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Zinger v. Blanchette


filed: January 20, 1977.



Adams, Kalodner*fn* and Weis, Circuit Judges.

Author: Weis

WEIS, Circuit Judge.

Acknowledging the inexorable march of time but unwilling to leave his employment before the customary age of 65, the plaintiff contests his involuntary retirement one year earlier. He contends that an agreement by his employer preceding the formation of the Penn Central Railroad and the Age Discrimination in Employment Act both proscribe his premature retirement. Consequently, he seeks to augment his pension to what it would have been had he remained in service until he reached 65. Though he argues vigorously, we conclude that he cannot prevail on either of his contentions and, therefore, we must affirm the district court's judgment for the defendants.

Only months before his sixty-fifth birthday and despite his protests, the Penn Central Transportation Company retired plaintiff Zinger, making him eligible for pension benefits from several sources, including the Railroad Retirement Fund. However, these payments total $834.12 less per year than he would have received had he continued to work for Penn Central until age 65.

Zinger began working for the Pennsylvania Railroad Company in 1943, and continued without interruption in the service of its successor, the Penn Central. He served as an attorney in the legal department of the company on a salary basis, and appeared for the railroad in proceedings in the courts as well as before the Interstate Commerce Commission. His efforts were directed chiefly toward claims for freight loss and damage, and did not extend to matters of company policy or the discretion to institute litigation.

Zinger had been a contributing member of the Plan for Supplemental Pensions first put into effect by the Pennsylvania Railroad in 1938 and later amended by the Penn Central in 1974.*fn1 The Plan provided for payment of pension benefits in addition to those afforded by the Railroad Retirement Act. In 1962, the Pennsylvania Railroad also adopted an "Interim Pension Policy" to pay benefits to those employees retiring before 65, when payments began under the Railroad Retirement Act.

In the preliminary negotiations for the Pennsylvania and New York Central merger, management agreed with the unions to provide extensive job protection for their members. In the course of ICC hearings, concerned in part with the fate of employees who would be affected by the merger, the companies stated that they would extend those benefits to non-union ("non-agreement") personnel as well. The Commission approved the protective agreement as "fair and equitable" to both union and "non-agreement" employees but required the latter group to accept the terms and conditions of the agreement in writing.*fn2

On April 5, 1965, the chairman of the board of the Pennsylvania Railroad sent a letter addressed to "PRR Supervisors, Managers, and Officers" explaining some effects of the merger. Mr. Zinger was one of the persons who received this communication. In the body of the letter, the chairman wrote:

"You will note from Section I, [of the attachment] which applies to you, that non-agreement supervisors, managers, and officers will be offered continued employment until they retire, . . . ."

The attached document, captioned "Personnel Policy for Merger of the Pennsylvania and New York Central Railroads Applying to Supervisors, Managers, Officers and other Employees Not Subject to Agreement with Unions,"*fn3 listed two classifications of personnel not subject to the union agreement: "I. Supervisors, Managers, and Officers" and "II. Other Employees Not Subject to Agreements with Unions." Paragraph E under the first category read:

"The company may elect to retire any such person between ages 60 and 65 and he, as well as any such person over 60 years of age who is unwilling to relocate or accept a position in a new field of endeavor, will be provided interim pension allowances. . . ."

On February 19, 1968, soon after consummation of the Penn Central merger, the senior vice president sent a letter to "Management Employees Provided For by The Personnel Policy for Merger of the Pennsylvania and New York Central Railroads." This letter, sent to Mr. Zinger among others, stated in part: "It is a pleasure to reaffirm the Personnel Policy for Merger which applies to you." The policy was reprinted on the reverse side and read in part: "These policies will apply to managers and officers not subject to the provisions of the ICC Order." Included was a provision for early retirement at the company's election set out in the same verbiage as in the letter of April 5, 1965.

On March 1, 1974, the general counsel for Penn Central told plaintiff that he would be retired very shortly. After Zinger protested and commenced this litigation, his retirement was postponed to October 1, 1974, seven months before his 65th birthday.

In the district court, plaintiff asked for injunctive relief and damages, asserting that as a "non-agreement employee" he could not be involuntarily retired. In addition, he alleged that the early retirement plan violated the Age Discrimination in Employment Act of 1967, 29 U.S.C. §§ 621 et seq. The district court rejected both contentions, and entered judgment for the defendants.

Plaintiff's position, as we understand it, is that, as a salaried employee of the railroad, he was entitled to the benefits of the protective agreement approved by the ICC as a condition of the merger. He argues that since the ICC is required to protect the interests of all affected railroad employees in the event of a merger, see 49 U.S.C. § 5(2)(f), and "employee" is not defined in the statute, the word should be given its ordinary meaning - one that would include a person in his position. In response, the defendants argue that managers and professional personnel are simply not "employees" within the meaning of § 5(2)(f) and there was no intention to include them in the protective agreement.

Before reaching the question of whether plaintiff was covered by the protective agreement, however, we think it important to determine whether its provisions have the effect Mr. Zinger urges. We conclude that they do not.

The plaintiff cites language in the union protective agreement of May 20, 1964 providing that, upon merger, employees of the Pennsylvania Railroad shall be continued in service "and none of the present employees . . . shall be deprived of employment or placed in a worse position with respect to compensation, rules, working conditions, fringe benefits or rights and privileges pertaining thereto at any time during such employment." Mr. Zinger apparently contends that the company's action in retiring him before age 65 was a deprivation of employment. However, the agreement states, "an employee shall not be regarded as deprived of employment or placed in a worse position . . . in case of his . . . retirement . . . ."

The plaintiff also points to a factual stipulation that "employees subject to the Union Contract dated May 20, 1964, have not involuntarily been retired early by the Penn Central Transportation Company." That fact, however, does not of itself establish a contractual undertaking under the terms of the protective agreement. All that the record shows is that the ICC order and the offer of the railroads were limited to the terms of the May 20, 1964 writing. There was no understanding that unspecified provisions of other union collective bargaining agreements or practices would be incorporated and applied to non-union employees.

After a careful review of the evidence, we find nothing to show that the protective agreement, even if it covers plaintiff, prohibits the early retirement on a pension otherwise permitted by company policy.

Since he has failed to prove any breach of the protective agreement, we need not decide whether the plaintiff would be considered an "employee" within the terms of the statute or the ICC order. We doubt that he would on the record here because of the lack of evidence to establish the meaning which the railroads and the ICC placed upon the word in their negotiations. Our research and that of counsel has not uncovered any authoritative court decision or ruling of the ICC in which a person in Mr. Zinger's capacity has been considered an "employee" under § 5(2)(f) of the Interstate Commerce Act. Accordingly, we would expect discussion and a specific designation in the proceeding and order if such an unusual result were desired.*fn4 What evidence there is in this case tends to show an intention to exclude, but since the record is not as complete as it might be, we think it better practice not to issue a definitive ruling. Accordingly, since the record does not demonstrate a breach of the protective agreement, the plaintiff has failed to meet the burden of proof on that issue, and the district court's finding in favor of the defendants was not erroneous.


Disposition of the protective agreement issue, however, does not end the case. As an alternative, Zinger contends that the Penn Central program authorizing involuntary retirement between the ages of 60 and 65 violates the Age Discrimination in Employment Act of 1967, 29 U.S.C. §§ 621 et seq. He asserts that the early retirement provision, although bona fide, is a "subterfuge" and, hence, not within the exception described in 29 U.S.C. § 623(f):

"It shall not be unlawful for an employer, employment agency, or labor organization -

"(2) to observe the terms of a bona fide seniority system or any bona fide employee benefit plan such as a retirement, pension, or insurance plan, which is not a subterfuge to evade the purpose of this Act, except that no such employee benefit plan shall excuse the failure to hire any such individual."

The railroad argues that since the early retirement plan predated the Act, it cannot be considered a subterfuge. We believe this chronological argument lacks merit, and the mere fact that the plan was in existence before the Act was passed is not determinative. The statute speaks of evading the " purposes " of the Act - not the Act itself. Thus, a seniority practice or employee benefit plan effective long before the enactment of the statute could, nevertheless, be opposed to its purposes and thus be a subterfuge. Further, the legislative history is contrary to defendant's position. The House Report, in discussing this particular clause, states:

"It is important to note that exception (3) [the present (2)] applies to new and existing employee benefit plans, and to both the establishment and maintenance of such plans. This exception serves to emphasize the primary purpose of the bill - hiring of older workers - by permitting employment without necessarily including such workers in employee benefit plans. The specific exception was an amendment to the original bill, is considered vita [sic] to the legislation, and was favorably received by witnesses at the hearings." H.R. Rep. No. 805, 90th Cong., 1st Sess. (as found in 1967 U.S. Code Cong. and Adm. News p. 2217)

To this extent, we agree with the conclusion of the United States Court of Appeals for the Fourth Circuit in McMann v. United Air Lines, Inc., 542 F.2d 217 (4th Cir. 1976), and, accordingly, reject the defendants' chronological argument. But see Brennan v. Taft Broadcasting Co., 500 F.2d 212 (5th Cir. 1974); deLoraine v. MEBA Pension Trust, 499 F.2d 49 (2d Cir.), cert. denied, 419 U.S. 1009, 42 L. Ed. 2d 284, 95 S. Ct. 329 (1974); Steiner v. National League of Professional Baseball Clubs, 377 F. Supp. 945 (C.D. Cal. 1974).

Plaintiff's contention is that the Act proscribes involuntary retirement before 65. In a far reaching decision, McMann v. United Air Lines, Inc., supra, the Court of Appeals for the Fourth Circuit held that the Act, by implication, outlaws all programs providing for involuntary retirement before age 65, whether at the company's option or under mandatory provisions. However, in Brennan v. Taft Broadcasting Co., supra, the Fifth Circuit held that a bona fide plan providing benefits upon involuntary retirement at age 60 was not a subterfuge and therefore permissible under the Act.

Confronted with diametrically different interpretations by two highly respected courts, we must independently examine the Act and its legislative history.

29 U.S.C. § 623*fn5 makes it unlawful to discharge an individual because of age. No statutory provision explicitly prohibits early retirement on pension. Only two sections mention "retirement": § 623(f)(2) which exempts observance of a bona fide retirement program; and § 624 which requires the Secretary of Labor to study the institutional arrangements giving rise to involuntary retirement and to report his findings, together with any legislative recommendations, to the President and to Congress.

The primary purpose of the Act is to prevent age discrimination in hiring and discharging workers. There is, however, a clear, measurable difference between outright discharge and retirement, a distinction that cannot be overlooked in analyzing the Act. While discharge without compensation is obviously undesirable, retirement on an adequate pension is generally regarded with favor.*fn6 A careful examination of the legislative history demonstrates that, while cognizant of the disruptive effect retirement may have on individuals, Congress continued to regard retirement plans favorably and chose therefore to legislate only with respect to discharge.

In his message of January 23, 1967, the President recommended legislation covering workers from ages 45 to 64 and "provided an exception for special situations . . . where the employee is separated under a regular retirement system." 113 Cong. Rec., pp. 1089-1090. As referred to committee, both Senate and House Bills provided:

"Sec. 4(f) It shall not be unlawful . . . .

(2) to separate involuntarily an employee under a retirement policy or system where such policy or system is not merely a subterfuge to evade the purposes of this Act."

Senator Javits recognized that actuarial considerations in the administration of pension plans might hinder employment of older workers. As he said to the Senate subcommittee:

"Now, another problem is the operation of established pension plans, some of which provide benefits based to a certain extent on the age of the employee when first hired.

"The administration bill, which permits involuntary separation under bona fide retirement plans meets only part of the problem. It does not provide any flexibility in the amount of pension benefits payable to older workers depending on their age when hired, and thus may actually encourage employers, faced with the necessity of paying greatly increased premiums, to look for excuses not to hire older workers when they might have hired them under a law granting them a degree of flexibility with respect to such matters. That flexibility is what we recommend.

"So, Mr. Chairman, in order to meet these needs, I will introduce the following amendments to S. 830.

"Third, that a fairly broad exemption be provided for bona fide retirement and seniority systems which will facilitate hiring rather than deter it and make it possible for older workers to be employed without the necessity of disrupting those systems."*fn7

Following this statement, Secretary of Labor Wirtz testified:

"There is also the effort in S. 830 to make quite clear the relationship which would necessarily be recognized between unjust discrimination and the retirement policies or systems to which Senator Javits has already referred . . . Section 4(a) reflects . . . simply the significant fact that what we are doing here is to extend to individuals in situations not covered by collective bargaining agreements or established retirement policies, a degree of protection against discrimination on the basis of age very much like what has evolved in private experiences and programs."*fn8 (Emphasis supplied)

When asked about the effect of the proposed legislation on existing pension and insurance plans, Secretary of Labor Wirtz replied:

"It would be my judgment . . . that the effect of the provision in 4(f)(2) [the original bill] . . . is to protect the application of almost all plans which I know anything about . . . . It is intended to protect retirement plans."*fn9

Representatives of organized labor expressed reservations about § 4(f)(2) at the subcommittee hearings in both houses. As a legislative director for the AFL-CIO testified:

"We likewise do not see any reason why the legislation should, as is provided in section 4(f)(2) in the Administration bill, permit involuntary retirement of employees under 65 . . . . Involuntary retirement would be forced, regardless of the age of the employee, subject only to the limitation that the retirement policy or system in effect may not be merely a subterfuge to evade the Act."*fn10 (Emphasis supplied)

These witnesses later submitted proposed amendments to strike the provision allowing separation under a retirement policy.*fn11

However, the union representatives were not successful in their efforts to remove the retirement provision from the bill, although the protection for seniority systems which they advocated was incorporated in the same section of the Act.

While the present form of § 4(f)(2) differs slightly from its original form in the Senate and House bills, we do not regard the difference as important. In commenting on the amendments which incorporate the present language of the Act, Secretary of Labor Wirtz, in testifying before the House committee, stated:

"In the bill reported out by the subcommittee in the Senate there is a change in the language which refers to this point which you raised earlier, the relationship of this to established pension plans. We count that change as not going to the substance and involving matters going to clarification which would present no problem."*fn12

Further, the text of the adopted amendment, "to observe 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 this chapter," is quite similar to that of the New York statute. That Act provides that its prohibition against age discrimination shall not "affect the retirement policy or system of any employer where such policy or system is not merely a subterfuge to avoid the purposes of said subdivision . . . ." Pennsylvania has a similar statute, Pa. Stat. Ann. tit. 43 § 955, and New Jersey's reads: ". . . nor to interfere with the operation of the terms or conditions and administration of any bona fide retirement, pension, employee benefit or insurance plan or program." New Jersey Stat. Ann. 10:5-2.1. These statutes were introduced into the record at the hearings*fn13 and were received with interest by the committees. Also introduced were New York's explanatory notes. They unequivocally stated that a plan formulated before enactment of the statute providing for compulsory retirement on pension at age 60 was lawful. When no retirement benefits were provided, however, the bona fides of the plan was subject to examination.*fn14

The former Secretary of Labor obviously thought that bona fide retirement programs permitting involuntary retirement before age 65 were exempted from the Act. The interpretive bulletin, 29 C.F.R. § 860.110, issued by the Department of Labor soon after enactment of the statute reads:

"Thus, the Act authorizes involuntary retirement irrespective of age, provided that such retirement is pursuant to the terms of a retirement or pension plan meeting the requirements of section 4(f)(2). The fact that an employer may decide to permit certain employees to continue working beyond the age stipulated in the formal retirement program does not, in and of itself, render an otherwise bona fide plan invalid insofar as the exception provided in section 4(f)(2) is concerned.

"(b) This exception does not apply to the involuntary retirement before 65 of employees who are not participants in the employer's retirement or pension program. It should be noted that section 5 of the Act directs the Secretary of Labor to undertake an appropriate study of institutional and other arrangements giving rise to involuntary retirement, and report his findings and any appropriate legislative recommendations to the President and to Congress."*fn15 (Emphasis supplied)

The bulletin demonstrates the Secretary's recognition of the difference between retirement with and without a pension; the financial effect of the latter being the same as outright discharge. Succeeding Secretaries, however, have revised the Department's position. Pursuant to the statutory directive, the Secretaries have submitted annual reports to Congress through 1976 discussing plans that mandate retirement before age 65. In the report of January 31, 1976, Secretary Brennan articulated the department's position:

"Retirements [before 65] are unlawful unless the mandatory retirement provision: (1) is contained in a bona fide pension or retirement plan, (2) is required by the terms of the plan and is not optional, and (3) is essential to the plan's economic survival or to some other legitimate purpose - i.e., is not in the plan for the sole urpose [sic] of moving out older workers, which purpose has now been made unlawful by the ADEA."*fn16

This is the interpretation that the Secretary urged upon the courts in both Brennan v. Taft Broadcasting Co., supra, and McMann v. United Air Lines, Inc., supra.

In adopting this stance, the Secretary ignored the obvious and important distinction implicit in his previous bulletin between discharge without pay and retirement on a pension. Moreover, the Secretary's latter day position is not only contrary to that taken by his predecessor contemporaneously with the consideration and passage of the Act, but also to the views of the Congressional committees which declined that proposal when it was forthrightly presented to them. Thus, rather than proposing an amendment to Congress, as Congress had instructed, the Secretary seeks to change the Act by court decision or administrative fiat.*fn17

There are many cogent, persuasive arguments why involuntary retirement, even with an adequate pension, should not be permitted before age 65.*fn18 Logically, allowing such a broad exemption may be inconsistent with the prohibition against discrimination in hiring and produce the anomaly that a person who has been involuntarily retired by one company before 65 may not be discriminated against in applying for employment at another company.*fn19 Similarly, as the Secretary suggests, there may be serious objections to allowing retirement to be at the company's option. As written, however, the statute does not limit its exemption for bona fide plans to those meeting the Secretary's three criteria.

Such arguments miss the mark when urged upon a court in support of a statutory interpretation. An exemption's merits are properly matters of legislative concern and evaluation. Congress has chosen to exclude retirements pursuant to bona fide retirement plans so long as the plan is not a subterfuge. That choice is binding upon us. As the Supreme Court recently noted, "the drawing of lines that create distinctions is peculiarly a legislative task and an unavoidable one." Massachusetts Board of Retirement v. Murgia, 427 U.S. 307, 314, 96 S. Ct. 2562, 49 L. Ed. 2d 520 (1976).

We leave to congressional consideration the broad policy questions underlying the desirability of regulating the minimum age for compensated involuntary retirement. Factors such as the population's gradually increasing average age and the proper methods of insuring the stability of the Social Security Plan may argue for an even higher retirement age. On the other hand, unemployment prevalent among younger members of society and a developing trend to distribute available employment by the use of a four day work week pull in the opposite direction. Further, the enactment of the Pension Reform Act of 1974 may be an important factor, concerned as it is with the financial stability of retirement plans and transferability of benefits.

The fact that the legislation requires the Secretary to study involuntary retirement and submit legislative recommendations to the President and Congress shows recognition of the problem by the legislature. It chose to await further data before deciding what, if any, further action is warranted. Legislation need not address itself to all the problems in any given area at one time. Particularly when the effects of a policy are not susceptible to accurate prediction, Congress may well decide that prudence dictates a tentative, experimental approach. It is not the function of the courts to accelerate that process when Congress unquestionably is acting within its proper scope.

In the case sub judice, the parties concede that the plan is bona fide and the pension payable not unreasonable - certainly not so small as to brand the plan a subterfuge to evade the purposes of the Act.*fn20 The sole attack is that the plan's retirement at age 60 provision unlawfully discriminates because of age. An employee reaching age 60 may be forced to retire because of that fact, although one who is 59 remains at his job. From that viewpoint, there is obviously discrimination because of age, just as there is in any retirement plan - voluntary or involuntary. But that discrimination, existing because of the terms of a bona fide retirement plan, is exempt from the scope of the Act, just as is involuntary retirement at any age beyond 65 or before 40. To summarize, involuntary retirement pursuant to a bona fide plan that is not a subterfuge but which requires or permits retirement at age 60 at the option of the employer is not unlawful.

Accordingly, the plaintiff's contentions must fail, and the judgment of the district court will be affirmed.


The plaintiff's contentions must fail, and the judgment of the district court will be affirmed.

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