been laid off. The Commission contends that any other arrangement is illegal under the ADEA because it would impose an age-based penalty upon employees who involuntarily end their employment with Westinghouse. In short, the Commission attacks the minimum age requirements of the benefit plans, while pretending not to do so.
While there appears to be no authority directly addressed to this specific contention, this is probably attributable to the fact that such a farfetched argument has never before been raised. The short answer to the EEOC's contention is that the defendant's arrangements are protected by the ADEA's exemption of bona fide pension plans. Every retirement plan contains some age-based distinctions which are necessarily "arbitrary." For example, a retirement plan providing benefits at age 70 would "discriminate" against 65 year old employees. The ADEA exemption for bona fide pension plans permits such legitimate line drawing. See S. Rep. No. 493, 95th Cong., 2d Sess. 9-10, reprinted in 1978 U.S. Code Cong. & Ad. News 504, 512-13; cf. Christensen v. Equitable Life Assurance Society of the United States, 767 F.2d 340, 342 (7th Cir. 1985) (absent purposeful discrimination, a negative impact on pension benefits caused by early disassociation from employment is not discriminatory).
The Disparate Impact Issue: The Impact Number Process
The EEOC's challenges the impact number process under the disparate impact theory of discrimination. This theory invalidates facially neutral practices that disproportionately affect a protected class unless the employer can justify the practice as a business necessity. See Massarsky v. General Motors Corp., 706 F.2d at 117.
Proof of discriminatory motive is not necessary in a disparate impact case. See Geller v. Markham, 635 F.2d 1027, 1031 (2d Cir. 1980), cert. denied, 451 U.S. 945, 68 L. Ed. 2d 332, 101 S. Ct. 2028 (1981). A prima facie case may instead be established by statistics "from which it may be inferred that an employer's . . . criteria" generate disproportionately adverse results. See id. at 1032. That is, the plaintiff must show that the practice has a "'significantly discriminatory impact.'" See Massarsky, 706 F.2d at 120 (quoting Connecticut v. Teal, 457 U.S. 440, 73 L. Ed. 2d 130, 102 S. Ct. 2525 (1982)). Once a prima facie case has been established, the employer may defend its practice by demonstrating that it is justified by business necessity. Id. The plaintiff may then rebut the defendant's argument by showing that the employer's practice is a mere pretext for discrimination.
The disparate impact theory was developed under Title VII. See Griggs v. Duke Power Co., 401 U.S. 424, 28 L. Ed. 2d 158, 91 S. Ct. 849 (1971). Westinghouse contends that the EEOC cannot proceed under the theory in the ADEA context. The Third Circuit has not ruled on this question, see Massarsky, 706 F.2d at 120 (declining to decide the issue). Nonetheless, other circuits have applied the disparate impact model to age discrimination cases. See, e.g., EEOC v. Borden's, Inc., 724 F.2d 1390 (9th Cir. 1984); Leftwich v. Harris-Stowe State College, 702 F.2d 686 (8th Cir. 1983); Geller v. Markham, 635 F.2d 1027 (2d Cir. 1980), cert. denied, 451 U.S. 945, 68 L. Ed. 2d 332, 101 S. Ct. 2028 (1981).
I am persuaded that disparate impact analysis under the ADEA is appropriate. As I have already noted, Title VII and the ADEA are parallel statutes, see Lorillard v. Pons, 434 U.S. 575, 55 L. Ed. 2d 40, 98 S. Ct. 866 (1977); the disparate impact model should apply in both contexts. See Borden's, 724 F.2d at 1394-95; see also Geller, 635 F.2d at 1032; Equal Employment Opportunity Commission v. Governor Mifflin School District and Governor Mifflin Education Association, 623 F. Supp. 734 (E.D. Pa. 1985).
Although I find the disparate impact model applicable, I do not find that this case fits the model. The Commission's statistical expert testified that "older workers who were employed at the time an impact number was announced were less likely to be covered by the impact number than were younger workers." T. Sept. 10 at 140 1. 19-22. Thus, the tendency for older workers to be laid off without an impact number was statistically significant. Id. at 148-49. Westinghouse argues that older employees were not disadvantaged by the system because their seniority insulated them from the reduction in force. The Company also argues that the process is based upon a bona fide seniority system and is therefore exempt from the ADEA. See 29 U.S.C.A. § 623(f)(2). The EEOC acknowledges the " de facto linkage" between the seniority system and the impact number process. In fact, it asserts that this linkage causes the process to have its discriminatory effects. See Plaintiff's Post-Trial Memorandum at 57. The Commission's factual analysis is correct, but its legal conclusion is not.
The linkage between the impact number process and the seniority system is what makes the impact number process a legitimate practice under the ADEA. The ADEA expressed a legislative desire to preserve seniority systems by tolerating such side effects. See S. Rep. No. 492, 95th Cong., 2d Sess. 9-10, reprinted in 1978 U.S. Code Cong. & Ad. News 504, 512-13. The ADEA's exception for seniority systems thus insulates the "last hired, first fired" practice that underlies defendant's impact number process.
The benefits of the impact number program may well be illusory. The EEOC's expert witness testified that
the individuals who were covered by the impact number generally could not make much use of it because they did not meet the 15 year service requirements whereas individuals who were laid off after the impact number generally could have taken advantage of it in much larger numbers had they been included in the impact number reduction. It had the effect of giving impact numbers to those who couldn't use them and withholding impact numbers from those who could have used them to get . . . special benefits.
T. Sept. 10 at 152 1. 6-15. Nonetheless, the plan does not violate the ADEA. Delayed layoffs of older employees, which resulted in the unavailability of impact numbers for them, stemmed from the operation of a bona fide seniority system.
An employer's willfulness has two consequences under the ADEA. First, it triggers application of a three year statute of limitations. Second, it triggers availability of liquidated damages.
There has been some disagreement among the courts regarding the appropriate standard of willfulness. There also has been disagreement over whether the same standard should apply in both the statute of limitations and liquidated damages contexts. The Supreme Court recently clarified the standard of willfulness for liquidated damages, but declined to resolve whether the same standard should govern the statute of limitations. See Trans World Airlines, Inc. v. Thurston, 469 U.S. 111, 105 S. Ct. 613, 625 &
, 83 L. Ed. 2d 523 (1985).
Under Thurston, an employer is liable for liquidated damages if "'the employer . . . knew or showed reckless disregard for the matter of whether its conduct was prohibited by the ADEA.'" Thurston, 105 S. Ct. at 624. This standard requires more than a realization that the ADEA might apply. It is therefore more favorable to employers than the "knew that the ADEA was 'in the picture'" standard formerly applied by some courts. See id. at 625. On the other hand, it does not require intentional violations. See id. at 624 n.19. An employer will be liable for liquidated damages if it acted in "'reckless disregard' of the requirement of the ADEA." Id. at 626.
The EEOC and Westinghouse agree that Thurston governs willfulness with respect to liquidated damages. They disagree, however, on whether Thurston also governs willfulness with respect to the statute of limitations. Plaintiff urges that the statute of limitations should be governed by the "in the picture" standard formulated in Coleman v. Jiffy June Farms, Inc., 458 F.2d 1139 (5th Cir. 1971), cert. denied, 409 U.S. 948, 34 L. Ed. 2d 219, 93 S. Ct. 292 (1972). Defendant advocates uniform application of the Thurston standard.
I find that Westinghouse acted willfully under the Thurston standard.
There is ample evidence that Westinghouse "acted in 'reckless disregard' of the requirements of the ADEA." Thurston, 105 S. Ct. at 626.
Defendant has long had the ability and the resources to ascertain the law and to attempt compliance with it. It did not. Trial testimony established that the Westinghouse Human Resources Department employs knowledgeable in-house counsel with extensive experience in the field of employment discrimination. See T. Sept. 10, at 4-11. Counsel monitors the legality of Westinghouse policies and practices. Id. at 11-16. The Company provides counsel with the resources necessary to keep up with the law. Id. at 17-18. These facts alone do not indicate willfulness. Indeed, they might signify eagerness to comply with the law. Nonetheless, the evidence shows that the Company never seriously tried to comply with the ADEA. On the contrary, it ignored increasingly clear signs that its policies were illegal, and stubbornly resisted compliance.
In the face of successive letters of violation, Westinghouse failed to question or change its policies. When litigation ensued, Westinghouse still insisted on the validity of its policies. Westinghouse has every right to do this. On the other hand, its course of action suggests that it did not violate the ADEA by mere mistake. In fact, its denial of severance pay to older employees clearly violated the ADEA. Nonetheless, Westinghouse turned its face from "the handwriting on the wall" by ignoring successive judicial invalidations of plans similar to Westinghouse's. See EEOC v. Borden's, 724 F.2d 1390 (9th Cir. 1984); EEOC v. City of Altoona, 723 F.2d 4, 7 (3d Cir. 1983).
Westinghouse never attempted to modify its arrangements. See T. Sept. 10 at 18-20. In 1982, Westinghouse changed its policy and provided an option between LIB and pension benefits. In 1985, a similar change was made for management employees. The Company's motivation, however, was to prolong and ameliorate the predictable unfavorable outcome in litigation over the plans. See T. Sept. 10 at 98 1. 3-6 (1982 change); T. Sept. 6 at 142-43 (1985 change).
Finally, the Third Circuit's ruling in the New Jersey case afforded some suggestion that at least the pre-1982 severance pay arrangements violate the ADEA. Nonetheless, the company continues to defend those arrangements, primarily through its "no doubledipping" rationale. This rationale simply is not credible. Despite the fact that defendant characterizes it as a long-standing corporate policy, it was first articulated in this litigation. I believe that the articulation is belated because the policy never existed.
Perhaps the most telling evidence of the Company's willfulness is its own argument that it acted in good faith.
Westinghouse's good faith argument is two-fold. First, it insists that its post-1982 arrangements were designed in reliance upon statements of EEOC Counsel made in the New Jersey litigation. Second, it argues that its pre-1982 arrangements were designed before enactment of the ADEA. It therefore concludes that it acted in compliance with what appeared to be the law.
I have already discussed and rejected these contentions. They are feeble excuses. Westinghouse has mounted a stubborn, protracted and futile defense of the indefensible policy of denying severance pay to its older employees because they were eligible for pensions. Westinghouse acted in reckless disregard of the requirements of the ADEA in its denial of severance pay benefits to older employees. Westinghouse resisted conciliation and tried to turn plaintiff's conciliatory approaches into a weapon of defense. When it became clear that denying severance pay to those eligible for pensions was going to be found illegal by the Courts, Westinghouse devised a sham option arrangement to evade the ADEA and claimed, without basis, that it was relying on a government lawyer's argument for its own tactical decision. Westinghouse belatedly invented an alleged corporate policy against doubledipping to justify denying older workers their severance pay. The circumstantial evidence is overwhelming that Westinghouse showed reckless disregard for the matter of whether its pre-July 1982, and post-July, 1982, layoff income benefits and management separation allowance benefits violated the ADEA. I therefore award double damages to the injured employees who fall within the three year statute of limitations.
AND NOW, this 26th day of March, 1986, it is hereby ORDERED that Westinghouse, its employees, agents, successors and assigns are enjoined from denying the LIB and MSA severance pay benefits specified in the annexed Memorandum to employees aged 40 or over, who are otherwise eligible for them, because such employees are also eligible for, or elect to receive, pension or retirement benefits to which they are entitled.
This Court's declaratory judgment as to liability is hereby entered in favor of plaintiff and against defendant on the LIB and MSA issues and in favor of defendant and against plaintiff on the other claims, in accordance with the attached Memorandum, there being no just reason for delay.
U.S. Magistrate Edwin E. Naythons is designated to serve as a Master, pursuant to Title 28 U.S.C. § 636(b)(2) and Rule 53, to make the difficult computation of damages, after receiving such evidence and holding such hearings as are necessary. The Master shall prepare and file a report with his findings of fact and conclusions of law in accordance with Rule 53(e).
This Order is stayed for ten days and pending determination of an appeal.