KY Retirement Systems v. EEOC

Bill Long 12/3/07

Docket No. 06-1037; Oral Arg. January 9, 2008

This age-discrimination case can be explained in a very difficult or very simple way. I will choose simplicity. Kentucky, like all states, has retirement plans for its state employees. For the purposes of this case, it has a "normal" plan and a "disability" plan. Let's go one at a time.

I. Under the "normal" plan, a person who retires at age 65 or after 27 years of service, whichever comes first, gets retirement benefits calculated as follows: 2.5% of the employee's final salary X the number of years worked. If, however, you worked in a "hazardous position" (defined by law), you could get the same benefits after completing 20 years of service or upon reaching the age of 55, whichever came first. You could also get these benefits after working for 5 years and attaining age 55. Of course, you don't have to retire at age 55. The man in this case needed to keep working after age 55 because of having to provide for school-age children. Since the facts of this case relate to a Deputy Sheriff, a hazardous position under law, let's do a simple calculation for him under a "normal" retirement plan. Let's assume for this and the next example, for sake of simplicity, that final salary was $100,000.

EXAMPLE ONE: Retired from hazardous position at age 61 after 10 years of service (in the actual case he had 17 years of service, but I chose 10 years to make the calculations easy). His retirement amount would be 2.5% of $100,000 X 10 years or $25,000 per year.

II. Now, let's move to the second scenario under Kentucky law. The Kentucky retirement plan also offers disability benefits. But under the plan, when workers become disabled after reaching the normal retirement age, they are disqualified from seeking disability retirement benefits. That means that the person in Example One (the Deputy Sheriff), couldn't get disability retirement benefits if he retired with an injury at age 61. He would have to rely on his normal retirement benefits. Well, that is one issue in the case. Is this kind of discrimination something that the ADEA (Age Discrimination in Employment Act) forbids? You might respond, "Well, it depends." What are the benefits accorded under the disability retirement plan? If they are less or the same than offered under example one, above, then perhaps there really is no difference. We are comparing dimes against "ten-cent" pieces.

But here is what KY law provides. Under the KY disability retirement plan when workers in hazardous occupations become disabled before they reach age 55 and have less than 20 years of service, they become eligible for disability benefits. How do you calculate them? Well, the amount of the benefit is calculated by adding to the number of years the employee actually worked the number of years remaining until the worker would have reached either normal retirement age (55) or 20 years of service, but no more than the number of years already worked. Then, you multiply this by 2.5% of the final salary. Ok, so let's do a calculation.

EXAMPLE TWO: Retired from hazardous position at age 45 due to disability after 10 years of service. Thus, the only difference between example one and two is the age of the worker. Under the complex formula spelled out just above, here are his benefits:

CALCULATION: 10 (years of service) + 10 (the number of years until reaching "legit." retirement age or years up to 20 years of service--55/20) X 2.5% of $100,000 (the final salary). Our numbers show that his retirement disability amount would be 20 X $2,500 or $50,000 per year.

If you really want to look at the statutes, they are at Ky. Rev. Stat. sec. 16.576, 16.577(2), 61.592(4), 78.545(31) and 61.510(18). Ok, I didn't think you did.

Before we think about this for second, I need to tell you one other aspect of the disability retirement law. The disability retirement plan also guarantees a hazardous duty employee who is eligible for disability retirement and becomes disabled in the line of duty monthly benefits of at least 25% of monthly final rate of pay. If such an employee has dependent children, the employee is entitled to a dependent-child benefit of 10% of monthly pay for each child, up to a maximum for all dependent children of 40% of monthly final rate of pay. These benefits are not available to a hazardous duty employee who becomes disabled after reaching normal retirement age.

Thinking About the Case

I have given, I believe, probably the most extreme example possible, though this is a quite realistic example. What have the courts done with this case? The Sixth Circuit Court of Appeals decided that the EEOC (Equal Employment Opportunity Commission) had stated what is called a "prima facie" case for discrimination under the ADEA when it brought this case on the Sheriff's behalf against the retirement system (467 F3d 571 (2006)). But there was loads of disagreement among the judges. At first a panel of that circuit decided that there was no discrimination because age was only one factor taken into consideration (length of service was another) and because there was no "discriminatory intent" of the state in implementing the system. But the circuit decided to sit en banc (all together). Ten of the judges said that the EEOC had made its preliminary case of discrimination; four judges said they had not.

The Supreme Court will be asked to decide if the EEOC has made, by this showing, a preliminary case of discrimination. If the Court decides that it has done so, then the case would be sent back, I presume, to determine if the state has a rebuttal that gives a legitimate non-discriminatory reason for its law. So, we may be years away from a "solution" to this problem. But, from the example I gave (assuming that I have read everything correctly), doesn't it look like a pretty open and shut case? That is what makes me worry...

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