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Equal Employment Opportunity Commission v. Home Insurance Co.

decided: January 26, 1982.

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, PLAINTIFF-APPELLANT,
v.
THE HOME INSURANCE COMPANY, DEFENDANT-APPELLEE.



Appeal from a final judgment entered in the United States District Court for the Southern District of New York, Leonard B. Sand, Judge, dismissing, on defendant's motion for summary judgment, complaint charging age discrimination in violation of the Age Discrimination In Employment Act, 29 U.S.C. §§ 621-634. Vacated and remanded.

Before Newman and Kearse, Circuit Judges, and Eginton, District judge.*fn*

Author: Kearse

Plaintiff Equal Employment Opportunity Commission ("EEOC") appeals from a judgment of the United States District Court for the Southern District of New York, Leonard B. Sand, Judge, dismissing the EEOC's complaint charging defendant The Home Insurance Company ("Home") with age discrimination in violation of the Age Discrimination in Employment Act of 1967 ("ADEA" or "Act"), 29 U.S.C. §§ 621-634 (1976). The district court, ruling that the stipulated facts showed that Home's action in lowering the mandatory retirement age for its employees was not a subterfuge to evade compliance with the Act, and that Home had attempted in good faith to comply with the Act, granted Home's motion for summary judgment. Because we conclude that there were genuine issues as to material facts, we vacate the judgment and remand for further proceedings.

FACTS

The following facts, except to the extent indicated, are not in dispute.

A. Home's Retirement Plan

Since 1948 Home has maintained a noncontributory retirement plan (the "Plan") for its employees. Under the terms of the Plan that were in effect until December 31, 1973, the normal retirement age, i.e., the age at which an employee was allowed to retire and receive full pension benefits without actuarial reduction, was 65. The mandatory retirement age, i.e., the age at which an employee was required to retire, was also 65. The Plan also allowed employees to retire between the ages of 55 and 65 at reduced pensions. Home stated that during the period 1969 through 1972, a substantial number of Home employees had opted for early retirement with reduced pension benefits, and that the average age of such early retirees was under 62.

Effective January 1, 1974, Home amended its Plan to, inter alia, lower both the normal and the mandatory retirement ages from 65 to 62. The amount of full pension benefits, which accordingly became payable at age 62, was increased. The earliest age at which an employee could retire early with reduced benefits remained 55, and the percentages of accrued benefits payable to those who retired early were increased.

In December 1978, the United States Secretary of Labor, after receiving a complaint from a Home employee and attempting informal negotiations with Home, commenced the present action*fn1 for monetary and injunctive relief, contending that Home,*fn2 by lowering the mandatory retirement age from 65 to 62, had violated § 4(a)(1) of the ADEA.*fn3 Home contended (a) that in enforcing the lower mandatory retirement age it was simply observing the terms of a bona fide employee retirement plan and hence was acting lawfully under § 4(f)(2) of the Act,*fn4 and (b) that in lowering the mandatory age Home had acted in good faith reliance on, and in conformity with, interpretations of the ADEA by the Wage-Hour Administrator of the Department of Labor, and that its actions were therefore immunized by § 10 of the Portal-to-Portal Act, 29 U.S.C. § 259 (1976) ("Portal Act").*fn5 The EEOC contended that Home's action was not protected by § 4(f)(2) of the ADEA because the action was mere subterfuge to evade compliance with the Act, and that the Portal Act defense was not available to Home because its action was not in conformity with the administrative rulings to which Home pointed.

B. The Stipulated Events Leading to Home's Lowering of the Mandatory Retirement Age

Following discovery, both sides moved for summary judgment. The parties entered into a stipulation of facts that was to "constitute the complete record for purposes of the parties' motions for summary judgment." The stipulation gave the following background of Home's lowering of the retirement ages.

For some years prior to 1973 it had been Home's practice to conduct, every five years, a review of its employee benefit plans to ensure that Home remained competitive in the labor market. Pursuant to that practice Home commenced a review in 1973 with the aid of the employee benefit consulting firm of Towers, Perrin, Forster & Crosby ("Towers, Perrin").

Towers, Perrin made a report to Home recommending two steps pertinent to the present case. First, it recommended that Home lower the normal retirement age from 65 to 62, thus allowing an employee to retire earlier and receive full pension benefits. Second, it recommended that the fractional pension benefits payable to employees who took "early" retirement be increased. This report neither recommended nor discussed any lowering of the mandatory retirement age.

The Towers, Perrin report was reviewed by Home's Retirement Committee, chaired by Home's Senior Vice President and General Counsel, Joseph F. Quinn. The Retirement Committee agreed with Towers, Perrin's recommendations and, in addition, decided to recommend to Home's management that not only the normal retirement age, but also the mandatory retirement age, be lowered. According to Quinn's testimony at his deposition, the purpose of the Committee's proposed reduction of the mandatory retirement age was to reduce the number of "spontaneous" retirements-i.e., early retirements that left Home with no adequately trained employees to fill the vacated positions. The Committee's report to Home's board of directors did not contain any discussion of the proposed reduction in the mandatory retirement age or of the spontaneous retirements problem that assertedly prompted the recommendation.

In presenting the Committee's recommendations to the board, a memorandum by Quinn stated that "the lowering of normal retirement age to 62 should very favorably affect morale in terms of affording more years of retirement to look forward to and promoting more rapid turnover at the top." The proposed modifications of the Plan, including the lowering of the mandatory retirement age, were eventually adopted by Home's board of directors. No evidence was offered as to the substance of any discussion of the mandatory retirement age reduction at any meeting of Home's directors.

The Plan's modifications were first announced to Home's employees in a company newsletter. The article stated in pertinent part as follows:

The revised Retirement Program is not only advantageous to those approaching retirement but to all employees. Perhaps the biggest impact is in the retirement age which has been reduced to 62, offering full retirement benefits 3 years sooner. This feature will quicken the pace of promotional advancement within the company, offering qualified employees better career opportunities.

Thereafter Home circulated printed descriptions of the modifications of the Plan, stating in pertinent part as follows:

Full Pension at Age 62

Under the improved Plan, normal retirement (the mandatory retirement age) for both male and female employees will be age 62 for everyone under age 60 on January 1, 1974.

What's more, in the case of long service employees, the change in the Plan not only means a full pension three years sooner than now, but it also means a bigger pension than the Plan now pays at age 65.

If you are a young employee, this Plan change can create entirely new career opportunities for you. It will quicken the pace of promotional advancement for all those who can qualify to move into more demanding, better paying positions. And since pensions at The Home are based on "final average earnings," early career advancement can add substantially to your retirement income. Final average earnings are your average basic earnings for the highest consecutive five years out of the last 10 you work.

(Emphasis in original.)

The parties' stipulation also recited that Home "offered" various reasons for its decision to lower the normal and mandatory retirement ages. As set forth in the district court's opinion, Home's asserted reasons were

(1) "to remain competitive in the labor market;" (2) "to come into line with other subsidiaries of Home's parent, City Investing Company, each of which had age 62 as the normal retirement age," and with the parent company itself, ... plus three other reasons Home labels "compelling business reasons apart from the marketplace for amending the Plan, namely, (3) "improving employee morale, ((4)) ensuring that there would be trained successors for retiring employees, and ((5)) "quicken(ing) the pace of promotional advancement for all those who can qualify to move into more demanding, better paying positions'...."

Slip op. at 3-4 (brackets in original). In support of these reasons Home proffered the affidavit and deposition testimony of Quinn, along with various documents and Home's answers to interrogatories. The EEOC neither endorsed the reasons advanced by Home nor accepted the truth of the statements contained in the proffered evidence.

C. The Granting of Summary Judgment

The district court granted Home's motion for summary judgment and dismissed the complaint. It found that Home had two valid defenses to the action.

First, the court ruled that the reasons advanced by Home were not sham explanations for its decision to lower the normal retirement age. In particular, the court found that the desire to ensure adequate training for successors to the retirees was a plausible explanation for Home's decision to lower the mandatory ...


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