Appeal from a judgment of the Southern District of New York (Lowe, Judge), granting summary judgment to plaintiffs in an Age Discrimination in Employment act action against the defendants New York Shipping Association, International Longshoremen's Association, AFL-CIO, and the Trustees of the Guaranteed Annual Income Fund of the New York Shipping Association, Inc. - International Longshoremen's Association, AFL-CIO.
Mahoney, Oakes, and Altimari, Circuit Judges.
Plaintiffs are longshoremen employed by the New York Shipping Association ("NYSA"). The collective bargaining agreement between their union and the NYSA created the " Guaranteed Annual Income" ("GAI") plan to mitigate the widespread unemployment that accompanied the use of containers in shipping. GAI creates a minimum annual income by supplementing wages and governmental benefits, such as unemployment, up to a guaranteed minimum amount, now between $33,000 and $36,000. Benefits end at age 70. Over time, the program's cost has increased dramatically, causing the NYSA to negotiate for cost reductions.
The Internal Revenue Service ("IRS") originally took the position that GAI was a supplemental unemployment compensation benefit, but was subject to Social Security taxes. Accordingly, longshoremen receiving GAI could not receive Social Security income ("SSI"). In 1979, however, the IRS held that GAI was not subject to federal employment taxes, including the Social Security tax, making longshoremen eligible for SSI.
The NYSA sought to offset the newly available SSI from the GAI benefits. An agreement was reached with the union providing that:
Employees 65 years of age or over who qualify for Social Security shall continue to be eligible for GAI except that, in addition to current contractual deductions, there shall also be deducted the amounts they would have received from Social Security. . . .
Under the Social Security law, payments may begin either at age 62 or 65. If, however, the recipient opts for payments to commence at age 62, the amount of each payment is reduced. Thus, if the GAI plan offset SSI at age 62, the payee would either have to accept less current income for greater later income (subtracting the potential SSI from GAI from age 62 to 65, but only accepting SSI at age 65), or accept the same total income between ages 62 and 70, and a lesser income after age 70 (subtracting actually received SSI from GAI from age 62 to 65, but getting only the smaller SSI payments in the period after age 70 when GAI payments end).
Plaintiffs, all over age 65, claim that the offset provision quoted above violates the Age Discrimination in Employment Act, 29 U.S.C. §§ 621-634 (1982) ("ADEA"), because it allows persons between ages 62 and 65 to receive full GAI benefits plus any social security benefit opted for (giving those who opt for SSI at age 62 a windfall for those three years),*fn1 while offsetting SSI benefits from GAI payments to those over age 65.
In granting plaintiffs' motion for summary judgment, the District Court held that plaintiffs showed a prima facie case under the ADEA, because the offset treated employees over 65 differently than those age 62-65,*fn2 and that defendants did not establish a defense under section 4(f)(2) of the ADEA, 29 U.S.C. § 623(f)(2) (1982), of which more later.
Section 4(a) of the ADEA provides in part:
It shall be unlawful for an employer --
(1) to fail or refuse to hire or to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's age;
(2) to limit, segregate, or classify his employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an ...