EEOC v. Jefferson County Sheriff's Dept., 6th Cir. Reply brief filed November 15, 2004 ______________________________________________________ No. 03-6437 ______________________________________________________ IN THE UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff-Appellant, v. JEFFERSON COUNTY SHERIFF'S DEPARTMENT, KENTUCKY RETIREMENT SYSTEMS, and COMMONWEALTH OF KENTUCKY, Defendants-Appellees. ______________________________________________________ On Appeal from the United States District Court for the Western District of Kentucky Docket No. 99-00500 Hon. Jennifer B. Coffman ______________________________________________________ FINAL COPY OF THE REPLY BRIEF OF THE EQUAL EMPLOYMENT OPPORTUNITY COMMISSION ______________________________________________________ ERIC S. DREIBAND EQUAL EMPLOYMENT General Counsel OPPORTUNITY COMMISSION Office of General Counsel LORRAINE C. DAVIS 1801 L Street, N.W., Room 7046 Acting Associate General Counsel Washington, D.C. 20507 (202) 663-4734 CAROLYN L. WHEELER Assistant General Counsel DORI K. BERNSTEIN Attorney TABLE OF CONTENTS Page TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . ii INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . .1 ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 THE KRS BENEFIT PLAN FACIALLY DISCRIMINATES AGAINST OLDER EMPLOYEES BECAUSE OF AGE BY REQUIRING DIFFERENT TREATMENT OF OTHERWISE SIMILARLY SITUATED WORKERS BASED SOLELY ON THE AGE WHEN THEY BECAME DISABLED FROM WORKING. . . . . . . . .3 CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . 28 CERTIFICATE OF COMPLIANCE WITH RULE 32(a). . . . . . . . . . . 29 ADDENDUM Appellant's Supplemental Designation of Appendix Contents CERTIFICATE OF SERVICE TABLE OF AUTHORITIES Page CASES Arizona Governing Committee v. Norris, 463 U.S. 1073 (1983). . . . . . . . . . . . . . 11, 16, 26, 27 Betts v. Hamilton County Board of Mental Retardation, 848 F.2d 692 (6th Cir. 1988), rev'd, 492 U.S. 158 (1989) . . . . . . . . . . . . . . . . . . . . 22 Courtney v. LaSalle Univ., 124 F.3d 499 (3d Cir. 1997) . . . . . . . . . . . . . . . 4, 6 DiBiase v. SmithKline Beecham Corp., 48 F.3d 719 (3d Cir.), cert. denied, 116 S. Ct. 306 (1995) . . . . . . . . . . . 4, 9 EEOC v. KECO Industries, Inc., 748 F.2d 1097 (6th Cir. 1984) . . . . . . . . . . . . . . . 10 EEOC v. City of Mt. Lebanon, 842 F.2d 1480 (3d Cir. 1988). . . . . . . . . . . . . . . . 22 Florida v. Long, 487 U.S. 223 (1988) . . . . . . . . . . . . . . . . . . 26, 27 General Dynamics Land Systems v. Cline, 124 S. Ct. 1236 (2004). . . . . . . . . . . . . . . . . 23, 25 Hazen Paper v. Biggins, 507 U.S. 604 (1993) . . . . . . . . .5, 11, 12, 13, 14, 15, 25 Huff v. UARCO, Inc., 122 F.3d 374 (7th Cir. 1997). . . . . . . . . . . . . . . . .8 Page Los Angeles Dept. of Water and Power v. Manhart, 435 U.S. 702 (1978) . . . . . . . . . . . . .8, 11, 12, 16, 26 Public Employees Retirement System of Ohio v. Betts, 492 U.S. 158 (1989) . . . . . . . . . . 16, 19, 20, 21, 22, 23 Raytheon Co. v. Hernandez, 124 S. Ct. 513 (2003) . . . . . . . . . . . . . . . . . . . .5 Teamsters v. United States, 431 U.S. 324 (1977) . . . . . . . . . . . . . . . . . . . . .5 Thomas Jefferson Univ. v. Shalala, 114 S. Ct. 2381 (1994). . . . . . . . . . . . . . . . . . . 18 Trans World Airlines v. Thurston, 469 U.S. 111 (1985) . . . . . . . . . . . . . . . . .4, 12, 16 STATUTES Age Discrimination in Employment Act of 1967, 29 U.S.C. § 621 note. . . . . . . . . . . . . . . . . . 21, 24 29 U.S.C. § 623 note. . . . . . . . . . . . . . . . . . . . 27 29 U.S.C. § 623(a). . . . . . . . . . . . . . . . . . . . . .4 29 U.S.C. § 623(a)(1) . . . . . . . . . . . . . . . . . . . 25 29 U.S.C. § 623(f)(2) . . . . . . . . . . . . . . . . . 20, 21 29 U.S.C. § 623(f)(2)(B)(i) . . . . . . . . . . . . 22, 25, 26 29 U.S.C. § 623(f)(2)(B)(ii). . . . . . . . . . . . . . . . 26 29 U.S.C. § 623(l)(1)(A). . . . . . . . . . . . . . . . . . 25 29 U.S.C. § 623(l)(3) . . . . . . . . . . . . . . . . . . . 26 29 U.S.C. § 626(b). . . . . . . . . . . . . . . . . . . . . 10 29 U.S.C. § 631(a). . . . . . . . . . . . . . . . . . . . . 25 Older Workers Benefit Protection Act, 101 Pub. Law 433, 104 Stat. 978 (Oct. 16, 1990) . . . . . . 16 Page Kentucky Revised Statutes, Ky. Rev. Stat. § 16.505(15) . . . . . . . . . 1, 2, 3, 5, 6, 7 Ky. Rev. Stat. § 16.576(1). . . . . . . . . . . .1, 2, 3, 7, 9 Ky. Rev. Stat. § 16.577(2). . . . . . . . . . . . . . . . 2, 9 Ky. Rev. Stat. § 16.582(2)(b) . . . . . . . . . .1, 2, 3, 6, 7 Ky. Rev. Stat. § 16.582(5). . . . . . . . . . . . .1, 3, 9, 11 Ky. Rev. Stat. § 16.582(2)(b) (1999). . . . . . . . 2, 3, 5, 6 Ky. Rev. Stat. § 61.510(18) . . . . . . . . . . .1, 2, 3, 6, 7 Ky. Rev. Stat. § 61.595(1). . . . . . . . . . . .1, 2, 3, 7, 9 Ky. Rev. Stat. § 61.595(2)(b) . . . . . . . . . . . . . . 2, 9 Ky. Rev. Stat. § 61.600(1)(b) . . . . . . . . . .1, 2, 3, 6, 7 Ky. Rev. Stat. § 61.600(1)(b) (1999). . . . . . . . 2, 3, 5, 6 Ky. Rev. Stat. § 61.605 . . . . . . . . . . . . . .1, 3, 9, 11 RULES AND REGULATIONS 29 C.F.R. § 1625.10. . . . . . . . . . . . . . . . 17, 18, 21, 22 LEGISLATIVE HISTORY H.R. Rep. No. 664, 101st Cong., 2d Sess. (1990). . . . . . 22, 24 Cong. Rec. (Oct. 2, 1990). . . . . . . . . . . . . . . . . 22, 24 Cong. Rec. (Sept. 17, 1990). . . . . . . . . . . . . . . . . . 19 ADMINISTRATIVE GUIDANCE EEOC Compliance Manual, Chapter 3: Employee Benefits, No. 915-003 (Oct. 2000). . . . . . . 17, 18 INTRODUCTION The Equal Employment Opportunity Commission (EEOC), in its opening brief, described the benefits provided by Kentucky Retirement Systems (KRS) to employees who must retire due to disability, pursuant to the terms of a bona fide employee benefit plan. See EEOC Br. at 7-17. While KRS criticizes the length, format, and detail of the EEOC's description of the plan, see KRS Br. at 10, 13, KRS does not dispute, in any material respect, the accuracy of the EEOC's explanation of the plan's provisions. The parties therefore agree that, pursuant to the terms of the plan, KRS: * disqualifies otherwise eligible employees from disability retirement because of the age (55/65 or older) they became disabled from working, see EEOC Br. at 31-32 (citing Ky. Rev. Stat. §§ 16.582(2)(b), 16.505(15), 16.576(1); 61.600(1)(b), 61.510(18), 61.595(1)); * uses an employee's age to calculate the amount of annual disability benefits he will receive, in a manner that invariably favors younger over older workers, see EEOC Br. at 9 (quoting Ky. Rev. Stat. §§ 16.582(5), 61.605); * pays more annual benefits to a younger employee who takes disability retirement than to an older employee who retires from the same job, with the same disabling condition, length of service, and final compensation, who is excluded from disability retirement because he is 55/65 or older, see EEOC Br. at 16; and * pays a younger retiree at least as much, and frequently more, in annual disability benefits than it pays to an older retiree, even though these two employees are identical in every respect – other than age – that is relevant to calculate benefits (i.e., job, disability, seniority, and pay), id. at 16-17; any difference in the amount of benefits received by each of these employees is due solely to the age at which each became disabled from working. See id. at 32. These undisputed facts are dictated solely by the terms of the KRS plan, and establish facial discrimination against older employees because of age.<1> ARGUMENT THE KRS BENEFIT PLAN FACIALLY DISCRIMINATES AGAINST OLDER EMPLOYEES BECAUSE OF AGE BY REQUIRING DIFFERENT TREATMENT OF OTHERWISE SIMILARLY SITUATED WORKERS BASED SOLELY ON THE AGE WHEN THEY BECAME DISABLED FROM WORKING. By its terms, the KRS plan disqualifies otherwise eligible employees from disability retirement at age 55/65, and uses age to calculate disability retirement benefits in a manner that disfavors older employees. Notwithstanding the EEOC's citation to the particular statutory provisions that require such age-based disparate treatment (and the inclusion of each cited provision in an addendum to the EEOC's brief at Tab A-2), KRS inexplicably asserts that "in its effort to establish facial discrimination, the EEOC does not rely on the literal language of the challenged statutes." KRS Br. at 9.<2> To the contrary, the EEOC contends (and KRS does not dispute, see supra at 1-2), that the plan, by its terms, requires KRS to treat older disabled employees less favorably than younger workers who are similarly situated in every relevant respect other than age. The plan's provisions thus constitute "direct evidence" that the type and amount of benefits available to an employee who can no longer work due to disability "depends upon his age," and establish that the KRS plan "is discriminatory on its face." See Trans World Airlines v. Thurston, 469 U.S. 111, 121-22 (1985) ("direct evidence that the method of transfer available to a disqualified captain depends upon his age" showed pilot transfer policy was "discriminatory on its face"). KRS acknowledges that facial discrimination "because of such individual's age," 29 U.S.C. § 623(a), is demonstrated when a policy "‘on its face sorts employees according to age'" and "‘the discrimination is apparent from the terms of the policy itself.'" KRS Br. at 10 (quoting Courtney v. La Salle Univ., 124 F.3d 499, 506 (3d Cir. 1997) and DiBiase v. SmithKline Beecham Corp., 48 F.3d 719, 727 (3d Cir.), cert. denied, 116 S. Ct. 306 (1995)). KRS insists, however, that its disability retirement plan does not facially discriminate against older employees because of age, and mischaracterizes the EEOC's claim as challenging "the disparate impact which certain aspects of the retirement plan have on older members." See id. at 15. KRS cannot reconcile this argument with the undisputed facts, see supra at 1-2, which demonstrate that pursuant to the plan's provisions, KRS uses an employee's age to determine whether he is eligible for disability benefits, and the amount of annual benefits he will receive. The Supreme Court has repeatedly described the "distinction between claims of discrimination based on disparate treatment and claims of discrimination based on disparate impact." See Raytheon Co. v. Hernandez, 124 S. Ct. 513, 519 (2003). Disparate treatment occurs where "‘[t]he employer simply treats some people less favorably than others because of their race, color, religion, sex, or [other protected characteristic].'" Id. (quoting Teamsters v. United States, 431 U.S. 324, 335 n.15 (1977)). Liability for disparate treatment "‘depends on whether the protected trait . . . actually motivated the employer's decision.'" Id. (quoting Hazen Paper v. Biggins, 507 U.S. 604, 610 (1993)). Disparate impact claims, by contrast, "‘involve employment practices that are facially neutral in their treatment of different groups but that in fact fall more harshly on one group than another and cannot be justified by business necessity.'" Id. (quoting Teamsters, 431 U.S. at 335-36 n.15). The KRS plan is not "facially neutral" with respect to age in its treatment of older and younger employees who become disabled from working. Until 2000, KRS required an employee to "be less than normal retirement age" to "qualify to retire on disability," see Ky. Rev. Stat. §§ 16.582(2)(b), 61.600(1)(b) (1999) (emphasis added), and defined "normal retirement age" as 55 for hazardous employees and 65 for non-hazardous employees. Ky. Rev. Stat. §§ 16.505(15), 61.510(18). This exclusion "on its face sorts employees according to age," see Courtney, 124 F.3d at 506, and disqualifies workers above 55/65 from an employment benefit that is available to younger workers. After the EEOC filed this suit, KRS amended these exclusionary provisions, which now provide that in order to "qualify to retire on disability . . . a person shall not be eligible for an unreduced retirement allowance." Ky. Rev. Stat. §§ 16.582(2)(b); 61.600(1)(b).<3> Because the plan uses age (55/65) to define eligibility for an unreduced retirement allowance, KRS continues to disqualify otherwise eligible employees from disability retirement because of their age.<4> By excluding employees over 55/65 from an employment benefit that is available to younger workers who are similarly situated in every relevant respect other than age, the plan, as amended, remains discriminatory on its face. The mere fact that the plan's explicit references to age are now in provisions separate from those that disqualify older workers from disability retirement does not transform the facially discriminatory exclusion of employees over 55/65 into a "neutral" classification with disparate effects.<5> It is the substance of the plan's provisions, and not their form, that determines whether the plan facially discriminates based on age. An employer cannot evade the federal prohibition against age discrimination in employee benefits simply by using a criterion that is itself age-based (e.g., retirement eligibility) to deny or reduce an employment benefit, and then defend the provision as a facially "neutral" classification. See, e.g., Huff v. UARCO, Inc., 122 F.3d 374, 387-88 (7th Cir. 1997) (benefit plan that denied option to receive lump-sum payout of pension contributions to employees who were eligible for early retirement, i.e., age 55 with 10 years of service, "draws an express line between workers over fifty-five and those under," and was therefore age-based disparate treatment rather than disparate impact). On this principle, the Supreme Court in Manhart rejected the employer's argument that "the different [pension fund] contributions exacted from men and women were based on the factor of longevity rather than sex." Los Angeles Dept. of Water and Power v. Manhart, 435 U.S. 702, 712-13 (1978). Because the employer's "actuarial distinction" derived from "an explicitly gender-based differential," i.e., sex-based mortality tables, the Court ruled that the resulting disparity in contribution rates was "based entirely on sex." Id. at 712-13 and n.24 (internal quotation marks and citation omitted). Similarly, KRS cannot defend its denial or reduction of disability benefits to otherwise eligible employees who became disabled at or near normal retirement age by arguing that the disparate treatment of older disabled workers is "based on any factor other than [age]. [Age] is exactly what it is based on." See id. at 713 (internal quotation marks omitted). The KRS plan, as amended, also excludes from disability retirement those employees who, regardless of age, are eligible for an unreduced retirement allowance based on length of service (20/27 years). See Ky. Rev. Stat. §§ 16.576(1), 16.577(2); 61.595(1), (2)(b). Such employees, however, are not disadvantaged by their exclusion from disability retirement because, due to the 20/25-year cap on disability benefits, their unreduced service retirement benefits will in every case equal or exceed the amount they would have received in disability benefits. See Ky. Rev. Stat. §§ 16.582(5), 61.605. The only employees who are disfavored by the plan, as amended, are older workers who are denied disability benefits solely because of their age (55/65 or older). See EEOC Br. at 12-13. Because the terms of the plan require the exclusion of employees over 55/65 from disability retirement, these provisions facially discriminate against older employees because of age. See DiBiase, 48 F.3d at 727 ("The touchstone of explicit facial discrimination is that the discrimination is apparent from the terms of the policy itself."). The amendments enacted in 2000 were thus purely cosmetic, in that they did nothing to alter or eliminate the age-based disparities in the type and amount of benefits available to older disabled employees. Both the original and amended versions of the plan exclude otherwise eligible employees from disability retirement solely because they became disabled after turning 55/65, and pay fewer benefits to older disabled retirees than to similarly situated younger retirees. See EEOC Br. at 34. It is for this reason – and not, as KRS suggests, due to any neglect by the EEOC of its statutory duty to "attempt to eliminate the discriminatory practices alleged, and to effect voluntary compliance with the requirements of [the ADEA] through informal methods of conciliation, conference and persuasion," prior to filing suit, 29 U.S.C. § 626(b), see KRS Br. at 2-4 – that "none of the revisions" to the KRS plan "have satisfied the EEOC." Id. at 4.<6> Nor is the KRS plan "facially neutral" in the formulas prescribed for calculating disability retirement benefits. The relevant provisions expressly require KRS to use an employee's age to compute the amount of his annual disability benefits, in a manner that necessarily favors younger employees over similarly situated older workers. See Ky. Rev. Stat. §§ 16.582(5) (adding service credits up to hazardous employee's 55th birthday), 61.605 (adding service credits up to non-hazardous employee's 65th birthday). While KRS criticizes the EEOC for using charts to illustrate the operation of the plan's disability benefit formulas, see KRS Br. at 10-11, KRS does not dispute that these charts accurately depict the disparity in disability benefits paid to employees who are similarly situated in every relevant respect other than age, pursuant to the formulas provided in the KRS plan. See EEOC Br. at 14-16. The charts are simply a useful tool to determine whether or not a benefit plan "discriminates ‘because of . . . [age]' for the simple reason that it treats each [employee] ‘in a manner which but for [his age] would [have been] different.'" See Arizona Governing Committee v. Norris, 463 U.S. 1073, 1081 (1983) (quoting Manhart, 435 U.S. at 711). The Supreme Court in Hazen Paper further elucidated the distinction between disparate treatment and disparate impact theories of employment discrimination. See Hazen Paper, 507 U.S. at 609-10. At issue in Hazen Paper was whether an employer who fires an employee because his pension benefits are about to vest as a consequence of accumulating ten years of service is liable for disparate treatment under the ADEA. Id. at 606-08. The Supreme Court concluded that the decision "to fire an older employee solely because he has nine- plus years of service and therefore is ‘close to vesting' would not constitute discriminatory treatment on the basis of age." Id. at 612. In its opinion, the Court "clarif[ied] that there is no disparate treatment under the ADEA when the factor motivating the employer is some feature other than the employee's age." Id. at 609. Because liability for disparate treatment "depends on whether the protected trait (under the ADEA, age) actually motivated the employer's decision," the Court explained, "a disparate treatment claim cannot succeed unless the employee's protected trait actually played a role in the [decisionmaking] process and had a determinative influence on the outcome." Id. at 610. Citing Thurston and Manhart as examples, the Court recognized that disparate treatment is established in cases where an employer "relied upon a formal, facially discriminatory policy requiring adverse treatment of employees with that trait." Id. The Court observed that "an employee's age is analytically distinct from his years of service," since an employee younger than 40 may have worked his entire career at one job, "while an older worker may have been newly hired." Id. at 611. "Because age and years of service are analytically distinct," the Court reasoned, "an employer can take account of one while ignoring the other, and thus it is incorrect to say that a decision based on years of service is necessarily ‘age based.'" Id. at 611. The Court recognized that the ADEA "requires the employer to ignore an employee's age (absent a statutory exemption or defense)," id. at 612, and explicitly limited the scope of its holding. The Court did "not rule out the possibility of dual liability under ERISA and the ADEA where the decision to fire the employee was motivated both by the employee's age and by his pension status," and declined to "consider the special case where an employee is about to vest in pension benefits as a result of his age rather than years of service . . . and the employer fires the employee in order to prevent vesting." Id. at 613. "Our holding," the Court stated, "is simply that an employer does not violate the ADEA just by interfering with an older employee's pension benefits that would have vested by virtue of the employee's years of service." Id. at 613. Because the vesting provision in Hazen Paper depended solely on an employee's years of service, his "pension status" under that provision was determined by his seniority in the workforce and was entirely independent of his chronological age. Under these circumstances, the Court recognized, "pension status or seniority" may be "empirically correlated with age," id. at 608, but is "analytically distinct" in that "an employer can take account of one while ignoring the other." Id. at 611. By contrast, under the terms of the KRS plan, an employee's eligibility for disability retirement, and the amount of his annual benefits, depend directly on his age. KRS cannot "ignore an employee's age," as the ADEA requires, see Hazen Paper, 507 U.S. at 612, in deciding whether to grant his application for disability retirement, or in calculating how much to pay him each year.<7> An otherwise eligible employee who, pursuant to the plan's provisions, is excluded from disability retirement solely because he becomes disabled after reaching age 55/65, has shown that his age "actually motivated [KRS's] decision" to deny him disability benefits. Id. at 610. Thus, when Charles Lickteig applied to retire on disability at age 61, KRS notified him that he was "ineligible to apply for Disability Retirement since you are over age 55 and in a hazardous position." (R.106, KRS Letter, Ex. 1 to Lickteig Affidavit, attached to EEOC Response to Cross-Motion for Summary Judgment, App. p.51) (emphasis added). In an apparent effort to camouflage this direct evidence that Lickteig's age motivated the decision to deny his application for disability retirement, KRS misrepresents the record. See KRS Br. at 1 (KRS "notified Lickteig that because he was eligible for normal retirement benefits he was ineligible for disability retirement benefits") (emphasis added). Similarly, an employee who receives fewer annual disability benefits solely because he was closer to 55/65 when he became disabled has demonstrated that his age "played a role . . . and had a determinative influence" in deciding the amount of benefits he is entitled to receive. Hazen Paper, 507 U.S. at 610. There is no question that, pursuant to the terms of the plan, KRS provides different benefits to older and younger employees, based solely on the age when they became disabled from working. KRS's actuarial expert conceded the obvious when asked whether, based on his review of the plan's disability retirement provisions, he had "concluded that there were not equal benefits" for employees of "different ages": "We concluded that if you had two people who had the same amount of service, that the monthly pension for a disabled older person would be less than the monthly pension for an otherwise identically situated younger person. And that, upon its face, did not seem to be in compliance." (R.100, Deposition of Thomas Levy p.44, attached to KRS Cross-Motion for Summary Judgment, App. p.41). Because the plan's provisions require KRS to deny or pay fewer annual disability benefits to an older employee who, but for his age, would be eligible to receive more benefits each year, the KRS plan is no different from other employment policies that the Supreme Court has held are facially discriminatory. See, e.g., Public Employees Retirement System of Ohio v. Betts, 492 U.S. 158, 164 (1989) (recognizing state "retirement scheme was discriminatory on its face, in that it denied disability retirement benefits to certain employees on account of their age"), superceded by statute, 101 Pub. Law 433, 104 Stat. 978 (Oct. 16, 1990); Thurston, 469 U.S. at 121-22 (policy that prohibited transfers by pilots disqualified by FAA's age-60 rule, while permitting transfers by pilots disqualified for other reasons, provided "direct evidence that the method of transfer available to a disqualified captain depends upon his age," and was "discriminatory on its face"); Norris, 463 U.S. at 1079-81 (pension plan that paid "a retired woman lower monthly benefits than a man who deferred the same amount of compensation," based on mortality tables showing average woman lives longer and would receive more monthly payments, discriminated against female employees because of sex); Manhart, 435 U.S. at 716 (retirement plan that used sex-based mortality tables to set higher contribution rate for female employees than for males "on its face discriminated against individual employees because of their sex"). KRS is harshly critical of the EEOC's reliance on a section of its Compliance Manual entitled "Employee Benefits," and insinuates that the EEOC issued this guidance in October 2000 solely to provide legal authority for its position in this litigation. See KRS Br. at 4-5.<8> The Benefit Guidance (which is nearly 70 pages long, exclusive of appendices and footnotes) addresses a panoply of issues arising under each of the statutes within the EEOC's enforcement authority in the highly complex and often technical area of employee benefits. It would have been odd (to say the least) for the EEOC, as the agency charged by Congress to interpret, administer, and enforce the federal laws prohibiting employment discrimination, to issue a comprehensive guidance on the application of such laws in the context of employee benefits and omit any discussion of age- based discrimination in disability retirement plans. It is thus hardly surprising (and certainly neither unfair nor unethical) that the EEOC addressed this topic in the Benefit Guidance, and construed the OWBPA and its own equal cost regulation, 29 C.F.R. § 1625.10, in a manner entirely consistent with its position in this litigation. The guidance includes a hypothetical example of a disability retirement plan that calculates benefits by crediting additional years of service to employees who become disabled before reaching normal retirement age. See Benefits Guidance at 26-27. This method of computing disability retirement benefits, which is similar to the formulas prescribed in the KRS plan, was identified by an industry expert during the OWBPA legislative hearings as a common feature of employee benefit plans that could be prohibited under the proposed Senate bill. See EEOC Br. at 40-41. The example was therefore appropriately included in a document designed to advise EEOC employees, and the general public, of the EEOC's analysis of issues commonly arising under the statutes it is charged to interpret and enforce. KRS asserts that this Court "owes no deference" to the EEOC's Benefit Guidance, see KRS Br. at 20, but utterly fails to specify any inconsistency between the pertinent provisions of the statute and the regulation governing age discrimination in employee benefit plans, 29 C.F.R. § 1625.10, and the EEOC's interpretation of those provisions. See Thomas Jefferson Univ. v. Shalala, 114 S. Ct. 2381, 2386-87 (1994) (courts "must defer" to agency's interpretation of its own regulation "unless an alternative reading is compelled by the regulation's plain language or by other indications of the [agency's] intent at the time of the regulation's promulgation") (internal quotation marks and citations omitted). The analysis reflected in the EEOC's Benefit Guidance is in fact entirely consistent with the text, history, and purpose of the ADEA, as amended by the OWBPA, see EEOC Br. at 36-42, and with the position advanced by the Solicitor General in the brief filed in the Supreme Court on behalf of the EEOC as amicus curiae in Betts. The government's brief in Betts, reprinted in the legislative history of the OWBPA, see Cong. Rec. pp. S13242-46 (Sept. 17, 1990), argues that Ohio's statutory provision disqualifying state employees over age 60 from disability retirement "is discriminatory on its face" and "had a discriminatory effect" on the plaintiff, June Betts, "since the monthly [normal] retirement benefit that Betts initially received was less than half of the amount that she would have received if she had not been barred from applying for those benefits." Id. at p. S13243. Pursuant to the terms of Ohio's benefit plan, the government explained, "an employee disabled before age 60 is treated significantly differently than an employee disabled after age 60 even if the younger and older employees have identical years of service, identical disabilities, and identical salaries." Id. This is precisely the analysis reflected in the EEOC's Benefit Guidance, and advanced in this litigation, in which the EEOC challenges disability retirement provisions that are strikingly similar to those at issue in Betts. See EEOC Br. at 25-27, 42 (discussing Betts). KRS does not dispute that, in excluding employees above normal retirement age from disability retirement, and paying fewer annual benefits to an older disabled employee than to a similarly situated younger worker, its plan is materially indistinguishable from the provision challenged in Betts, 492 U.S. at 162-63. Rather, KRS maintains that the Supreme Court was not required to decide "whether or not the retirement plan [in Betts] was facially discriminatory," and on that basis urges this Court to disregard the Supreme Court's decision. KRS Br. at 23. KRS's constricted reading of Betts is untenable. The Supreme Court in Betts identified the question to be decided as follows: The [ADEA] forbids arbitrary discrimination by public and private employers on account of age. Under § 4(f)(2) of the Act, 29 U.S.C. § 623(f)(2), however, age-based employment decisions taken pursuant to the terms of "any bona fide employee benefit plan such as a retirement, pension, or insurance plan, which is not a subterfuge to evade the purposes of" the Act, are exempt from the prohibitions of the ADEA. In the case before us, we must consider the meaning and scope of the § 4(f)(2) exemption. Betts, 492 U.S. at 161 (emphasis added). Obviously, if the exclusion of workers above normal retirement age from disability retirement in Ohio's benefit plan was not an "age-based employment decision" that would otherwise be prohibited by the ADEA, there would have been no need for the Court to "consider the meaning and scope of the § 4(f)(2) exemption." Id.; see also 29 C.F.R. § 1625.10 ("As the statutory text makes clear, the section 4(f)(2) exception is limited to otherwise discriminatory actions which are actually prescribed by the terms of a bona fide employee benefit plan.") (emphasis added). To reach the question before it, the Supreme Court in Betts therefore necessarily adopted the district court's finding, affirmed by this Court, that Ohio's "retirement scheme was discriminatory on its face, in that it denied disability retirement benefits to certain employees on account of their age." Betts, 492 U.S. at 157. In answering this question, the Court invalidated the EEOC's regulation interpreting the section 4(f)(2) exemption, 29 C.F.R. § 1625.10, to require an employer to cost-justify any age-based disparity in benefits provided under a bona fide employee benefits plan, and ruled instead that section 4(f)(2) "exempt[s] the provisions of a bona fide benefit plan from the purview of the ADEA so long as the plan is not a method of discriminating in other, non-fringe-benefit aspects of the employment relationship." Betts, 492 U.S. at 177. Congress's central goal in passing the OWBPA was to respond to the Betts Court's interpretation of section 4(f)(2) and its rejection of the EEOC's equal cost regulation. See 29 U.S.C. §§ 621 note (finding that "as a result of [Betts], legislative action is necessary to restore the original congressional intent in passing and amending the [ADEA], which was to prohibit discrimination against older workers in all employee benefits except when age-based reductions in employee benefit plans are justified by significant cost considerations"). Accordingly, the OWBPA codified the equal cost regulation and made it part of the ADEA. 29 U.S.C. § 623(f)(2)(B)(i) (incorporating equal cost defense provided in 29 C.F.R. 1625.10 (1989)). Congress clearly approved this Court's decision in Betts – which was reversed by the Supreme Court – as having correctly interpreted and applied the ADEA's prohibition against age-based discrimination in employee benefit plans, and enacted the OWBPA to restore that construction: Consistent with both congressional intent and the longstanding administrative regulations, the federal courts of appeals have limited the applicability of section 4(f)(2) to benefit reductions that are justified by age-based cost considerations. Thus, for example, both the Third and Sixth Circuits held that, absent a cost justification, an employer violates the ADEA's proscription on differential benefits by limiting or denying disability benefits to older workers. See EEOC v. City of Mt. Lebanon, 842 F.2d 1480, 1492 (3d Cir. 1988) (employer must demonstrate age-related cost factors to justify disability benefit reductions); Betts v. Hamilton County Board of Mental Retardation, 848 F.2d 692, 695 (6th Cir. 1988) (affirming grant of summary judgment when employer failed to show economic justification for denying disability retirement benefits to employees over 60). H.R. Rep. No. 664, 101st Cong., 2d Sess. 13 (1990) (OWBPA House Report) (emphases added); see also Cong. Rec. p. H8617 (Oct. 2, 1990). KRS perceives that the legislative restoration of the law pre-Betts somehow "flies in the face of the separation of powers doctrine." KRS Br. at 24. Yet the Supreme Court, citing Betts and the OWBPA, has recently recognized Congress's authority to amend statutory provisions in response to the Court's decisions. See General Dynamics Land Systems v. Cline, 124 S. Ct. 1236, 1245 n.7 (2004) ("Congress has not been shy in revising . . . judicial constructions of the ADEA."). KRS asserts that the position advanced by the EEOC "threatens retirement plans throughout the country." KRS Br. at viii. The only support KRS cites for this remarkable statement is the district court's mistaken perception that the EEOC, in challenging KRS's age-based denial or reduction of disability benefits to older employees, "is asking the court to hold that age cannot be explicitly referred to in a retirement policy without violating the ADEA, and the court cannot so hold without undermining virtually every retirement policy in existence." R.136, Order p.5, App. p.33 (quoted in KRS Br. at viii note 1). Both the district court and KRS misunderstand the EEOC's position. The only benefit plans "threatened" by the EEOC's interpretation of the ADEA are those that do not comport with the requirements of the statute. Consistent with the statutory text and congressional purpose, the EEOC interprets the ADEA to prohibit the denial or reduction of an employment benefit to an older worker because of his age, unless the employer can demonstrate that the age-based disparity is cost-justified or falls within the scope of an explicit statutory exemption. See 29 U.S.C. § 621 note ("congressional intent" of ADEA is "to prohibit discrimination against older workers in all employee benefits except when age-based reductions in employee benefit plans are justified by significant cost considerations"); OWBPA House Report at 34 ("[U]nder this bill, and subject to the exceptions contained in the bill that are discussed below, the only justification for age discrimination in an employee benefit is the increased cost in providing the particular benefit to older individuals."); Cong. Rec. p. H8617 (Oct. 2, 1990) (under equal benefit or equal cost approach adopted in OWBPA, "an employer that provides a particular employee benefit must generally provide the same benefit to all workers. But if the cost to that employer of providing that benefit is greater for older workers than younger workers, the employer may provide a smaller benefit to older workers, so long as the employer spends at least the same amount of money for all workers."). The EEOC, in its opening brief, pointed out that the plain language of the ADEA explicitly allows an employer to set a minimum age for early or normal retirement eligibility, and provides certain carefully defined exemptions and affirmative defenses that sanction certain age-based provisions in benefit plans. See EEOC Br. at 37-42. Unless an employer demonstrates that its plan falls within one of these statutory exemptions, however, the plain language of the ADEA prohibits denying an older worker an employment benefit, or paying him fewer benefits, because of age. 29 U.S.C. §§ 623(a)(1), 631(a); see also Hazen Paper, 507 U.S. at 612 (the ADEA "requires the employer to ignore an employee's age (absent a statutory exemption or defense)"). Thus, the EEOC's interpretation of the statutory prohibition against age discrimination in employee benefits would not invalidate the most common age-based criterion in retirement plans – the requirement that employees attain a minimum age to be eligible for normal or early retirement. See 29 U.S.C. § 623(l)(1)(A) (permitting pension plans to require "attainment of a minimum age as a condition of eligibility for normal or early retirement benefits"). Nor would the EEOC's construction prohibit an employer from providing greater benefits to older workers than to similarly situated younger employees. See 29 U.S.C. § 623(f)(2)(B)(i) ("It shall not be unlawful . . . to observe the terms of a bona fide employee benefit plan where, for each benefit or benefit package, the actual amount of payment made or cost incurred on behalf of an older worker is no less than that made or incurred on behalf of a younger worker . . .") (emphasis added); see also Cline, 124 S. Ct. at 1239 (ADEA does not prohibit "favoring the old over the young"). Further, under the EEOC's interpretation, an employer can escape ADEA liability by showing that an age-based distinction in employee benefits is cost-justified, 29 U.S.C. § 623(f)(2)(B)(i), or falls within another explicit statutory exemption. See, e.g., 29 U.S.C. §§ 623(f)(2)(B)(ii) (permitting "voluntary early retirement incentive plan consistent with the relevant purpose of purposes of this chapter"); 623(l)(3) (permitting employer to deduct from long-term disability benefits the amount of pension benefits "for which an individual who has attained the later of age 62 or normal retirement age is eligible"). Finally, KRS prematurely raises the issue of relief, and asserts that, in the event liability is established, the Supreme Court's decisions in Manhart and Norris preclude the EEOC from requiring KRS to compensate employees who received fewer annual benefits solely because of their age when they became too disabled to work. See KRS Br. at 28-29. KRS's argument conflicts with Supreme Court precedent, and with section 105(c) of the OWBPA. In Florida v. Long, 487 U.S. 223 (1988), the Supreme Court determined that "Norris informed covered employers with pension plans of the obligation under Title VII to provide payment levels, both for contributions and for benefits, that are nondiscriminatory as to sex," and therefore ruled that "the effective date of our decision in Norris provides the appropriate limit on retroactive liability" for sex-based disparities in a state's pension plan. Id. at 237. Like the Court's decision in Norris, the OWBPA, which Congress enacted on October 16, 1990, informed covered employers with employee benefit plans of their obligation under the ADEA to provide the same benefits to all employees, regardless of age, unless the difference could be cost- justified or was otherwise exempt from the prohibition against age discrimination in employee benefits. See supra at 24-26. In section 105(c) of the OWBPA, Congress allowed state employers two years from the date of enactment to bring their employee benefit plans into compliance with the statute. See 29 U.S.C. § 623 note. The EEOC therefore properly seeks relief for individuals who, because of age, were excluded from disability retirement, or applied for disability retirement and have received fewer annual benefits, since October 16, 1992. CONCLUSION For the foregoing reasons, and those stated in its Opening Brief, the EEOC respectfully urges this Court to reverse the summary judgment and remand the case to the district court to determine whether defendants can meet their burden to demonstrate a statutory affirmative defense to justify the age-based disparate treatment of older workers under the terms of the KRS employee benefit plan. Respectfully submitted, ERIC S. DREIBAND General Counsel LORRAINE C. DAVIS Acting Associate General Counsel CAROLYN L. WHEELER Assistant General Counsel ___________________________ DORI K. BERNSTEIN Attorney EQUAL EMPLOYMENT OPPORTUNITY COMMISSION Office of General Counsel 1801 L Street, N.W., Room 7046 Washington, D.C. 20507 (202) 663-4734 CERTIFICATE OF COMPLIANCE WITH RULE 32(a) Certificate of Compliance With Type-Volume Limitation, Typeface Requirements, and Type Style Requirements 1. This brief complies with the type-volume limitation of Fed. R. App. P. 32(a)(7)(B) because this brief contains 6,751 words, excluding the parts of the brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii). 2. This brief complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because this brief has been prepared in a proportionally spaced typeface using WordPerfect 9 in 14-point Times New Roman font. ___________________________ Dori K. Bernstein Attorney for Equal Employment Opportunity Commission Dated: _______________________ ADDENDUM APPELLANT'S SUPPLEMENTAL DESIGNATION OF APPENDIX CONTENTS Docket # Record Document Date Filed R.100 Deposition of Thomas Levy, p. 44, attached 04/07/2003 to KRS Cross-Motion for Summary Judgment R.106 Ryan Affidavit, attached to EEOC Response 06/09/2003 to Cross-Motion for Summary Judgment R.106 Hall-Craig Affidavit, attached to EEOC Response 06/09/2003 to Cross-Motion for Summary Judgment CERTIFICATE OF SERVICE I hereby certify that two copies of this final reply brief was mailed, first class, postage prepaid, on this 15th day of November, to the following: Robert D. Klausner Klausner & Kaufman, PA 10059 NW 1st CT Plantation, Florida 33324 Mitchell L. Perry Office of the Jefferson County Attorney 531 Court Place Suite 1001 Fiscal Court Building Louisville, Kentucky 40202 C. Joseph Beavin, James D. Allen, Lizabeth Ann Tully Stoll, Keenon & Park 300 W. Vine Street Suite 2100 Lexington, Kentucky 40507-1801 D. Brent Irvin Attorney General - Civil & Environmental Law Division 700 Capitol Avenue Frankfort, Kentucky 40601-3449 _________________________ Dori K. Bernstein Attorney EQUAL EMPLOYMENT OPPORTUNITY COMMISSION Office of General Counsel 1801 L Street, N.W., Room 7046 Washington, D.C. 20507 (202) 663-4734 **************************************************************************** <> <1> KRS claims there are “numerous inaccurate statements in the EEOC’s description” of the plan, but the single example cited reflects only KRS’s misreading of the EEOC’s brief. See KRS Br. at 15 n.15 (citing EEOC Br. 34). The EEOC did not state, on page 34 or elsewhere in its brief, that service retirement was newly enacted in 2000. Rather, the EEOC correctly explained: “Effective July 2000, after the EEOC filed suit, Kentucky amended the plan to omit the explicit reference to ‘normal retirement age’” in the provisions excluding employees over 55/65 from disability retirement, see Ky. Rev. Stat. §§ 16.582(2)(b), 61.600(1)(b) (1999), “and substituted language that disqualifies from disability retirement any employee who is ‘eligible for an unreduced retirement allowance,” Ky. Rev. Stat. §§ 16.582(2)(b), 61.600(1)(b), i.e., employees over 55/65, and those with at least 20/27 years of service, Ky. Rev. Stat. §§ 16.505(15), 16.576(1), 16.577(2); 61.510(18), 61.595(1), (2)(b). See EEOC Br. at 7-8; id. at 34 (“EEOC does not challenge the exclusion from disability retirement of employees who are pension-eligible based on length of service – an exclusion enacted only after the EEOC filed suit”) (emphasis added). In any event, KRS concedes that neither this misunderstanding, nor any of the unspecified “inaccuracies” in the EEOC’s description of the plan, “are relevant to the issue posed before the Court.” KRS Br. at 15 n.15. <2> See EEOC Br. at 7-8, 31-32 (citing Ky. Rev. Stat. §§ 16.582(2)(b) (1999), 16.582(2)(b), 16.505(15), 16.576(1) (exclusion of hazardous employees from disability retirement at 55); 61.600(1)(b) (1999); 61.600(1)(b), 61.510(18), 61.595(1) (exclusion of non-hazardous employees from disability retirement at 65)); id. at 9 (quoting Ky. Rev. Stat. §§ 16.582(5) (adding service credits up to hazardous employee’s 55th birthday), 61.605 (adding service credits up to non-hazardous employee’s 65th birthday)). <3> Although KRS faults the EEOC for discussing amendments to the plan enacted after suit was filed, see KRS Br. at 4 note 4, KRS relies on the identical amended version of the plan in its own brief. See KRS Br. at 7 (“Under the challenged statutes, if a member is eligible for normal retirement benefits he or she is not eligible for disability retirement benefits.”). Perhaps for obvious reasons, KRS avoids any mention in its brief of the age-based disqualification in effect in 1999, when the EEOC sued, which required employees to “be less than normal retirement age” to “qualify to retire on disability.” Ky. Rev. Stat. §§ 16.582(2)(b), 61.600(1)(b) (1999). We note that, in addition to discussing the plan provisions in effect during the pendency of this litigation, in the interest of complete disclosure, the EEOC also described KRS’s very recent amendment of the plan, applicable to employees hired after August 2004. See EEOC Br. at 10 note 6. This description – the accuracy of which KRS does not dispute – hardly constitutes “an attack.” See KRS Br. at 4 note 4. <4> See Ky. Rev. Stat. §§ 16.505(15) (“‘Normal retirement date’ means the first day of the month following a [hazardous] member’s fifty-fifth birthday.”), 16.576(1) (“Any [hazardous] member with at least five (5) years of service credit may retire at his normal retirement date, or subsequent thereto.”); 61.510(18) (“‘Normal retirement date’ means the sixty-fifth birthday of a [non-hazardous] member.”), 61.595(1) (“upon retirement at normal retirement date or subsequent thereto, a [non-hazardous] member may receive an annual retirement allowance”). <5> See explicit references to age in Ky. Rev. Stat. §§ 16.505(15) (“‘Normal retirement date’” means the first day of the month following a member’s fifty-fifth birthday.”); 61.510(18) (“‘Normal retirement date’ means the sixty-fifth birthday of a member.”); and disability retirement disqualifications in Ky. Rev. Stat. §§ 16.582(2)(b) (“Any person may qualify to retire on disability, subject to the following: . . . The person shall not be eligible for an unreduced retirement allowance.”), 16.576(1) (“Any member with at least five (5) years of service credit may retire at his normal retirement date, or subsequent thereto.”); 61.600(1)(b) (“Any person may qualify to retire on disability, subject to the following conditions: . . . The person shall not be eligible for an unreduced retirement allowance.”), 61.595(1) (“upon retirement at normal retirement date or subsequent thereto, a member may receive an annual retirement allowance”). <6> Having determined that the KRS disability retirement provisions discriminate against older employees because of age, the EEOC initiated conciliation efforts and proposed that KRS eliminate the age-based disparities in disability benefits required by the plan, and compensate older workers who were excluded from disability retirement or received fewer annual benefits because of age. See R.106, Ryan Affidavit pp.2-5, ¶¶4-18 attached to EEOC Response to Cross-Motion for Summary Judgment, App. pp.53-56; R.106, Hall-Craig Affidavit pp.2-3, ¶¶4-8, attached to EEOC Response to Cross-Motion for Summary Judgment, App. pp.61-62. In response, KRS proposed (and later enacted) the amendment, described in the text, that did not alter the plan’s disparate treatment of older disabled workers, and offered no relief to employees who continue to receive lower benefits solely because of the age they became disabled and retired. Id. The EEOC consequently terminated the conciliation process and filed suit. See EEOC v. KECO Industries, Inc., 748 F.2d 1097, 1101-02 (6th Cir. 1984) (“EEOC is under no duty to attempt further conciliation after an employer rejects its . . . good faith effort to conciliate the claim.”). Throughout this litigation, at trial and on appeal, the EEOC has continued its efforts to resolve this case through a negotiated settlement. See, e.g., R.55 (Report on Settlement Negotiations); 59 (Joint Status Report); 69 (Report on Settlement Conf.); 105 (Report on Settlement Conf.); 6th Cir. docket entry of 3/5/04 (EEOC Status Report, requesting briefing remain suspended pending mediation). <7> While KRS would not need to know the age of an employee with over 20/27 years of service to disqualify him from disability retirement, such an employee is unlikely to apply for disability benefits (and would not be disadvantaged by the disqualification) because he is eligible to receive an equal or greater amount of service retirement benefits each year. See supra at 9-10. <8> See EEOC Compliance Manual, No. 915.003 (Oct. 3, 2000) (Benefit Guidance), excerpted at Tab A-6 of the addenda to the EEOC’s brief, and available in its entirety on the EEOC’s website, www.EEOC.gov.