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Age discrimination: past, present, prologue.

Older workers have come a long way toward achieving parity in the workplace in the nearly three decades since the ADEA was enacted. But the fight is far from over.

There was a time not long ago when a familiar rite of passage--discovering those first few gray hairs--struck fear in the hearts of many workers. Would their employers start to think they were too old to do their jobs? Would choice assignments and promotions start going to younger coworkers? Would they be fired and replaced by someone younger?

Sadly, these fears were all too frequently realized.

With passage of the Age Discrimination in Employment Act in 1967, workers age 40 and older began to breathe a little easier. No longer could they be singled out for demotions, firings, or reduced compensation and benefits packages simply because of their age.

In the years since then, the workforce has changed dramatically, and many employers have learned to appreciate the maturity and experience that older workers bring to the job.

The future looks even brighter, according to Tom Osborne, staff attorney with the AARP Foundation Litigation in Washington, D.C. In this interview with TRIAL Senior Editor Jean Hellwege, Osborne talks about the gains in equality older workers have made in recent decades, the focus of current legal battles, and what the future may hold.

It's been more than 30 years since the Age Discrimination in Employment Act (ADEA) was signed into law. Are older workers better off now than they were 30 years ago?

Older workers are absolutely much better off now than they were before enactment of the ADEA. Blatant ageism, which was widespread then, has almost entirely disappeared from today's workplace. As our population has aged and our economy has strengthened, opportunities for older workers have grown.

Except for a few statutory exceptions related to public safety, mandatory retirement because of age--which was the norm before the ADEA--has become a thing of the past. Successful challenges under the ADEA to bias-driven practices like discriminatory hiring and termination policies, early retirement incentives that reduce benefits with increasing age, and reductions in benefits not justified by cost have reduced employer misconduct and raised public awareness of the unfairness of age discrimination.

There are some skeptics, like Chief Judge Richard Posner of the Seventh Circuit, who question whether the much-improved condition of older workers today is because of the ADEA or in spite of it. But there is no dispute that due in large measure to the act, the public today is much more sensitive to ageism in all its forms than it has ever been.

The U.S. Supreme Court handed down two significant decisions regarding age discrimination in the last year--Reeves v. Sanderson Plumbing Products, Inc., and Kimel v. Florida Board of Regents. What was Reeves about?

In Reeves, a jury concluded that Sanderson Plumbing's professed reason for firing its 40-year employee, Roger Reeves, was a pretext to disguise the real reason--age discrimination. The Fifth Circuit threw out the verdict, holding that since Reeves had failed to provide additional proof of discrimination beyond that required to support his case for pretext, there was not enough evidence to support it.

Reinstating the verdict for the 57-year-old Reeves, the Supreme Court unanimously rejected the so-called pretext-plus rule, holding instead that proof of the falsity of the employer's explanation for the adverse employment action can be sufficient to support a plaintiff's verdict. The Court also declared that reviewing courts must not usurp the jury's function by weighing the evidence.

In addition to ADEA claims, Reeves will be applied to claims under Title VII and statutes, proof of which requires use of the pretext method. Therefore, the decision is a significant victory for workers who sue for employment discrimination.

And Kimel?

Kimel is a tremendous setback for state government employees with age discrimination claims against their employers. By the narrowest possible margin, the Supreme Court's 5-4 Kimel majority wiped out more than 25 years of law applying the ADEA to states and stripped millions of state employees of federal protection against age discrimination.

As it had done previously with the Religious Freedom Restoration Act and other federal statutes, the Court ruled in Kimel that the Eleventh Amendment to the U.S. Constitution shields states from private suits under the ADEA.

How will these decisions affect pending or potential age bias claims?

Both decisions apply to all pending and potential claims. By removing the obstacle of the pretext-plus rule and cautioning that reviewing courts must take care not to invade the province of the jury, Reeves should make it easier for plaintiffs to get discrimination claims before juries and to have favorable verdicts sustained on appeal.

As a result of Kimel, state employees cannot sue for monetary relief under the ADEA. Perhaps recognizing the huge blow that decision would inflict on the rights of older state employees, the Court pointedly stated that state age discrimination victims would not be left without any legal remedy because the decision does not affect their rights under state law. Nevertheless, while it is true that every state has a law that prohibits age discrimination, these statutes run the gamut--some are very effective, others are merely words on paper.

Although Kimel does not affect the federal government's right to enforce the ADEA, one can hardly expect the Equal Employment Opportunity Commission (EEOC), an agency chronically short on both staff and funds, to shoulder the burden of vindicating the civil rights of every state employee.

Even after Kimel, state employees can still bring suit under the ADEA for injunctive and declaratory relief. It is unrealistic, however, to expect many individuals to undertake the expense and effort of litigation when there is no hope of recovering any monetary relief.

On September 6, U.S. Senators Russell Feingold (D-Wis.), James Jeffords (R-Vt.), and Edward Kennedy (D-Mass.) introduced legislation entitled The Older Workers Rights Restoration Act of 2000 (S.3008). It would require states to waive their sovereign immunity from ADEA suits as a condition of receiving federal funds for programs and activities.

There's been a lot of press lately about workers switching from traditional defined pension plans to cash balance plans, which AARP says is a bad idea. What is the problem with cash balance plans?

The ADEA and companion provisions in the federal tax code and the Employee Retirement Income Security Act (ERISA) prohibit the reduction in, or cessation of, benefit accruals based on age. The overall objectives of these provisions are twofold: to ensure that pension plans do not discriminate on the basis of age and to remove disincentives to older employees to remain in the workforce. In general, cash balance plans violate both the letter and spirit of these provisions.

The burst in growth of cash balance plans has been almost entirely the result of conversions from exiting defined benefit plans. At least 20 of the nation's largest 100 corporations, and at least 300 other large companies, have converted, affecting millions of U.S. employees.

Under traditional defined benefit pension plans, employees earn most of their retirement benefits toward the end of their careers. Cash balance plans are defined benefit plans that have been repackaged to look like defined contribution plans like 401(k)s. They generally provide for a much larger accrual of benefits at an earlier age. Consequently, older workers frequently lose thousands of dollars in retirement credits as a result of the conversion from a defined benefit plan to a cash balance plan.

Under cash balance plans, older, longer-service employees often fail to accrue any new retirement benefits until their new hypothetical account balance exceeds the accrued benefit the employee had achieved under the old plan. This is known as the "wear-away."

The result is that an older employee who retires today and takes a lump sum distribution could receive far fewer benefits than would a younger employee who earns the same salary and works for the same number of years before retiring several years from now.

While salary and service may be components in determining a wear-away, all else being equal, age is the determining factor of the amount of wear-away. Because the calculation of the wear-away is based directly on age, it also violates the pension accrual laws.

For older workers, absent transition relief (for example, "grandfathering" employees in the old plan), the conversion to a cash balance plan is extremely detrimental. By depriving older workers--especially those with long service histories--of the benefit of their increased years of service and their peak earning years (including any early retirement subsidies), employers who convert break the implicit promise made to older workers in the traditional defined benefit pension plan.

These employees may have made career and retirement decisions based on the expectation of certain benefits, only to see that expectation disappear--replaced by the new cash balance plan formula that reduces or eliminates their benefits.

Are you aware of any litigation involving these plans?

Although there have been a few decisions, they have been inconsistent. The battle at both the trial and appellate level is far from over. In Engers v. AT&T, a federal district court in New Jersey earlier this year ruled that AT&T employees could proceed with claims that the company's cash balance plan violates both the ADEA and ERISA.

In September, in Eaton v. Onan Corp., a federal district court in Indiana voiced the opposite view, granting summary judgment to the employer on the plaintiffs' claim that its cash balance plan violates the ADEA.

In Lyons v. Georgia-Pacific Corp., the Eleventh Circuit held earlier this year that the company's cash balance plan violated ERISA by improperly calculating the plaintiffs lump sum distribution. The Second Circuit issued a similar ruling in September in Esden v. Bank of Boston.

The Tax Court has yet to weigh in on cash balance plans. Both the EEOC and the IRS are reviewing the myriad issues raised by cash balance plans and conversions, but neither agency is likely to make a determination or issue regulations any time soon.

I understand AARP has asked Congress to require employers to fully inform employees about how converting to a cash balance plan can affect their benefits. Has Congress responded to AARP's request?

No. We don't know what response Congress will provide.

In a recent TRIAL article, you wrote that the evidentiary value of ageist comments is one of the most contentious issues in age discrimination litigation. Why?

Statements and comments reflecting age bias in the workplace are the most powerful indicators of discriminatory intent. They are worth their weight in gold to a plaintiffs case because the jury can much more easily understand the meaning and implications of ageist remarks than, say, an expert's testimony or a statistical analysis.

Every plaintiff attorney would dearly love to have the jury consider comments such as those of the Sanderson Plumbing Products executive who was instrumental in having Roger Reeves fired after 40 years of service with the company: "You are so old that you must have come over on the Mayflower" and "You are too damn old to do the job."

Defense attorneys also recognize the weight carried by such comments and work hard to have the trial court exclude them from the jury's consideration. The jury in Reeves would almost certainly not have ruled in the plaintiffs favor had those comments not been in evidence. And the case might not have survived summary judgment without them.

What can a lawyer do to prevent having a client's evidence of discriminatory intent, as you say, "tossed on the scrap heap of stray remarks and [the] case tossed out of court"?

Plaintiff attorneys must be able to articulate succinctly the theory under which the comments are admissible and provide sufficient evidence of the context in which they were made.

First, job-related, biased comments specifically about the plaintiff by people directly involved in or with influence over the challenged decision at about the time that decision was made should always be admissible on the issue of the defendant's discriminatory intent.

On the other hand, general comments that could have an innocent as well as a biased connotation made outside the workplace, even if made by someone in a superior position to the plaintiff, are generally not admissible if that person had nothing to do with the decision being challenged, unless there are special circumstances favoring admissibility. An example would be comments made by the chief executive officer (CEO) or another executive whose word is equivalent to company policy.

When the comments fall in-between these two extremes, plaintiff attorneys must be both creative and persistent in advocating their admission. For example, in one case, an ageist remark made 20 years earlier when the company president who fired the plaintiff was a teenager was admissible because it reflected his lifelong prejudice against older people in general.

In another case, even the ageist remarks of the plaintiff's coworkers were admissible to show the pervasively biased atmosphere in which the decision was made to fire the plaintiff.

And in yet another case, general comments that had nothing to do with the firing of the plaintiff more than a year before the firing at a meeting of senior executives and then effectively endorsed by the CEO were nevertheless admissible as evidence of the corporate culture in which the decision to fire the plaintiff was made.

But plaintiff lawyers must also remember that ageist comments do not share the same opprobrium as racist or ethnic slurs in the minds of judges or jurors, probably because aging is a universal human process. Additionally, people often attribute minor personal failings to aging with remarks like "I'm just getting too old for that" or "I'm just not as young as I used to be."

So, counsel in these cases may face a struggle to get an ageist comment admitted where in a race discrimination case a comment reflecting race bias would be easily admitted.

The general rule of thumb seems to be that the more evidence of age bias there is, the more readily the court will accept ageist comment evidence. Expressed another way, the more the plaintiff needs the ageist comment evidence to prove a claim because of the dearth of other evidence, the less likely it is that the comment will be admitted. Even if it is admitted, its weight may be heavily discounted.

The Third Circuit recently ruled that employers can be sued for violation of the ADEA if they modify benefits to retirees to give lesser benefits to those who are 65 or older and therefore eligible for Medicare. Is this a widespread practice?

Yes. In Erie County Retirees Association v. County of Erie, the Third Circuit held that even though the ADEA permits the coordination, or reduction, of the employer-provided portion of health care benefits for Medicare-eligible retirees, these reductions must satisfy the equal cost or equal benefit rule.

The case has received widespread attention because many companies treat Medicare-eligible retirees differently from younger retirees, assuming that the rule does not apply to benefits coordination or that the ADEA applies only to employees and not to retirees.

What did the Third Circuit have to say about that assumption--that the ADEA does not protect retirees?

In Erie County, the court relied on the decision of the Supreme Court in Robinson v. Shell Oil Co. to hold that the term "employee benefits," a term that is not defined in the ADEA, encompasses not only benefits provided to current employees, but also benefits that "are structured discriminatorily after retirement."

In Robinson, a Title VII retaliation case based on race, the Court found that the meaning of the term "employees" used in the Title VII provision at issue was ambiguous as to whether it excluded former employees. In light of the broad remedial purposes of Title VII, the Court construed the term to include former employees.

The Third Circuit also found persuasive the EEOC's argument that "it is inconceivable that Congress would in the same breath expressly prohibit discrimination in employee benefits, yet allow employers to discriminatorily deny or limit post-employment benefits to former employees at or after their retirement, although they had earned those employee benefits through years of service with the employer." I think this analysis is not only persuasive, but correct.

A recent news report suggests that plaintiffs are more likely to win retaliation claims than discrimination claims. Are retaliations claims easier to prove?

To succeed on a retaliation claim, the plaintiff must prove that he or she engaged in statutorily protected activity, that the employer made an employment decision adverse to the plaintiff or took other action against the plaintiff, and that there is a causal connection between the plaintiff's protected activity and the employer's decision or action.

The same methods of proof are employed in proving retaliation claims as in proving discrimination claims. Proving such claims, especially the third element, the causal connection, can be as difficult as proving a discrimination claim. If there is a perception that plaintiffs are more likely to win retaliation claims, it may be based on the notion that juries can more easily understand retaliation claims than discrimination claims and may be more willing to infer the causal connection, or retaliatory intent, than discriminatory intent.

The taxability of damages in discrimination cases is an issue that seems to be getting increasingly complicated. What part of an award for age bias is taxable to the plaintiff?

Damages and settlements are not taxable if the underlying claim is based on tort or tort-type rights and is compensation for personal injuries or sickness. The three types of damages recoverable under the ADEA--back pay, front pay, and liquidated damages--do not meet either of these requirements. Therefore, the full amount is taxable to the plaintiff. The tax is deducted as a lump sum from the award, even though it may represent compensation for several years of past and future lost earnings and benefits.

The Tax Court held earlier this year that the plaintiff is liable for income tax on the contingent fee deducted from the amount of an ADEA settlement and retained by an attorney. The Fifth and Sixth Circuits have both held that attorney fees are earned by the attorney and, therefore, are not taxable income to the client. The Ninth Circuit recently issued a ruling in favor of taxation, which parallels an earlier ruling from the Federal Circuit.

Doesn't the Tax Court ruling amount to double taxation?

Yes, the decision, in effect, endorses double taxation in age discrimination cases because the attorney must also pay income tax on the fee earned.

Does the taxation of awards make cases harder to settle?

The taxation of damage awards makes settlement more difficult because employers are not willing to pay more than what they think a case is worth. On the other hand, plaintiffs are reluctant to accept a figure that does not include an amount over and above the settlement value of the case to compensate for the reduced "net" amount they will receive due to the income tax deduction.

Is anything being done to change how civil rights awards are taxed?

Legislation is pending in both the House and Senate to remedy the existing inequities in the taxation of awards to plaintiffs under the ADEA and other fair employment and civil rights laws. The Civil Rights and Tax Fairness Act of 2000 includes provisions to eliminate the tax on emotional distress damages and the double taxation of attorney fees, permit income averaging of back and front pay awards, and minimize the impact of the alternative minimum tax.

What cases are before the Supreme Court this term that could affect older workers?

In the second week of this term, the Court heard arguments in University of Alabama at Birmingham Board of Trustees v. Garrett to resolve whether Congress, when it enacted the Americans with Disabilities Act (ADA), validly abrogated the states' immunity under the Eleventh Amendment.

Should the Court hold that the states are immune from individual suits for monetary damages under the ADA, state employers will have significantly less motivation to comply with the ADA's prohibitions against discrimination in employment since few ADA claimants will undertake litigation when only injunctive relief is available. Older people have a higher incidence of disabilities than the population as a whole, so the Garrett decision will have tremendous impact on all older workers.

Another case is Circuit City Stores, Inc. v. Adams, in which the Court will review the Ninth Circuit's decision holding that the Federal Arbitration Act, which requires enforcement of valid arbitration agreements, does not apply to employment contracts. Every other court of appeals to decide the issue has ruled that the act applies to employment contracts like that between the plaintiff and Circuit City. If the Court adopts the rule of the circuit majority, employers may legally force workers to either arbitrate employment discrimination claims or forfeit their jobs.

The last case before the Court is Egelhoff v. Egelhoff. In that case, the Court will again construe the breadth of ERISA's pre-emption clause. This time, the issue is whether ERISA preempts a Washington state law that nullifies or overrides ERISA plan beneficiary designations that are used in employer-sponsored welfare and pension plans. The decision will have a direct impact on older workers by determining who should receive their employer-sponsored benefits.

The Court has also agreed to hear PGA Tour, Inc. v. Martin, a case raising issues under the ADA. Since this is not an employment case, it is uncertain if the decision will affect older workers.

The baby boom generation--our population's pig in the python--is now middle-aged. Looking into your crystal ball, what do you predict the aging of this largest segment of our workforce will have on the workplace?

Employers will begin to realize that the number of young workers will be insufficient to replace the current aging "boomer" work Force as they retire. As a result, the combination of economics and demographics, rather than litigation or legislation, will have the greatest effect on reducing and, hopefully, eliminating workplace age discrimination. In other words, assuming that the U.S. economy remains healthy, economic necessity will force employers to make decisions based on ability rather than age.

Also, the trend to retire early will probably be reversed, as many boomers may likely decide to continue to work beyond the usual retirement age rather than take a chance that a fixed retirement income will be sufficient to maintain the comfortable lifestyle they have achieved. A significant number of boomers will continue to work well beyond what is considered retirement age at full- or part-time jobs.

By the time they are ready to fully retire, the political clout of this most successful of American generations will have forced resolution of the problems of Social Security and health and long-term care so that they will be secure in their retirement years.
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Author:Hellwege, Jean
Article Type:Interview
Geographic Code:1USA
Date:Dec 1, 2000
Previous Article:Chipping away at the ADA.
Next Article:Admissibility of expert testimony: What's next?

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