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

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Supreme Court, U.S,

FILED

jun 1b 88

F. SPANIOL, JR,

CLERK

No. 88-1770

IN THE

Supreme Court of the United States

OCTOBER TERM, 1988

WESTINGHOUSE ELECTRIC CORPORATION,

Petitioner,

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION,

Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Third Circuit

BRIEF FOR THE NATIONAL PUBLIC

EMPLOYER LABOR RELATIONS ASSOCIATION

AS AMICUS CURIAE IN SUPPORT OF THE PETITION

GERALD D. SKONING

(Counsel of Record)

JAMES BAIRD

SEYFARTH, SHAW,

FAIRWEATHER & GERALDSON

55 East Monroe Street

Chicago, IL 60603

(312) 346-8000

Counsel for Amicus

WILSON - EPES PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001

QUESTION PRESENTED

Whether § 4(a' (1) of the Age Discrimination in Em-

ployment Act of 1967 (“ADEA”), 29 U.S.C. § 623(a)

(1), precludes representatives of an employer and union

from bargaining for, and agreeing to, a post-employment

income maintenance program which provides retirement-

eligible employees with more valuable early retirement

benefits or less valuable severance payments, but not

both.

(i)

TABLE OF AUTHORITIES _.

TABLE OF CONTENTS

INTEREST OF THE AMICUS

STATEMENT

REASONS FOR GRANTING THE WRIT

II.

THE THIRD CIRCUIT'S DECISION THAT

$ 4i(a) (1) OF THE ADEA PROHIBITS BAR-

GAINING REPRESENTATIVES FOR’ EM-

PLOYERS AND UNIONS FROM ESTAB-

LISHING A POST-EMPLOYMENT BENE-

FIT PROGRAM THAT PROVIDES’ RE-

TIREMENT-ELIGIBLE EMPLOYEES WITH

EITHER IMMEDIATE RETIREMENT OR

SEVERANCE BENEFITS, BUT NOT BOTH,

PRESENTS AN IMPORTANT QUESTION

OF FEDERAL LAW THAT THIS COURT

SHOULD RESOLVE

THE THIRD CIRCUIT’S DECISION IS IR-

RECONCILABLE WITH CONGRESS’ AND

THIS COURT'S ENDORSEMENT OF CON-

TRACTUAL FREEDOM IN COLLECTIVE

BARGAINING

A. The Third Circuit’s Failure To Consider

The Evolution Of Westinghouse’s Benefit

Program Through Collective Bargaining Is

Inconsistent With The Decisions Of This

Court

B. The Decision Below Interferes With The

Lawful Trading Of Benefits In Collective

Bargaining

CONCLUSION

(ili)

Page

TABLE OF AUTHORITIES

CASES Page

Abenante v. Fulflex, 701 F. Supp. 296 (D.R.I.

1988), appeal pending, No. 87-0456-B (lst

i A ESSERE a DiRT PRE Po le Rn ect RO xs

Ackerson v. W estern Union Tel. Co., 234 Minn. }

271, 48 N.W.2d 338 (Minn. 1951) ...................... 9

Alerander v. na ay" ENS Co., 415 U.S. 36

BL | ERR pT Ra Uy ORS indy nore OL CLEP RIN War ana 14

Antonioli v. Lehigh Coal & Navigation Co., 451

F.2d 1171 (5d Cir. 1971), cert. denied, 406 U.S.

ae 10

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

ee Ae ee SE carn aticarksnctiaceeaa 8

Buchholtz v. Swift & Co., 609 F. 2d 317 (8th Cir.

1979), cert. denied, 414 U.S. 1018 (1980). 19

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

§_, SCRE S eens ene e enemy DUNN SR eae PRONE: STO 12

Chesser v. Babcock & Wilcox, 753 F.2d 1570 (11th

Cir.), cert. denied sub nom. Sims v. Babcock &

Wileor Co.. A741 U.S. 836 (1985) | = 18

Clemens v. Cent. R.R. Co., 399 F.2d 825 (3d Cir.

1968), cert. denied, 393 U.S. 1023 (1969). ; 10

Corning Glass Works v. Brennan, 417 U.S. 188

(1974) ........... 14

EEOC v. Babcock & Ww Neos Ce. 43 Fair Empl.

Prac. Cas. (BNA) 736 (E.D.N.C, 1987) .......... 7

EEOC v. Borden's Inc., 724 F.2d 1390 (9th Cir.

[eee 7 7

EEOC v. Firestone Tire & ‘Rubber Ce. 650 F.

Supp. 1561 (W.D. Tenn. 1987) 7

EEOC v. Great Atlantic & Pacific Tea Co., 618

F. Supp. 115 (N.D. Ohio 1985) % 7

EEOC v. beeps Corp., 10 Emplovee Benefit Cas.

(BNA) 25341 (E.D. Pa. Mar. 23, 1989) 7

Emporium Capwell Co. v. Western Addition Com-

munity Org., 420 U.S. 50 (1975) 13,17

Fibreboard Paper Prod. Corp. v. NLRB, 379 US.

203 (1964) ee eee 12, 15

TABLE OF AUTHORITIES—Continued

Ford Motor Co. v. Huffman, 345 U.S. 330 (1953)..

Hendricks v. Airline Pilots Ass’n, Int’l., 696 F.2d

Cie 40 GClt.. CG 2 ee

H.K. Porter Co. v. NLRB, 397 U.S. 99 (1970)...

Humphrey v. Moore, 375 U.S. 335 (1964)

Inland Steel Co. v. NLRB, 170 F: 2d 247 (7th Cir.

1948), cert. denied, 336 U.S. 960 (1949) _......

Khan v. Grotnes Metalforming Sys., Inc., 679

F. Supp. 751 (N.D. Ill. 1988) -................0.............

NLRB v. Borg-Warner Corp., 356 U.S. 342

(1958) sas EA raph BINNS,

NLRB v. Ins. Agents’ Tat’ Union, 361 U.S. 477

(1960) Retin eer BE rm eae

NLRB v. Royal Plating & Polishing Co., 350 F.2d

191 (3d Cir. 1965) ..... See

Owens v. Press Publishing Co., 20 NJ. 537, 120

Be 6 Ana. See) ee

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

See Cran Sats See 3 ee eee

Roberts v. Lehigh & New England Ry. Co., 323

F.2d 219 (3d Cir. 1963) ,

Steele v. Louisville & Nashville R.R. Co., 323 .U, s.

EG |) RON Eee IN Ath Ao ls

emp Local caper No. 6°8 v. NLRB, 756

F.2d 659 (8th Cir. 1985) Rebel he ty has estted

Trans World pry fue. v. Hardison, 432 U.S.

63 (1977) . Gninededcuusditiniiia ie wee

Trans World Aistines, ‘Tne. v. Thurston, 469 U.S.

3 ae |: ) pennant Mm Nh, MORK oA nck?

UMWA Health & Retirement Funds v. Robinson,

Se US. S62 (1962)...

United Air Lines, Inc. v. McMann, 424 U.S. 192

| MOR Sretl et eel Me a tecent oe!

Vaca v. Sipes, 386 U Ss. i71 (1967)

Williams v. Pacific Maritime Ass'n, 617 F. 2d 13

(9th Cir. 1980), cert. denied, 41° U.S.

(1981)

Page

17, 18

; 17, 18

Saprene Court of the United States

t }

On Petition fora Writ of Certiorari to the

L nited States Court of Appeals

for the Third Circuit

BRIEF FOR THE NATIONAL PUBLI

EAIPLOYER LABOR RELATIONS ASSOCIATION

Ls AMICUS CURIAE IN SLPPORT OF THE PETITION

INTEREST OF THE AMICUS

Labor Relation \

Many governmental entities maintain, and many of

NPELRA’s members are involved in administering, regu-

lar and early retirement plans and other types of em-

ployee benefit plans. Some of these benefit plans are nego-

tiated with representatives of employee groups or may

be affected by collective bargaining agreements; others

are created by state and or local law and _ regulation.

Thus, the resolution of the issue presented in this case—

involving whether $4/a)(1) of the ADEA, 29 U.S.C.

. 623(a) (1), makes unlawful a post-employment benefit

plan which provides retirement-eligible employees with

either more valuable early retirement benefits or less

valuable severance payments, but not both—and its im-

pact on the stability of collectively bargained retirement

severance programs are of significant interest to

NPELRA and its members.

STATEMENT

1. Petitioner, Westinghouse’ Electric Corporation

(“Westinghouse”), provides a multi-faceted post-employ-

ment income maintenance program to its employees. Pet.

Apy. at 8a-13a. Under the program in effect between

1979 and 1985, employees who satisfied certain eligibility

requirements—relating to age, years of service, and cir-

cumstances of termination—could immediately begin te-

ceiving lifetime retirement benefits upon the termination

of their employment with Westinghouse. /d. at 8a-

13a.°_ Employees who did not satisfy these eligibility re-

quirements, or who chose not to receive such immediate

lifetime retirement benefits, could, upon their termina-

tion, receive less valuable post-employment benefits-—

specifically, deferred retirement benefits and, where the

termination was through no fault of their own, immediate

short-term layoff and income benefits (“LIB”). Jd. at

“These lifetime retirement benefits included immediate monthly

pension benefits for life; monthly pension supplements until the

onset of Social Security benefits; and lifetime insurance benefits.

See Pet. App. at 23a.

9a-13a. Westinghouse established these retirement and

LIB provisions through negotiations with its employees’

collective bargaining representatives; * it did so on the

understanding that employees would be eligible for LID

‘and deferred pension benefits! only if they were ineli-

gible for, or chose not to receive, the more valuable, im-

mediate lifetime retirement benefits. Pet. App. at 8a-l3a;

J.A. 515, 534-36, 1272-80, 1302-06.

Westinghouse and its employees’ collective bargaining

representatives first linked the provision of immediate

retirement benefits and LIB in their 1960 negotiations.

J.A. 568a, 534-36, 1409-10. In 1960, they negotiated a

Pension and Insurance Agreement (“P&I Agreement’)

that provided immediate “early” retirement benefits to

those employees who, at the time of their separation,

were at least 60 years of age and had at least ten years

of service. J.A. 1785-86, 1792, 1794, 1798. At the same

time, Westinghouse agreed to add an LIB component to

the P&I Agreement: this LIB component provided for a

cash payment—equal to one week’s pay per year of

service—to those employees who, when terminated

through no fault of their own, were ineligible for imme-

diate retirement benefits. J.A. 534-35, 1409-10.

With this linkage between immediate retirement bene-

fits and LIB in place, Westinghouse and its employees’

unions in their subsequent negotiations increased the

henefits available under both the pension and LIB com-

ponents of the P&I Agreement and, concomitantly, ex-

panded the pool of employees eligible to receive the more

valuable immediate retirement benefits (instead of LIB).

Pet. App. at 26a; see also J.A. 1302-06, 1324-27, 1844-46,

1598-99, 1696, 1704, 1720-21, 1765. For example, in

1973, they agreed that, in the event of a plant closing,

3 Westinghouse has also provided its terminated managemen'

personnel with either immediate retirement or deferred pension

and severance benefits under a program that largely parallels the

collectively-bargained benefit program. Pet. App. at 10a-lla, 1lda.

affected employees could apply for and receive “early”

retirement benefits if they were between 55 and 60 yeai's

of age and had at least 10 years of service (see J.

1704); and, in 1979, they agreed that, in the event of

a job movement or product line relocation as well, affected

employees who satisfied certain liberalized age and serv-

ice requirements could also receive these immediate early

retirement benefits. J.A. 1599-1600. Throughout this

period, however, the P&I Agreement continued to pro-

vide that employees who became eligible for the more

valuable retirement benefits could not receive the less

valuable LIB as well. Sce J.A. 1302, 1324, 1344, 1363.

In 1982, Westinghouse and its unions decided to give

all retirement-eligible employees who were terminated

through no fault of their own the option to elect deferred

retirement benefits and LIB. But, in doing so, they once

again made clear in both the pension and LIB components

of the P&I Agreement that this was an “either-or” option

—that is, that employees could choose immediate retire-

ment benefits or deferred retirement benefits and LIB.

but not both. Pet. App. at 12a-13a; see also J.A. 1272-80.

1549-50.

2. In November 1983, the Equal Employment Oppor-

tunity Commission (“EEOC”) filed its complaint in this

action. J.A. 15-20. In the complaint, as amended, the

EEOC alleged, inter alia, that Westinghouse had ‘“will-

fully” violated the ADEA by failing to pay LIB to in-

voluntarily terminated individuals who had received im-

mediate, lifetime retirement benefits. J.A. 16-17, 26-27.

39-40.

The district court agreed with the EEOC. concluding

that Westinghouse’s “denial of severance pay to employees

who take retirement is age-based discrimination.” Pet.

App. at 85a. In so concluding, the district court deter-

mined that Westinghouse could not justify its actions

based on its policy of providing employees with only one

post-employment income stream; in the court’s view, pen-

sion and severance benefits “are distinct benefits with

different purposes” and cannot be interchanged. /d. at

87a. It further concluded that the ‘“‘bona-fide employee

benefit plan’? exemption of ADEA § 4(t) (2) did not

protect Westinghouse’s actions (id. at 91a), and that

Westinghouse’s violations of the ADEA were “willful.”

Id. at 97a,

3. Westinghouse appealed the district court’s decision.

The Third Circuit affirmed in part, reversed in part, and

remanded for further proceedings. Pet. App. at la-36a.

The Third Cireuit first ruled that, by conditioning

receipt of LIB on ineligibility for or election not to re-

ceive immediate retirement benefits, Westinghouse had

treated older employees unfavorably because of their age

in violation of $4(a)(1) of the ADEA. Pet. App. at

16a. In so ruling, the court found that older employees

had received only immediate retirement benefits, whereas

younger employees had received “both severance pay and

retirement benefits (when they reached the required

age).” Id. at 16a-17a. For this reason, the court

concluded that ‘older employees were treated less favor-

ably than younger employees despite the fact that the

actuarial value of early retirement benefits may be equal

to or greater than the actuarial value” of LIB and de-

ferred pension benefits. /d. at 17a. And the court

found that this adverse treatment was based on age,

since “retirement eligibility,” the condition leading to the

denial of LIB, is “inexorably linked with age.” Jd. at

19a.

The court next ruled that Westinghouse could not

justify the denial of LIB by the fact that the P&I Agree-

ment provides more valuable immediate retirement bene-

fits to older emplovees. Pet. App. at 20a. It reasoned

that “severance pay and pension benefits have distinctly

different purposes” and, therefore, that “pension benefits

[cannot be] a substitute for severance pay.” Jd. at 20a.

The court further held that “Westinghouse’s severance

pay and pension plans are not exempt under [§ 4(f) (2)

of the ADEA].” Pet. App. at 29a. It found that the

LIB and pension provisions in issue were “not integral

components of a comprehensive employee benefits scheme,”

reiterating its earlier conclusion that “severance pay is a

fringe benefit for which vested early or selected retire-

ment benefits cannot be a substitute.” Jd. at 26a. The

court also held that the challenged components of the

P&I Agreement could not themselves qualify for § 4

(f)(2)’s_ protection, since they did not “involve age-

related cost factors.” Jd. at 27a.

Finally, the court reversed the district court’s judgment

that Westinghouse had “willfully” violated the ADEA

and remanded for further proceedings. Pet. App. at 36a.

REASONS FOR GRANTING THE WRIT

I. THE THIRD CIRCUIT’S DECISION THAT § 4(a)(1)

OF THE ADEA PROHIBITS BARGAINING REPRE-

SENTATIVES FOR EMPLOYERS AND UNIONS

FROM ESTABLISHING A POST-EMPLOYMENT

BENEFIT PROGRAM THAT PROVIDES RETIRE-

MENT-ELIGIBLE EMPLOYEES WITH EITHER

IMMEDIATE RETIREMENT OR SEVERANCE

BENEFITS, BUT NOT BOTH, PRESENTS AN IM-

PORTANT QUESTION OF FEDERAL LAW THAT

THIS COURT SHOULD RESOLVE

This case presents an issue of federal law that this

Court has not decided, but should decide, because of its

vital importance and broad applicability to both public

and private employers: that is, whether $4/a)(1) of

the ADEA prohibits an employer and its union from

establishing a multi-component post-employment benefit

package that provides retirement-eligible emplovees with

either more valuable immediate retirement benefits or less

valuable severance benefits, but not both, upon their ter-

mination from employment. The court below held that it

does. Because this conclusion threatens a severe disrup-

tion of settled compensation practices in this country and

lacks any sound basis in the ADEA, the Court’s review

is necessary.

That the Third Circuit’s decision effects a dramatic

disruption of current benefit practices is obvious from the

fact that Westinghouse’s benefit program is not unique.

Approximately 24 percent of the private collectively-

bargained severance pay plans in this country deny sever-

ance benefits to employees if they are eligible for pensions.

See Basic Patterns: Income Maintenance, Collective Bar-

gaining Negot. & Cont. (BNA) No. 1144, at 53:3 (April

6, 1989); see also Compensation: Special Pay Practices,

BNA Policy & Prac. Series No. 989, at 331:734 (March

1987) (survey of 112 responding organizations showed

that “[e]mployees who retire without pension benefits

and those who receive pensions upon retirement are paid

severance benefits at 6 percent and 7 percent, respectively,

of the firms with formal severance plans’); Indus. Rel.

Guide (P-H) {53,458 (1986) (to prevent abuse of sev-

erance pay plans, employers often insist on certain safe-

guards, e.g., provisions that “[s]everance pay is not pay-

able if an employee retires on pension’). In addition,

plans with such restrictions have evolved in a wide vari-

ety of industries: indeed, the EEOC has already liti-

gated the lawfulness of various kinds of severance and

retirement benefit programs in the dairy, rubber, groc-

ery, and steel industries;* it has initiated challenges to,

and is currently litigatine the lawfulness of, similar

plans in the communications, meat packing, food, auto-

4 See EEOC v. Borden’s, Inc., 724 F.2d 1390 (9th Cir. 1984);

EEOC v. USX Corp., 10 Employee Benefit Cas. (BNA) 2341 (E.D.

Pa. Mar. 23, 1989); EEOC v. Firestone Tire & Rubber Co., 650

F. Supp. 1561 (W.D. Tenn. 1987); EEOC v. Babcock & Wilcox Co.,

43 Fair Empl. Prac. Cas. (BNA) 736 (E.D.N.C. 1987); EEOC v.

Great Atlantic & Pacific Tea Co., 618 F. Supp. 115 (N.D. Ohio

1985).

motive, electrical and petroleum industries.° Thus, the

Third Circuit’s legal analysis, if applied generally, will

destabilize negotiated benefit programs in many indus-

tries nationwide. Moreover, that analysis may likewise

be used to disrupt various public sector retirement plans

and programs impacting thousands of public sector em-

ployees.

Nothing in the ADEA mandates such a wholesale in-

validation of these collectively-bargained benefit pro-

grams. Section 4(a)(1) of the ADEA only’ prohibits an

employer from providing less “compensation” to an in-

dividual because of his age. See 29 U.S.C. §$ 623(a) (1).

It does not prohibit an employer from providing equal or

greater “compensation” to that individua: through an

integrated benefit package that distributes different types

of benefits to different persons. And it does not single

out pensions for special treatment or preclude parties

from linking them to severance or other benefits in an

integrated benefit package. See, e.g., Britt v. Bul. DuPont

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

», Federal Nat’! Mortgage Ass’n, 741 F.2d 975 (7th Cir.

1984): Abenante v. Fulflex, Inc., 701 F. Supp. 296

(D.R.I. 1988), appeal pending, No. 87-0456-B (1st Cir.) ;

Khan v. Grotnes Metalforming Sys., lie., 679 F. Supp.

751 (N.D. Til. 1988).

Nor is there any reason to read into the ADEA’s lan-

guage, as the Third Circuit did, a limitation that Congress

itself did not intend. Because benefit’ programs estab-

lished both before and after passage of the ADEA fre-

quently linked pension and severance benefits, Congress

5 See EEOC Summary of Age Discrimination Lawsuits Filed in

FY 1988, Daily Labor Report, No. 251, at D-1 (Dec. 80, 1988)

Report on the Ope rations of the Office of General Counsel, Equal

Employment Opportunity Commission, October 1986 through Sep-

tember 1987, at Appendix C (July 11, 1988); Report on the Opera-

tions of the Office of Gene ral Counsel, Equal Employment Oppor-

tunity Commission, October 1985 through September 1986, at

Appendix A (Mar. 31, 1987).

has had ample opportunity to invalidate integrated plans

in the ADEA or in subse uent amendments. But it has

not.” Congress has left undisturbed the numerous benefit

programs that it enacted for the benefit of federal em-

ployees—programs that either deny severance benefits

to, or offset those benefits against the pension benefits

available to, retirement-eligible employees. See 5 U.S.C.

» 9095(a) (2) (iv) (1983); 10 U.S.C. § 1186(b)-(e) and

10 U.S.C. § 1174(e), th) (1983 & Supp. 1986) (officers

and enlisted members eligible for voluntary retirement

from active military service not entitled to separation

pay); see also 14 U.S.C. §$ 286(b), 286a(d). and

$ 327(b) (1983 & Supp. 1986); 33 U.S.C. § 853h(e)

(Supp. 1986). And Congress has done nothing to in-

validate the well-established benefit practices—practices

in which trade-offs of severance and pension benefits were

common—in effect when it enacted and amended the

ADEA.'

5 Indeed, the legislative history of the ADEA indicates that Con-

gress did not want to disrupt existing « mployee benefit plans and

that it intended generally to address problems of age discrimination

in benefit plans in separate legislation. Se: United Air Lines, Inc.

v. McMann, 434 U.S. 192, 195-203 (1977): see also 115 Cong. Ree.

7076 (March 16, 1967) (Sen. Javits). reprinted in EEOC Legisla-

five History of the Age Discrimination in En pl yment Act of 1967

(1981), at 71.

*See Basic Patterns: Income Mainte) nee, Collective Bargain-

ing Negot. & Cont. (BNA) No. J87, at 53:2 (March 31, 1983

Basic Patterns: Income Maintena ce, Basic Patterns in Union Con-

ts (BNA), at 35 (9th ed. 1979): Major Collective Bargaining

eemerts: Severance Pay and Layoff Be nefit Plans, U.S. Dept.

of Labor, Bulletin No. 1425-2. at 22 1965); Dismissal-Pay Provi-

sions in Union Agreements, 1949, 70 Monthly Lab. Rev. No. 4. at

085 (April 1950); Employee Benefit Plans Under Collectins Bar-

gaining: E'mployee-Be nefit Program of Consol dated Ed son, U.S.

Dept. of Labor, Bulletin No. 946, at 18 (1948). Courts historically

. ; ; ; a

have recognized and permitted cn pension severance trade-offs

both before and after the ADE A’s enactment. See, e.g.. Owens v.

Press Publishing Co., 120 A.2d 442, 446 (N.J. 1956). citing Acker-

Western Union Tel. Co., 48 N.W.2d 308, 342 (Minn. 1951)

The Third Circuit’s decision thus achieves a result that

Congress carefully sought to avoid when it enacted the

ADEA. By effectively precluding the exchange of pension

and severance benefits within the context of a compre-

hensive benefit package, the decision below causes wide-

spread disruption of benefit programs that, for decades,

have integrated precisely these types of benefits. Because

of the decision below, employers, unions, and plan ad-

ministrators—and ultimately taxpayers where public

plans are involved—now face significant potential lia-

bilities to employees who, while receiving substantial ben-

efits (ie., retirement benefits), have not received all of

the benefits that these integrated benefit packages pro-

vide (i.e., severance benefits). In the face of such poten-

tial liabilities, cautious and prudent employers, unions,

and plan administrators, who are intensely concerned

with legal certainties and lowest common-denominators,

will have to alter their existing benefit programs to en-

sure that they can satisfy the arbitrary rule of the Third

Circuit and courts that might follow it. The net effect,

of course, will be fewer severance pay programs, fewer

increases in pension entitlements (in order to channel the

funds to severance pay and other programs’, and a gen-

eral mismatching of benefit payments with benefit needs.

This Court’s immediate review is necessary to prevent

these serious, unnecessary, and counterproductive disrup-

tions in the provision of employee benefits.

(one of the objectives of severance pay is “ ‘partial compensation

for ... loss of possible pension rights’ ”) ; Antonioli v. Lehigh Coal

& Navigation Co., 451 F.2d 1171, 1178 (3d Cir. 1971), cert. denied,

406 U.S. 906 (1972), Clemens v. Cent. R.R. Co., 399 F.2d 825, R28

(3d Cir. 1968), cert. denied, 393 U.S. 1028 (1969), Roberts v.

Lehigh & New England Ry. Co., 323 F.2d 219, 224 (2d Cir. 1965)

(in these three cases, the Third Circuit held that contracts setting

mandatory retirement dates were leral and, therefore, did not

unlawfully deprive employees of severance payments .

Il. THE THIRD CIRCUIT’S DECISION IS IRRECON-

CILABLE WITH CONGRESS’ AND THIS COURT'S

ENDORSEMENT OF CONTRACTUAL FREEDOM

IN COLLECTIVE BARGAINING

This Court’s review is important for yet another rea-

son: the Third Circuit’s decision, which unraveled West-

inghouse’s collectively-bargained benefit program for pur-

poses of its discrimination analysis, is at odds with this

Court’s traditional reluctance to interfere with the col-

lective bargaining process. It a'so imposes severe restric-

tions on the way employers and unions negotiate collec-

tive bargaining agreements; and, more importantly, it

seriously disrupts the stability of collectively-bargained

retirement programs.

A. The Third Circuit’s Failure To Consider The Evo-

lution Of Westinghouse’s Benefit Program Through

Collective Bargaining Is Inconsistent With The

Decisions Of This Court

The National Labor Relations Act (“NLRA” or the

“Act”, 29 U.S.C. $$ 141 et seq. (1982)—along with numer-

ous public sector collective bargaining acts—imposes a duty

on employers and labor organizations or their agents to

bargain collectively with respect to wages, hours and

other terms and conditions of employment. See 29 U.S.C.

S$ 158(ai (5), 158(bi(3!, 158(d).5 The Act’s legisla-

tive history demonstrates that Congress intended to re-

quire only that parties negotiate with respect to these

“mandatory” subjects. See 79 Cong. Ree. 7659 (1935).

Congress did not intend tc compel agreement. See 29

U.S.C. $158(d). Thus, the NLRA permits the courts

* Federal public employees exercise collective bargaining rights

under title VII of the Civil Service Reform Act of 1978. 5 U.S.C.

$$ 7101-7135 (1982 & Supp. 1987). Many state employees also

exercise statutory bargaining rights. See, e.g, Fla. Stat. Ann.

$$ 447.201-609 (West 1981 & Supp. 1989); Mass. Gen. Laws Ann.

ch. 150E (West 1982 & Supp. 1989); see generally Developments—

Public Employment, 97 Harv. L. Rev. 1611 (1984).

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188 (1960

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bargaining agreen : a

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an empiovee S

make the purported benefits illusory”). And they typ-

ically bargain for these items in the context of a total

economic package. M. Granof, How to Cost Your Labor

Contract 19 (1973) (‘|tlotal contract cost is one of the

major restrictions established by top management”’)."

As long as certain cost items remain outstanding, the

entire package is subject to reshuffling through further

trades, compromises or set-offs. See D. Rothschild, Col-

lective Bargaining and Labor Arbitration, at 91; Hart,

Techniques of Collective Bargaining, 26 Prac. Law. at 18.

Pension benefits and severance benefits, as bo.un man-

datory subjects of collective bargaining and cost items,

are therefore commonly-traded items in this system of

compromise. See discussion supra at 14-16. As cost items,

they are necessarily related to all other cost proposals

and therefore to each other. In their dual status as “cost”

items and “mandatory subjects,” they are susceptible to

use as bargaining chips and, as such, are common sub-

jects of deal-making. Finally, because an employer’s ob-

ligation to provide pension and severance payments is

often triggered by the same event—namely, empioyee

terminations—the two benefits are most peculiarly suited

to compromises and set-offs against each other. See, e.9.,

Teamsters Local Union No. 688 v. NLRB, 756 F.2d 659,

661 (8th Cir. 1985).

The Third Circuit’s conclusion that these benefits can-

not, under the ADEA, be so traded, disregards the law-

ful collective bargaining practices fomenting pension

11 See also D. Rothschild, L. Merrifield & H. Edwards, Collective

Bargaining and Labor Arbitration 135 (2d ed. 1979), citing

H. Davey, Contemporary Collective Bargaining 111-12 (2d ed.

1959) (“fulse of the basket approach on economic issues is recom-

mended”): Hart, Techniques of Collective Bargaining, 26 Prac. Law

at 18 (“[{plreferably, all the economic items should be presented to-

gether, with the understanding that the ‘package’ is a single pro-

posal”) ; Borg-Warner Corp., 356 U.S. at 347 (“| t]he company sub-

mitted a ‘package’ proposal covering economic issues’’).

severance linkages. Moreover, the court’s hastily-concocted

per se assumption that the two benefits serve “distinctly

different purposes,” Pet. App. at 20a, effectively seals

pensions off from all compromise and economic pressure.

No other mandatory subject of bargaining is subject to

such strictures. Nor should it be. The decision below

thus seriously undermines the free collective bargaining

that Congress and this Court have endorsed.

2. The decision below also places an artificial, prospec-

tive restriction on the negotiating freedom traditionally

afforded collective bargaining representatives. By essen-

tially removing a major cost item—here pension bene-

fits—from the field of potential bargaining chips, the

court has severely limited the bargaining discretion of

the majority-selected representative. That limitation is

contrary to this Court’s repeated confirmation of the

wide-ranging powers of such exclusive bargaining agents

(see Ford Motor Co. v. Huffman, 345 US. 330, 338

(1953)) and its contextual approach to accommodating

minority rights within the NLRA’s predominantly ma-

joritarian collective bargaining framework.

In enacting $9(a) of the NLRA, 29 U.S.C. § 159(a),

“Congress sought to secure to all members of the unit

the benefits of their collective strength and bargain-

ing power, in full awareness that the superior strength

of some individuals or groups might be subordinated to

the interest of the majority.” Emporium Capwell Co.,

420 U.S. at 62: see also Steele v. Lowisville & Nashville

R.R. Co., 328 U.S. 192, 202 (1944). While this Court

historically has sought to preserve bargaining unit mem-

bers’ collective strength, it has, concomitantly, imposed

on exclusive bargaining representatives an obligation to

serve the interests of all unit members without hostility

or discrimination toward any, to exercise their discretion

with complete good faith and honesty, and to avoid ar-

bitrary conduct. See Vaca v. Sipes, 386 U.S. 171, 177

(1967) ; Humphrey v. Moore, 375 U.S. 335, 342 (1964).

The Court traditionally has interpreted this “duty of

fair representation” in a manner that protects minority

interests. It has done so, however, without ignoring the

practical constraints of collective negotiations or the ne-

cessity for binding majority rule. The Court has state

om |

ajny authority to negotiate derives its principal

that

strength from a delegation to the negotiators of a discre-

as, in light of al

will best serve the interests of the parties represented.”

Huffman, 345 U.S. at 387-38. Thus, the Court has rec-

‘

tion to make such concessions and accept such advantages

| relevant considerations, they believe

ognized that “differences arise in the manner and degree

to which the terms of any negotiated agreement affect

individual employees and classes of employees” (id. at

388). but has refused to “find a breach of the collective

argaining agent’s dutv of fair representation In taking

a good faith position contrary to that of some individ

whom it represents... for! in supporting the position

of one group of emplovees against that of another.

Humphrey, 395 U.S. at 349.

The decisions of the lower federal courts il’ustrate the

extent to which bargaining representatives can enjoy

significant negotiating freedom as to emplovee benefits

without violating their duties of fair representation. In

Chesser v. Babcock & Wilcow, 753 F.2d 1570. 1573 (11th

Cir.). cert. denied sub nom. Sims v. Babcock & Wilcox

Co., 474 U.S. 836 (1985), for example, the Eleventh Cir-

cuit held that a union was not required to insist on extra

pension benefits for certain emplovees at the expense of

frustrating the desires of a majority of the members for

severance pay. Other federal courts have upheld similar

bargains against duty of fair representation challenges.

See He ndricks Oa Airline Pilots Ass’n, Jnt’l, H96 F.2d 673,

677 (9th Cir. 1983) (no breach of duty of fair represen-

tation when union confiscated one group’s right to ex-

change vacation days for compensation in favor of and

‘

directly to the economic benefit of another group subject

to a potential layoff) ; Williams v. Pacific Maritime Ass’n,

617 F.2d 1321, 1330 (9th Cir. 1980), cert. denied, 429

U.S. 1101 (1981) (aw of fair representation clearly per-

mits a union to negotiate for an agreed-to contract vro-

vision awarding greater benefits to fully registered work-

ers than to provisional workers); Buchholtz v. Swift &

Co., 609 F.2d 317, 319 (8th Cir. 1979). cert. denied, 444

U.S. 1018 (1980) (no breach of duty of fair representa-

tion when union withdrew vacation pay claim of some

former employees in order to obtain pension benefits for

others).

The Third Cireuit’s decision stands in direct contrast

to these courts’ careful balancing of individual and col-

lective rights and places a prior restraint on the nego-

tiating freedom of collective bargaining representatives.

The Third Circuit’s decision effectively forecloses a union

representative from agreeing to any integrated benefits

program involving a trade-off of pension and severance

benefits ‘or, for that matter, pensions and any other

benefit). It does so regardless of the plan’s history, the

industry involved, the employee interests at stake, or the

representative’s motives for negotiating such a plan. Such

a prospective limitation is in serious tension with the

NLRA’s exclusive representation scheme.

It is also in serious tension with the purposes underlying

the ADEA. One of the ADEA’s express purposes is “‘to

help employers and workers find ways of meeting problems

arising from the impact of age on employment.” 29

U.S.C. $ 621(b). The legislative history makes clear that,

in formulating this purpose, Congress recognized that

older and younger workers have different qualifications

and face different pre- and post-employment problems.

See generally The Older American Worker: Age Dis-

crimination in Employment, Report of the Secretary of

Labor to the Congress Under Section 715 of the Ciiil

Rights Act of 1964 (1965), reprinted in EEOC Legisla-

tive History of the Age Discrimination an Employment

Act of 1967 (1981), at 11-17. It thus intended to en-

courage, rather than discourage, employers and the rep-

resentatives of their employees to work out solutions

these different problems and to implement programs tail-

ored to the special needs of older and younger workers.

Because the Third Circuit’s decision invalidates precisely

such a program-—one that Westinghouse and its unions

designed to address the special post-employment needs of

older workers—and therefore contravenes one of the

ADEA’s express purposes, this Court should grant re-

view.

CONCLUSION

The Court should grant the Petition.

> 1

Respectfully submitted,