE WRIT .................... 3

I. THROUGH AN OVERLY BROAD INTER-

PRETATION OF THE PROHIBITIONS OF

THE ADEA THAT CONFLICTS WITH CON-

GRESSIONAL INTENT AND THE DECI-

SIONS OF OTHER CIRCUIT COURTS, THE

THIRD CIRCUIT’S DECISION WILL IM-

PEDE EMPLOYERS’ ABILITY TO DE-

VELOP COMPENSATION AND BENEFIT

PACKAGES, ESPECIALLY THOSE THAT

ARE COLLECTIVELY BARGAINED, THAT

UNIQUELY AND FAIRLY MEET THEIR

bg Fab 6) | 4 5 3

A. The Third Circuit’s Overly Broad Interpre-

tation Of The ADEA’s Prohibitions, In Vio-

lation Of Congress’ Intent, Will Subject To

Legal Challenge Innumerable Equitably Con-

ceived And Administered Severance And

Pension Plans

B. By Discouraging The Provision By Em-

ployers Of Severance And Other Post-

Employment Compensation, The Third Cir-

cuit’s Decision Will Undermine The Pur-

eee ee OO PRU IA ...........00.............. deddemvoiecess 7

C. Because It Conflicts With The Rulings Of

Other Federal Courts Concerning The Pro-

priety Of Post-Employment Benefit Plans

Under The ADEA, The Third Circuit’s De-

cision Will Cause Uncertainty And Insta-

bility In The Administration Of Such Plans

Throughout The United States

(iil)

iv

TABLE OF CONTENTS—Continued

D. The Third Circuit’s Decision Not Only Im-

pedes Compliance With The ADEA Through

Its Conflict With Rulings Of Other Courts,

But Also Creates Further Confusion By

Interpreting Section 4(f) (1) Inconsistently

With Parallel Provisions Of The Equal Pay

pe, hf Ba Reneue re re a nen =

E. The Third Circuit’s Decision Unreasonably

Intrudes Upon The Ability Of Employers

And Unions To Develop Compensation And

Benefit Plans That Uniquely And Fairly

Meet The Needs Of All Employees Involved

In A Plant Closing Or Relocation _..............

Il. THE THIRD CIRCUIT’S DECISION THAT

SECTION 4(f)(2) OF THE ADEA PRO-

TECTS ONLY THOSE BENEFIT PLANS

WHICH REFLECT AGE-RELATED COST

FACTORS IMPOSES A STANDARD NOT

INTENDED BY CONGRESS AND CON-

FLICTS WITH THE DECISIONS OF OTHER

COURTS OF APPEALS .......... asmaicanindphectacnloes:

i.) fF 2) | |), Eee set eiatt cupitanasiorssanees eterna

Page

10

14

18

Vv

TABLE OF AUTHORITIES

Cases Page

Alford v. City of Lubbock, 664 F.2d 1263 (5th

Cir.), cert. denied, 456 U.S. 975 (1982) ............. 7,19

Betts v. Hamilton County Bd. of Mental Retarda-

tion, 848 F.2d 692 (6th Cir.), prob. juris. noted

sub nom. Public Employees Retirement Sys. v.

Beatin, 16D B. CE. TG CRUD cccrcsccscccccensscssscccsssssc 19

Brennan v. Taft Broadcasting Co., 500 F.2d 212

I Mean. oe eee eee 19

Britt v. EI. DuPont de Nemours & Co., 768 F.2d

Se Ck Sak SE ito ce oe 9

California Brewers Ass’n v. Bryant, 444 U.S. 598

(G _ SRRRRUPER AAR earner ORE RANTES Jae shiner ad 16

Cipriano v. Board of Educ., 785 F.2d 51 (2d Cir.

OI tececaccsspaassvanseuecadee nal eteicedan aca enn ee eee, 19

City of Los Angeles v. Manhart, 435 U.S. 702

PRUNES rocco: seneuacs toca ted ei ee 12,13

EEOC v. Cargill, Inc., 855 F.2d 682 (10th Cir.

|_| RRR nnn OUEOIEON SEOUEE CSU TENE 0m A EME Se kat 19

EEOC v. County of Orange, 837 F.2d 420 (9th Cir.

1988) _......... ee ec een So ee 19

EEOC v. J.C. Penney Co., 843 F.2d 249 (6th Cir.

tN SVE Reet Cen RA NEN ra Rie OFF HH 12, 13

EEOC v. USX Corp., No. 87-6044 (E.D. Pa. Mar.

23, 1989) (LEXIS, Genfed library, Dist file)... 8,9

EEOC v. Westinghouse Elec. Corp., 869 F.2d 696

CN Ga) MND ccccocueccsncicccat acne ee passim

EEOC v. Westinghouse Elec. Corp., 632 F. Supp.

DES Cs Pe See ecb ee 2

Karlen v. City Colleges, 837 F.2d 314 (7th Cir.),

cert. denied, 108 S. Ct. 2038 (1988) ................... 19

Laugesen v. Anaconda Co., 510 F.2d 307 (6th Cir.

Ree BO eae eau eee eae spaiantcape esate’ 4,5

Lemons v. City & County of Denver, 17 Fair

Empl. Prac. Cas. (BNA) 906 (D. Colo. 1978),

aff'd, 620 F.2d 228 (10th Cir.), cert. denied,

GD Uae; ee ee ee cee 6

Mastie v. Great Lakes Steel Corp., 424 F. Supp.

1299 (E.D. Mich. 1976)

vi

TABLE OF AUTHORITIES—Continued

Page

Parker v. Federal Nat'l Mortgage Ass'n, 741 F.2d

SE PGMs SUIDIED cccotessesssncvecincencsseistcibicniacne 9

Patterson v. Independent School Dist. +709, 742

ee EE EEE, MIDI. cccacsrnosbuncassonasketéndssuanionecns 5, 6

Public Employees Retirement Sys. v. Betts, No.

88-389 (U.S. argued Mar. 28, 1989) ....000000.. 19, 20

Trans World Airlines v. Hardison, 432 U.S. 63

UIPIFIP sacioisiscksi.sagsacnsaiascaccadetacasciaaneeaeleeataacanaaaeeanee 17

Trans World Airlines v. Thurston, 469 U.S. 111

ENINENN corn canconcgsnsnssontionndeabansdiniaase aiisiondaanereaeas 12

United Air Lines v. McMann, 434 U.S. 192

SUN TUT sas ncacssssicate sasuiessdecectetamobccennaneunieenaeenie enna 6

United Mine Workers v. Robinson, 455 U.S. 562

aE eer eo a PoP RA ROR Srp I TNS 16 17

Wambheim v. J.C. Penney Co., 705 F.2d 1492 (9th

Cir. 1983), cert. denied, 467 U.S. 1255 (1984). 12

Statutes

Age Discrimination in Employment Act of 1967

(ADEA), as amended, 29 U.S.C. §$§ 621-634

Pe Oe A. OO RUBY ccdecsncccsedstoaiiccececcccsccctacneeas passim

ADEA § 2(a) (1), 29 U.S.C. § 621(a) (1)...... 7

ADEA § 2(b), 29 U.S.C. § 621(b) 5

ADEA § 4(f) (1), 29 U.S.C. § 623(f) (1)... passim

ADEA § 4(f) (2), 29 U.S.C. § 623(f) (2)... passim

ADEA § 12, 29 U.S.C. § 631 (a) 0... 7

Equal Pay Act, 29 U.S.C. § 206 (1982) 00. 11,12

29 U.S.C. § 206(d) (1) .......... iabase dence toanigsasesetsieanen 13

29 U.S.C. § 206(d) (1) (iv) 2... saesoicecuneeliaunninn 11

Title VII of the Civil Rights Act of 1964 (Title

VII), as amended, 42 U.S.C. §$§ 2000e to 2000e-

17 (1982 & Supp. IV 1986)

Title VII §703(h) 0. EET CD CAEP, 12, 13

Worker Adjustment and Retaining Notification

Act, Pub. L. No. 100-379, 102 Stat. 890 (1988)

(to be codified at 29 U.S.C. §$§ 2101-2109)... 15

Regulations

29 C.F.R. § 1625.13 (1988)

vii

TABLE OF AUTHORITIES—Continued

Miscellaneous

Basic Patterns: Income Maintenance, Collective

Bargaining Negotiations and Contracts (BNA)

No. 167, at 53:4 (Apr. 24, 1986) .........................

Hearings on Employment Problems of Older

Workers on H.R. 10634 and Similar Bills, Se-

lect Subcomm. on Labor of House Comm. on

Educ. and Labor, 89th Cong., Ist Sess. (Aug.

SE: Si Bas -2, BPO ccticceesteeninienss

Hearings on S. 830 and S. 788, Subecomm. on Labor

of the Senate Comm. on Labor and Public Wel-

fare, 90th Cong., Ist Sess. (1967) ........................

H.R. Rep. No. 805, 90th Cong., 1st Sess., reprinted

in 1967 U.S. Code Cong. & Admin. News 2215...

King, The ADEA and Employee Benefit Plans, in

Age Discrimination in Employment Act: Com-

pliance and Litigation Manual for Lawyers and

Personnel Practitioners 307 (M. Lake ed.

BOS aan senessasosjnsassoenecmacamdopeieinicatioestemenanieenenas

Personnel Policies Forum: Severance Benefits and

Outplacement Services (BNA) No. 143 (Dec.

|, certo WEES STAG Shee TRe ne Seb eS oA S

Stacy, A Case against Extending the Adverse Im-

pact Doctrine to ADEA, 10 Employee Rel. L.J.

GOT CARB EE iced cocina

U.S. Dep't of Labor, Report to the Congress on

Age Discrimination in Employment under Sec-

tion 715 of the Civil Rights Act of 1964

(1965)

Page

17

16

17

IN THE

Supreme Court of the United States

OCTOBER TERM, 1988

No. 88-1770

WESTINGHOUSE ELECTRIC CORPORATION,

Petitioner,

We

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION,

Respondent.

On Petition for Writ of Certiorari to the

United States Court of Appeals

for the Third Circuit

BRIEF AMICUS CURIAE OF THE

AMERICAN MEAT INSTITUTE

IN SUPPORT OF PETITIONER

The American Meat Institute (AMI), with the written

consent of all parties,’ respectfully submits this brief as

Amicus Curiae in support of the petition for a writ of

certiorari to the United States Court of Appeals for the

Third Circuit.

INTEREST OF AMICUS CURIAE

AMI is a nonprofit corporation organized to promote

the interests of the meat packing and processing industry

and to assist it in operating responsibly, efficiently, and

1 The written consents of the parties have been filed with the

Clerk of the Court.

2

profitably in the legislative, regulatory, and consumer

environments. AMI’s membership includes more than

420 companies which prepare ard process the full range

of meat and meat-food products available in the United

States. AMI member companies produce over eighty per-

cent of the federally inspected meat products available to

American consumers and employ approximately 129,000

people in their operations. Many of these employees are

protected by post-employment benefit plans which have

been collectively bargained between AMI member com-

panies and representative unions.

Substantially all AMI member companies are subject

to the provisions of the Age Discrimination in Employ-

ment Act of 1967 (ADEA), as amended, 29 U.S.C.

$$ 621-634 (1982 & Supp. IV 1986) and Title VII of the

Civil Rights Act of 1964 (Title VII), as amended, 42

U.S.C. $$ 2000e to 2000e-17 (1982 & Supp. IV 1986). As

such, AMI mem4ers are subject to uncertainty and confu-

sion caused by the judgment of the United States Court of

Appeals for the Third Circuit in EEOC v. Westinghouse

Electric Corp., 869 F.2d 696 (3d Cir. 1989), and there-

fore submit this brief Amicus Curiae in support of the

petition for a writ of certiorari.

STATEMENT OF THE CASE

In 1983, the Equal Employment Opportunity Commis-

sion (EEOC) filed this action alleging that an employee

benefits program, crafted through many years of collec-

tive bargaining between Westinghouse and employee-

representative unions, which provided post-employment

income protection to.employees in the form of severance

benefits or pension benefits, but not both, constituted will-

ful age discrimination in violation of the ADEA. The

district court found that because pension-eligible employ-

ees were ineligible for a second post-employment income

stream—severance pay—the benefit plan constituted will-

ful age-based discrimination. FEOC v. Westinghouse

Elec. Corp., 682 F. Supp. 343 (E.D. Pa. 1986).

3

Or review, the Third Circuit held, as a matter of law,

that “severance pay and pension benefits have distinctly

different purposes,” and that one may not be substituted

for the other. 869 F.2d at 707. Ignoring the fact that

Westinghouse’s collective bargaining agreements had

linked severance benefits and pension benefits since sever-

ance benefits were first negotiated in 1960, the court

excised the severance provisions from the whole of the

challenged benefit plan. Scrutinizing the severance bene-

fit component of the plan alone, the court found a viola-

tion of the ADEA because the eligibility criteria for sev-

erance pay—ineligibility for pension benefits—was “‘in-

exorably linked with age.” Jd. at 706.

The court also ruled that the Westinghouse post-

employment benefit plan was not an “employee benefit

plan” under section 4(f) (2) of the ADEA. In this con-

nection, it concluded that the severance provisions stand-

ing alone were shert-term fringe benefits which were not

contemplated by the section 4(f) (2) exemption, nor were

they “integral components of a comprehensive employee

benefits scheme.” Jd. at 710. To constitute an employee

benefit plan under section 4(f) (2), the court held that

the plan must “involve age-related cost factors.” Jd.

REASONS FOR GRANTING THE WRIT

I. THROUGH AN OVERLY BROAD INTERPRETA-

TION OF THE PROHIBITIONS OF THE ADEA

THAT CONFLICTS WITH CONGRESSIONAL IN-

TENT AND THE DECISIONS OF OTHER CIRCUIT

COURTS, THE THIRD CIRCUIT’S DECISION WILL

IMFEDE EMPLOYERS’ ABILITY TO DEVELOP

COMPENSATION AND BENEFIT PACKAGES,

ESPECIALLY THOSE THAT ARE COLLECTIVELY

BARGAINED, THAT UNIQUELY AND FAIRLY

MEET THEIR EMPLOYEES’ NEEDS.

Like Westinghouse, many employers in the nation’s

meat packing and processing industry offer post-employ-

ment income protection to employees. These benefit plans

4

are, in many cases, the product of collective bargaining.

Commonly, pension and severance benefits are negotiated

as integral components of a comprehensive benefits plan.

The Third Circuit’s decision in this case of nationwide

scope disrupts that process in a manner not intended by

Congress nor sanctioned by other circuits. In addition to

subjecting employers and unions to a rigid new rule

which is not consonant with the ADEA, the Third Cir-

cuit’s decision will disrupt the collective bargaining proc-

ess and ultimately undermine the purposes of the ADEA.

If the decision stands, it will force employers to seriously

consider eliminating severance benefit programs or re-

stricting the eligibility for or monetary contributions to

pension programs.

A. The Third Circuit’s Overly Broad Interpretation Of

The ADEA’s Prohibitions, In Violation Of Congress’

Intent, Will Subject To Legal Challenge Innumer-

able Equitably Conceived And Administered Sever-

ance And Pension Plans.

The court below ignored congressional intent in adopt-

ing a rigid and formalistic rule which led to a finding

that Westinghouse’s post-employment policies concerning

severance and pension benefits, as they existed in 1979

and as modified in 1982, were impermissible under the

ADEA. In enacting the ADEA, Congress sought to avoid

such a mechanical application of its proscriptions. It en-

couraged flexible application of the Act, taking into ac-

count the unique circumstances of each case.? The court

below, however, adopted an inflexible approach that would

find age discrimination in the design of most post-

employment benefit plans.

2 Laugesen v. Anaconda Co., 510 F.2d 307, 312 n.4 (6th Cir.

1975) (citing H.R. Rep. No. 805, 90th Cong., 1st Sess. 6-7, reprinted

in 1967 U.S. Code Cony & Admin. News 2218, 2219-20).

5

The ADEA was clearly intended to prohibit “arbitrary

age discrimination.” * It was not, however, formulated

so as to hold employers liable for the mere presence of

age, which might be an indirect and harmless part of the

structure of a benefit plan.* The statutory scheme of the

ADEA reflects this intent. Section 4(f)(1) permits

otherwise prohibited discrimination where the differentia-

tion is based on reasonable factors other than age. Pat-

terson v. Independent School Dist. #709, 742 F.2d 465,

466 n.1 (8th Cir. 1984). Moreover, section 4(f) (2) pro-

tects bona fide employee benefit plans which contain a

differentiation in benefits based upon age. 29 U.S.C.

§ 623 (f) (2).

Patterson is instructive through its acknowledgment

that the ADEA accommodates some differences based on

age and that actuarial considerations are essential in

evaluating the fairness of employee pension and benefit

plans.° The court in Patterson stated:

329 U.S.C. §621(b); Hearings on Employment Problems of

Older Workers on H.R. 10634 and Similar Bills, Select Subcomm.

on Labor of House Comm. on Educ. and Labor, 89th Cong., Ist

Sess. (Aug. 25, 31, Sept. 1, 2, 1965) (Statement of Secretary of

Labor Wirtz).

4It is important to recognize that age, unlike race, sex, and

other immutable factors protected under Title VII of the Civil

Rights Act, is a universal characteristic that can be a benign com-

ponent of employment policies or practices. For a discussion on

this point, see the Secretary of Labor’s Report to Congress which

became the basis of the ADEA’s enactment. U.S. Dep’t of Labor,

Report to the Congress on Age Discrimination in Employment

under Section 715 of the Civil Rights Act of 1964, at 2, 5-6

“ (1965); see also Laugesen, 510 F.2d at 213 n.4; Mastie v. Great

La“es Steel Corp., 424 F. Supp. 1299, 1206 (E.D. Mich. 1976).

5 Further evidence of the ADEA’s flexibility in accepting age-

based differences where it furthers a reasonable objective is found

in the EEOC’s Age Discrimination in Employment Act Interpreta-

tion on Apprenticeship Programs. 29 C.F.R. 1625.13 (1988). In

its guidelines, EEOC concludes that the ADEA does not prohibit

limiting entry into apprenticeship programs to youths below a

certain age.

6

Perhaps a plan (since the purpose of the [4(f) (2) ]

exemption is to afford practicality and flexibility in

applying the prohibition against age discrimination)

must be a systematic and interrelated structure

where consideration of age is an actuarial necessity

in order to attain fairness in computing benefits.

742 F.2d at 467. The court further recognized, quoting

Justice White in his concurrence with this Court’s deci-

sion in United Air Lines v. McMann, 434 U.S. 192, 207

(1977), that “all retirement plans necessarily make dis-

tinctions based on age.” Patterson, 742 F.2d at 467.

By breaking Westinghouse’s integrated severance and

benefit plan into its component parts, finding fault in the

slightest perceived variations in entitlements thereunder,

and rejecting legitimate actuarial explanations of the

plan’s provision of benefits, the court below adopted a

rigid rule which is not supported by the ADEA and is

contrary to clear congressional intent. The decision below

did not find arbitrary discrimination—it found a differ-

ence in benefits for which it rejected a legitimate explana-

tion permissible under the ADEA. If the Third Circuit’s

approach is not rejected, the severance and benefit plans

of innumerable employers throughout the United States

will be subject to legal challenge regardless of the legiti-

mate business or actuarial reasons supporting them.°®

6 In addition, the courts of this country will be put into the posi-

tion of passing judgment on the innumerable, varied, and complex

pension and benefit plans which are predicated upon actuarial con-

siderations. Surely, Congress did not envision the courts dissecting

the nation’s compensation and benefit plans in search of minute and

inconsequential disparities. Cf. Lemons v. City & County of Den-

ver, 17 Fair Empl. Prac. Cas. (BNA) 906, 909 (D. Colo. 1978),

aff'd, 620 F.2d 228 (10th Cir.), cert. denied, 449 U.S. 888 (1980).

7

B. By Discouraging The Provision By Employers Of

Severance And Other Post-Employment Compensa-

tion, The Third Circuit’s Decision Will Undermine

The Purposes Of The ADEA.

Congress’ primary purpose in enacting the ADEA was

to eliminate discrimination in the hiring of older work-

ers. Alford v. City of Lubbock, 664 F.2d 1263, 1270 (5th

Cir.), cert. denied, 456 U.S. 975 (1982). Congress ex-

pressed particular concern about the unemployment of

older workers* and especially their ability “to regain

employment when displaced from jobs.” * Contrary to

this purpose, however, the overly broad view of the pro-

hibitions of the ADEA taken by the Third Circuit below

will discourage the provision of post-termination income

and have its most harmful impact upon those likely to

experience greater difficulty re-entering the job market

and thereby defeat a major purpose for the enactment of

the ADEA.

In providing an exemption from the prohibitions of the

ADEA for employers who observe the terms of bona fide

employee benefit plans, Congress attempted to facilitate

the hiring of older workers, rather than deter it, by mak-

ing it possible for them to be employed without disrupting

existing benefit plans.* Through its dissection of West-

inghouse’s collectively bargained severance and retire-

ment benefit plan and conclusion that it violated the

ADEA, however, the decision below will discourage the

voluntary inclusion of severance pay as part of company

7 The use of the term “older employees” herein refers to those age

40 and above protected under the ADEA. 29 U.S.C. § 631(a).

8 Congressional Statement of Findings and Purpose, 29 U.S.C.

§ 621(a) (1).

® Senator Javits, a primary sponsor of the ADEA, expressed this

point on introducing an amendment that became section 4(f) (2)

of the ADEA. Hearings on S. 830 and S. 788, Subcomm. on Labor

of the Senate Comm. on Labor and Public Welfare, 90th Cong., 1st

Sess. 27-28 (1967).

8

benefit packages and collective bargaining agreements."

This undesirable result will prove detrimental to all em-

ployees who would otherwise benefit from the financial

safety net provided by severance pay while they seek new

employment. It will be especially harmful to those older

employees laid off or terminated after being employed an

insufficient period of time to qualify for early or normal

retirement income. As noted above, it is this group Con-

gress was particularly interested in protecting when it

enacted the ADEA because of the difficulty older work-

ers often experience in finding new jobs. Thus, the posi-

tion taken by the EEOC and adopted by the court below

is inconsistent with and counterproductive to Congress’

purpose in enacting the ADEA.

C. Because It Conflicts With The Rulings Of Other

Federal Courts Concerning The Propriety Of Post-

Employment Benefit Plans Under The ADEA, The

Third Circuit’s Decision Will Cause Uncertainty

And Instability In The Administration Of Such

Plans Throughout The United States.

By arbitrarily dividing Westinghouse’s plan into com-

ponent parts, the Third Circuit improperly isolated age

as the factor which determined ineligibility for severance

benefits. The court’s analysis gave little consideration to

the nondiscriminatory reason—entitlement to actuarially

equal or greater post-employmest pension benefits—which

determined ineligibility for severance benefits. In effect,

it held that such legitimate business reasons cannot con-

stitute reasonable factors other than age. In so ruling,

the Court’s decision has the practical effect of striking

the section 4(f) (1) “reasonable factor other than age”

defense from the ADEA in the post-employment benefit

10 FEOC v. USX Corp., No. 87-6044 at 23 (E.D. Pa. Mar. 23,

1989) (LEXIS, Genfed library, Dist file).

g

plan context.’ Moreover, the Third Circuit rejected

Westinghouse’s ADEA section 4(f) (2) defense by hold-

ing that, as a matter of law, severance and pension bene-

fits cannot constitute integral parts of a single post-

employment income protection plan.’?

Consequently, the decision below is in conflict with the

decisions of other circuits.’* Other federal courts recognize

that an employee’s entitlement to other post-employment

benefits is an eligibility condition which equalizes, rather

than discriminates. See, e.g., Parker, 741 F.2d 975; Britt,

768 F.2d 593. As such, entitlement to other benefits is a

reasonable factor other than age. The Third Circuit de-

cision, however, removes from consideration the pension

components of an otherwise integrated benefits package,

thus depriving an employer of an opportunity to show

that ineligibility for severance pay is based upon a rea-

11 Section 4(f) (1) of the ADEA, 29 U.S.C. § 623(f) (1), protects

any action by an employer “where the differentiation is based on

reasonable factors other than age... .”

12 Although the decision represents the law of the Third Circuit,

even the district courts in that circuit have expressed concern about

following an arbitrary rule of law. E.g., EEOC v. USX Corp.,

No. 87-6044 at 18 (E.D. Pa. Mar. 23, 1989) (LEXIS, Genfed

library Dist file) (“[wlere this a matter of first impression, I

would agree . .. [under] the terms of the pension plan that the

severance pay offset [pursuant to which pension payments were

reduced to the extent of severance payments received] does not dis-

criminate on the basis of age.’’)

13The Seventh Circuit for example, has upheld the propriety

under the ADEA of the denial of severance benefits to a former

employee who chose to be retired rather than laid off. Parker v.

Federal Nat’l Mortgage Ass’n, 741 F.2d 975 (7th Cir. 1984).

Likewise, the Fourth Circuit has held that “no discrimination

within the contemplation of the ADEA resulted” under an inte-

grated plan which linked eligibility for severance benefits with

acceptance of deferral of pension benefits. Britt v. E.J. DuPont de

Nemours & Co., 768 F.2d 593, 594 (4th Cir. 1985).

10

sonable factor other than age—entitlement to an equal

or greater pension benefit."

Because the decision below conflicts with the holdings

of other federal courts, the numerous employers located

throughout the United States represented by Amicus are

now subject to inconsistent standards with respect to the

propriety of post-employment benefit plans under the

ADEA. The decision below has caused great uncertainty

concerning whether, in reviewing a collectively-bargained

pension and severance plan, a court will sanction the

existence of reasonable factors other than age, such as

an employee’s eligibility for post-employment income, or

simply ignore this factor and apply the Third Cir-

cuit standard. If a court follows the approach of the

Seventh and Fourth Circuits, integrated pension and sev-

erance benefits plans will survive ADEA challenge. If,

however, a court follows the Third Circuit’s approach

the severance benefit component of the plan will be viewed

in isolation, with a likely finding of age-based discrimi-

nation.

D. The Third Circuit’s Decision Not Only Impedes

Compliance With The ADEA Through Its Conflict

With Rulings Of Other Courts, But Also Creates

Further Confusion By Interpreting Section 4(f)(1)

Inconsistently With Paraliel Provisions Of The

Equal Pay Act And Title VII.

In rejecting Westinghouse’s collectively bargained ber

efit plan, the Third Circuit reached an inexplicable re-

It concluded that older employees treated more

avorably than younger employees were victims of dis-

jecting Westinghouse’s defenses raised under sections

4if)(1) (reasonable factors other than age) and 4(f)

14 Indeed, the Third Circuit itself recognized that under the

Westinghouse plan employees who received pension benefits fared

better than employees who received severance pay. 869 F.2d at 705.

11

(2) (bona fide employee benefit plan) and finding the

ADEA is violated regardless of whether employees are

adversely affected or subject to arbitrary discrimination.

Instead, the court below focused on any difference in

treatment regardless of whether it was arbitrary or

harmful to older employees. Moreover, it erroneously re-

jected legitimate explanations for the differences in bene-

fits provided.

Westinghouse put forward a number of legitimate rea-

sons in explanation of its post-employment severance and

retirement plan. It explained that denial of severance

benefits was based on eligibility for post-termination ben-

efits, seniority, and the dates and reasons for termina-

tion. Moreover, Westinghouse established that the value

of the retirement package for older employees was equal

to or greater than the severance package received by

others based upon actuarial calculations. The court re-

jected these factors, however, and unreasonably found

an age element in each one. The result of the court’s

conclusion is as follows: if age is present in any form

in the factors that determine the eligibility for or value

of employer provided benefits, an employer will be liable

regardless of whether older employees are adversely af-

fected.

The approach taken by the court below not only mis-

construes the requirements of the ADEA, br, in addi-

tion, creates confusion for employers trying to comply

with parallel provisions of Title VII and the Equal Pay

Act, both of which provide defenses similar to s«ction

4(f)(1) of the ADEA. The Equal Pay Act and Title

VII prohibit sex-related discrimination in compensation

and benefits. The Equal Pay Act’s “factor other than

sex” defense’ provided the statutory precursor to and

conceptual model for the ADEA’s section 4(f) (1) reason-

15 The Equal Pay Act excepts from its prohibitions “a differential

based on any factor other than sex... .” 29 U.S.C. § 206(d) (1) (iv).

12

able factor other than age defense.’* Under Title VII and

the Equal Pay Act, legitimate business efforts of employ-

ers and unions to fashion a satisfactory and affordable

employee benefit plan constitute a factor “other than sex”

that may protect a company from discrimination claims,

even. though gender correlations may exist as part of the

plan. EEOC v. J.C. Penney Co., 843 F.2d 249, 254 (6th

Cir. 1988)..7 In J.C. Penney, the Sixth Circuit adopted a

“legitimate business reason” standard for determining

what constitutes a reasonable “factor other than sex.”

843 F.2d at 253. In so doing, the court noted that an

employer choosing a comprehensive “benefit package faces

the challenge of maximizing employee satisfaction while

minimizing or controlling cost.” 843 F.2d at 253. More-

over, the court stated emphatically that employers and

unions “must be allowed reasonable latitude” in framing

such benefit plans. Jd. at 254.

In a similar case, the Ninth Circuit rejected the

EEOC’s argument that the decision in City of Los An-

geles v. Manhart, 485 U.S. 702 (1978), prohivits cost-

related defenses in cases involving sex-based cost differen-

tials in an employee benefit plan. Wambheim v. J.C.

Penney Co., 705 F.2d 1492, 1495 (9th Cir. 1983), cert.

denied, 467 U.S. 1255 (1984). In Wambheim, the court

held that an employer did not discriminate under Title

16 Stacy, A Case against Extending the Adverse Impact Doctrin

to ADEA, 10 Employee Rel. L.J. 437, 446 (1984-85).

1

‘7 In this se, the Sixth Circuit rejected an EEOC charge of

sex discrimination in a company’s compensation and benefit plan in

violation of Title VII of the Civil Rights Act of 1964. 843 F.2d at

252. Section 703(h) of Title VII incorporates by reference the

affirmative defenses to wage discrimination claims which are set

forth in the Equal Pay Act (one of which is differentiation based

on “any other factor other than sex”). Jd. Although distinguish-

able in some circumstances, standards under Title VII are some-

times considered by courts when reviewing age discrimination

claims under the ADEA. E.g., Trans World Airlines v. Thurston,

469 U.S. 111, 121 (1985).

13

VII in the payment of benefits where it could show sex-

related differences were based upon legitimate business

justifications."*

Thus, an employer like Westinghouse is justified in

adopting a plan which attempts to give all its employees

“the biggest ‘bang for the buck’... ,” even though it may

accomplish its objective through a budget conscious, no

“double-dipping” policy. EEOC v. J.C. Penney Co., 843

F.2d at 254. This is especially true where, as in this case,

the plan provides benefits of equal or greater actuarial

value to the older employees claiming discrimination.

Unless the petition for a writ of certiorari is granted,

the Third Circuit’s decision will fuel needless confusion

in the interpretation of statutory defenses related to com-

pensation and benefits under section 703(h) of the Civil

Rights Act and section 206(d)(1) of the Equal Pay Act.

Thus, the Third Circuit’s decision will not only create

confusion for those attempting compliance with the

ADEA, but will also exacerbate that confusion by up-

setting parallel statutory standards that govern the sex-

related components of benefit and compensation plans.

This will cause further disruption and inflict needless

burdens upon those responsible for developing compensa-

tion and pension plans in this country.

18 Certain Title VII standards are inapplicable to the ADEA.

For example, this Court in Manhart, 435 U.S. 702, rejected under

Title VII the use of sex-based actuarial factors which result in

differences in benefits. In many ADEA cases, however, including

the instant case, it is impossible to ignore age-based actuarial data

in pension and retirement-related plans. As noted by this Court in

Manhart, 435 U.S. at 718, its decision did not “call into question

the insurance industry practice of considering the composition of

an employer’s work force in determining the probable cost of a

retirement or death benefit plan.” As also discussed supra, foot-

note 4, Title VII involves immutable characteristics like sex. Age,

however, is distinct because it is a universal characteristic.

14

E. The Third Circuit’s Decision Unreasonably Intrudes

Upon The Ability Of Employers And Unions To

Develop Compensation And Benefit Plans That

Uniquely And Fairly Meet The Needs Of All Em-

ployees Involved In A Plant Closing Or Relocation.

The decision of the Third Circuit, if allowed to stand,

will severely limit the ability of management and labor

to tailor programs which suit the unique and particular

needs of employees in a given industry and at a given

location.

Plant closings, although unavoidable, inflict hardship

on all affected employees. The burdens that follow a plant

closing do not discriminate. They hurt older workers to

be sure, but are no kinder to a young father with chil-

dren, or a single mother. Thus, it is entirely reasonable

and, indeed, essential, that unions and employers strive to

develop suitable plans which will help provide a safety

net for all employees who might be affected by a plant

closing or relocation.

Westinghouse and its unions, like employers and unions

in many industries, including members of Amicus, have

ver a long period of time attempted to fairly allocate

available resources among all affected workers to help

ease the transition associated with a plant closing. The

product of this bargaining in Westinghouse’s case was a

plan which, in cases of plant closure or work relocation,

provided employees with one of two basic post-employ-

ment henefits—immediate retirement benefits, or sever-

ance and deferred retirement ben@fits—but not both. In

finding a violation of the ADEA in this case, the court

below has, in effect, prohibited employers and labor

unions from establishing integrated severance and pen-

sion benefit plans through good faith negotiations.

If the Third Circuit’s decision is left standing, it will

render invalid and unlawful many similarly integrated

programs intended to ameliorate the effects of plant clos-

ing or relocation. Because post-employment benefit funds

15

are not unlimited, the decision below will force employ-

ers and unions to reconsider the feasibility of providing

severance pay. Before Westinghouse and its unions de-

veloped an integrated plan for plant closure, only em-

ployees eligible for retirement benefits received benefits

at the time of a plant closing. A return to this system

would leave workers ineligible for pensions without finan-

cial resources for relocation, retraining, and other tran-

sition expenses.

Employers and labor unions could also choose to make

severance pay available to all employees, but would have

to offset the increased cost of severance pay by limiting

increases in pension benefits. Such action would produce

a result which even the Third Circuit would have to re-

gard as being nondiscriminatory, but which nevertheless

would have a negative effect on older employees."

AMI submits that the collective bargaining process pro-

vides the most appropriate vehicle for allocating available

resources among employees at the time of plant closings

or relocations, and that the decision of the Third Circuit

unnecessarily intrudes on that process. It is a traditional

function of labor unions and the collective bargaining

process to attempt to accommodate the interests of all

employees. The development of a suitable plant closing

program requires that labor and management consider

1 Congress most recently demonstrated its concern about the

negative impact of plant closings through the enactment of The

Worker Adjustment and Retraining Notification Act (WARN),

Pub. L. No. 100-379, 102 Stat. 890 (1988) (to be codified at 29

U.S.C. §§ 2101-2109). In enacting WARN, Congress sought to pro-

vide some protection for workers with respect to lay-offs and plant

closings by requiring notice of such closings and lay-offs under

certain circumstances. Congress, however, did not go as far as

the Third Circuit by mandating severance payments to all employ-

ees, regardless of entitlement to other post-employment income

benefits. Thus, the limited scope of WARN implies a continued

congressional desire to defer the issue of post-employment benefits

to collective bargaining. Congress saw no need to provide the type

of extraordinary benefit to older workers faced with a plant closing

now being mandated by the Third Circuit.

16

a wide variety of information, including the availability

of suitable jobs in a locality, the specific demographic

characteristics of the work force, the general financial

wherewithal of the members of the work force, and the

desires of employees to have severance pay, retirement

or early retirement options.”

Members of AMI have utilized the collective bargain-

ing process to tailor programs that provide employees

flexibility in selecting post-employment benefits. For

example, companies and unions in the meat industry have

historically agreed to plant closing plans that allow em-

ployees to select a variety of benefit options, some of

which maximize severance benefits and others which en-

hance retirement income. Under these option plans, the

employees decide themselves which benefit option best

serves their particular interests. The court below has

undermined this freedom of choice by unreasonably tying

the hands of the parties and precluding them from devel-

oping through collective bargaining benefit plans that

uniquely meet their needs.

This Court has in the past recognized the important

role that collective bargaining plays in the context of

discrimination cases. In upholding the validity of a col-

lectively bargained seniority system, the Court wrote in

California Brewers Association v. Bryant, 444 U.S. 598,

608 (1980) (citations omitted) that:

Congress passed the Civil Rights Act of 1964 against

the backdrop of this Nation’s longstanding labor

policy of leaving to the chosen representatives of

employers and employees the freedom through col-

lective bargaining to establish conditions of employ-

ment applicable to a particular business or industrial

environment. It does not behoove a court to second-

guess either that process or its products. Senicrity

systems, reflecting as they do, not only the give and

20 See King, The ADEA and Employee Benefit Plans, in Age

Discrimination in Employment Act, A Compliance and Litigation

Manual for Lawyers and Personnel Practitioners 307, 325-27 (M.

Lake ed. 1982).

17

take of free collective bargaining, but also the spe-

cific characteristics of a particular business or indus-

try, inevitably come in all sizes and shapes.

In Trans World Airlines v. Hardison, 482 U.S. 63

(1977), this Court upheld a collectively bargained senior-

ity system against a claim that the agreement resulted

in unlawful discrimination on the basis of religion, writ-

ing that: “Collective bargaining, aimed at effecting

workable and enforceable agreements between manage-

ment and labor, lies at the core of our national policy

...? Id. at 79; see also United Mine Workers v. Robin-

son, 455 U.S. 562, 574-76 (1982).

There was no compelling reason for the court below to

undermine a practice which “lies at the core of our na-

tional policy.” Through bargaining, the parties did estab-

lish a fair, comprehensive plan for dealing with plant

closings, which in all cases treated older workers at least

equal to younger workers, and in many instances more

favorably than younger employees.

The impact of the Third Circuit’s decision upon the

collective bargaining process will be significant. A re-

cent employer survey indicated that eighty-two percent

of the respondents paid severance benefits to laid off or

terminated employees at some time. Personnel Policies

Forum: Severance Benefits and Outplacement Services

(BNA) No. 143 (Dec. 1986). According to that survey,

severance benefits have become more prevalent “[als

organizations throughout the United States strive to

streamline their work forces in the face of tighter

budgets, foreign competition, and a growing number of

corporate mergers... .”’ 7d. at 1. It is common for such

plans to deny severance benefits to employees who are

eligibie for pensions. Another survey indicates that ap-

proximately forty-five percent of the private collectively

bargained benefit plans impose such a restriction. Basic

Patterns: Income Maintenance, Collective Bargaining

Negotiations and Contracts (BNA) No. 167, at 53:4

(Apr. 24, 1986).

18

Given the number of severance plans which are in ef-

fect, the substantial number of those plans which deny

severance benefits to employees of retirement age, and

the nationwide impact of the Third Circuit decision, it

becomes readily apparent that thousands of employers

and employees will be affected by the decision.

The obvious way to satisfy the rule established by the

Third Circuit in this case is to eliminate severance pay

or limit pension benefits. It simply is not reasonable to

merely assume that employers have the financial where-

withal to pay both existing post-employment benefits and

the additional severance benefits mandated by the Third

Circuit. Thus, the ultimate result of the Third Circuit’s

decision will be to upset many pension and severance

plans bargained in good faith over many years. How-

ever, employees who now enjoy post-employment income —

protection cannot be expected to readily accept the elim-

ination of severance pay or the reduction in pension

benefits. Employers, on the other hand, particularly in

those industries which are financially strapped, cannot

be expected to simply supplement current severance plans

with a new influx of cash. The decision, therefore, holds

the potential for creating substantial new labor unrest.

II. THE THIRD CIRCUIT’S DECISION THAT SEC-

TION 4 (f)(2) OF THE ADEA PROTECTS ONLY

THOSE BENEFIT PLANS WHICH REFLECT AGE-

RELATED COST FACTORS IMPOSES A STAND-

ARD NOT INTENDED BY CONGRESS AND CON-

FLICTS WITH THE DECISIONS OF OTHER

COURTS OF APPEALS.

The Third Circuit interpreted the ADEA’s section

4(f) (2) defense*! as applying only to those employee

21 Section 4(f) (2) of the ADEA, 29 U.S.C. § 623 (f) (2), provides

that it shall not be unlawful for an employer or labor organization

“to observe the terms of a bona fide seniority system or any bona

fide employee benefit plan such as a retirement, pension, or insur-

ance plan, which is not a subterfuge to evade the purposes of this

chapter....”

19

benefit plans that reflect age-related cost factors, holding:

“{ijn order to qualify as exempt under § 4(f) (2), a plan

must involve age-related cost factors: i.e. the cost of pro-

viding benefits pursuant to the plan must increase with

age.” 869 F.2d at 710 (citations omitted).

A conflict exists among the circuit courts regarding

whether section 4(f)(2) of the ADEA protects only

those plans that reflect age-related cost factors. In addi-

tion to the Third Circuit in the present case, the Sixth

Circuit has held that section 4(f)(2) applies only to

those plans where the cost of providing the, benefit in-

creases with age. Betts v. Hamilton County Bd. of

Mental Retardation, 848 F.2d 692, 694 (6th Cir.),

prob. juris. noted sub nom. Public Employees Retire-

ment Sys. v. Betts, 109 S. Ct. 256 (1988). The Seventh

Circuit also adopts this view. Karlen v. City Colleges,

837 F.2d 314, 319 (7th Cir.), cert. denied, 108 S. Ct.

2038 (1988).

In contrast, the Second, Fifth, Ninth, and Tenth Cir-

cuits have held that age-related cost justification is not

the exclusive means of establishing that the section 4

(f) (2) defense applies. EEOC v. Cargill, Inc., 855 F.2d

682, 686 (10th Cir. 1988) ; EEOC v. County of Orange,

837 F.2d 420, 422 (9th Cir. 1988) ; Cipriano v. Board of

Educ., 785 F.2d 51, 54-55 (2d Cir. 1986) ; Alford v. City

of Lubbock, 664 F.2d 1263, 1268-70 (5th Cir.), cert.

denied, 456 U.S. 975 (1982); Brennan v. Taft Broad-

casting Co., 500 F.2d 212, 216-i7 (5th Cir. 1974) .2

This issue is also raised in Public Employees Retire-

ment System v. Betts, No. 88-389 (U.S. argued Mar. 28,

*2 In the best reasoned decisions, the courts have rejected the

Third Circuit’s narrow view of section 4(f) (2) as applying only _

to the statutorily enumerated benefit, retirement, pension, or insur-

ance plans. These decisions conclude that the list is only illustra-

tive and indicate that plans that do not have an age-based cost

relationship, such as profit-sharing plans, are protected by section

4(f) (2). Aiford, 664 F.2d at 1272, 1272 n.10; Brennan, 500 F.2d

at 215-17.

20

1989). Thus, this Court may resolve this issue in the

Betts case. In such case, Amicus Curiae agrees with

Westinghouse that the Court should dispose of that as-

pect of Westinghouse’s petition as is appropriate in light

of the Court’s decision in Betts.

The current uacertainty engendered by the split among

the circuit courts of appeal with respect to this issue

must be resolved. Many contracts in the meat packing

industry, as well as other industries, cover thousands of

employees, and contain provisions which in some manner

integrate severance and retirement pay benefits. AMI

submits that such plans fulfill a very important purpose,

and in some industries hard hit by plant closings, an es-

sential function. Given the national-scope of these con-

tracts, however, unions and employers may have to capit-

ulate to the holding of the Third Circuit unless the issue

is resolved expeditiously and authoritatively by the Su-

preme Court.

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted,

ROBERT G. HIBBERT

MONTE B. LAKE *

DOMINIC T. BODENSTEINER

HERON, BURCHETTE, RUCKERT

& ROTHWELL

1025 Thomas Jefferson St., N.W.

Suite 700

Washington, D.C. 20007

(202) 337-7700

Attorneys for Amicus Curiae

the American Meat Institute

June 1, 1989 * Counsel of Record