This is an age discrimination action brought by the Equal Employment Opportunity Commission (EEOC) against the City of Mt. Lebanon, Pennsylvania. In its amended complaint the EEOC alleges the termination of disability benefits to city employees at age 55 under Mt. Lebanon's former disability plan, set out in resolution R16-73, violated the Age Discrimination in Employment Act (ADEA), 29 U.S.C. § 621 et seq. (para. 6); and the termination of disability benefits to city employees at ages 62-68 under a schedule of duration of benefits under Mt. Lebanon's present disability plan, the "MEIT" plan, violates the ADEA (para. 7). The EEOC seeks injunctive relief, back pay and liquidated damages. Mt. Lebanon answered alleging the action was time-barred and the disability plans were statutorily exempt bona fide employee benefit plans.
The EEOC now moves for summary judgment on liability contending the disability plans violate the ADEA, and Mt. Lebanon cannot establish the defense of the statute of limitations or the defense of a statutorily exempt bona fide employee benefit plan.
Because the cause of action grounded in the R16-73 disability plan is time-barred, summary judgment will be granted for Mt. Lebanon on paragraph 6. Because the MEIT disability plan is a statutorily exempt bona fide employee benefit plan, summary judgment will be granted for Mt. Lebanon on paragraph 7.
The disability plan set out in resolution R16-73 was in effect from January 1, 1973 through December 31, 1983. Under R16-73 a portion of the disability benefits, beginning in January, 1978, was insured under a policy purchased from an insurance carrier. Mt. Lebanon was responsible for the remaining portion of disability benefits not provided under the insurance policy. Under R16-73 disability payments terminated when an employee reached "normal retirement age." Beginning in 1978 the term "normal retirement age" in R16-73 was interpreted to refer to an employee's eligibility for a normal retirement pension. Under the pension plan an employee was eligible for a normal retirement pension at age 55 with 25 years of service.
The current disability insurance policy was purchased through the Municipal Employers Insurance Trust (MEIT) and was effective January 1, 1984. Under the MEIT plan disability benefits are paid under a schedule of duration of benefits. Under this schedule an employee disabled at age 62 is paid benefits for 3-1/2 years. As the age at which an employee becomes disabled increases, the duration of benefits payments decreases, until at age 69 benefits are paid for one year. To date, no disability benefits have been paid under the MEIT plan.
Statute of limitations
The EEOC contends this suit is timely. Specifically, the EEOC contends the cause of action grounded in the R16-73 disability plan is timely under the ADEA's three year statute of limitations for willful violations. Mt. Lebanon, on the other hand, contends the cause of action grounded in the R16-73 disability plan is barred under the ADEA's two year statute of limitations for non-willful violations.
The ADEA has a two year statute of limitations for non-willful violations and a three year statute of limitations for willful violations. 29 U.S.C. § 626(e)(1) (incorporating 29 U.S.C. § 255(a)). In this Circuit, an employer acts willfully under 29 U.S.C. § 255(a) if it "knew or showed reckless disregard for the matter of whether its conduct was prohibited . . . ." Brock v. Richland Shoe Co., 799 F.2d 80, 83 (3d Cir. 1986). The more lenient standard for willful violations set out in Coleman v. Jiffy June Farms, Inc., 458 F.2d 1139 (5th Cir. 1972), that an employer acts willfully if it knew the ADEA was in the picture, has been expressly rejected in this Circuit. Brock, 799 F.2d at 82.
The EEOC asserts that the reckless disregard standard set out in Brock v. Richland should not govern the present case because the present case was commenced before Brock was decided.
There is no basis for refusing to apply Brock to the present case. The three requirements for non-retroactive application of a judicial decision set out in Chevron Oil Co. v. Huson, 404 U.S. 97, 106, 30 L. Ed. 2d 296, 92 S. Ct. 349 (1971) are not met here. First, Brock did not overrule clear past precedent, nor did it decide an issue of first impression whose resolution was not foreshadowed. The Third Circuit had not previously decided what constituted willfulness under 29 U.S.C. § 255(a). Brock, 799 F.2d at 82. The Supreme Court had adopted the reckless disregard standard for willfulness for liquidated damages under the ADEA and had rejected the Jiffy June "in the picture" standard. Trans World Airlines v. Thurston, 469 U.S. 111, 83 L. Ed. 2d 523, 105 S. Ct. 613 (1985). The district courts within the Third Circuit had split on the question of the appropriate standard of willfulness for the statute of limitations under the ADEA. Compare Slenkamp v. Borough of Brentwood, 603 F. Supp. 1298 (W.D. Pa. 1985), and Michaels v. Jones & Laughlin Steel Corp., 628 F. Supp. 48 (W.D. Pa. 1985) (reckless disregard standard) with EEOC v. Governor Mifflin School District, 623 F. Supp. 734 (E.D. Pa. 1985) ("in the picture" standard).
Second, Brock's reckless disregard standard of willfulness is consistent with the plain meaning of the statute and a more lax standard would frustrate the legislative intent. Brock, 799 F.2d at 83.
Third, no inequity will result from retroactive application of Brock. Brock itself did not shorten any existing statute of limitations. Although the EEOC asserts it withheld filing suit because it believed that a willful violation had occurred under the Jiffy June "in the picture" standard, the EEOC could not have reasonably relied on a standard of willfulness never adopted by the Third Circuit.
The EEOC next asserts that if it is required to prove reckless disregard under Brock to invoke the ADEA's three year statute of limitations, it has done so. As proof of Mt. Lebanon's knowing or reckless disregard for the matter of whether its termination of disability benefits at eligibility for normal retirement was prohibited by the ADEA, the EEOC points to the following facts: In 1979 the insurance carrier responsible for a portion of the R16-73 disability plan advised Mt. Lebanon of the effects of the 1978 amendments to the ADEA on long term disability plans; the insurance carrier then recommended changes to its portion of the plan; and Mt. Lebanon approved those changes.
Mt. Lebanon asserts there was no knowing or reckless disregard for whether its conduct violated the ADEA. In support of its position Mr. Lebanon points to the following facts: The individual who has been responsible for administering the disability plans for the last seven years was not aware of, and had not read, the 1979 memoranda from the insurance carrier. The first time a question arose concerning the termination of disability benefits under the R16-73 plan was in 1982. At that time Mt. Lebanon requested legal advice from its solicitor and was given an opinion that it could legally terminate benefits at eligibility for normal retirement. Relying on that opinion, Mt. Lebanon terminated the disability benefits in question, and has continued the practice.
On facts similar to those before this Court, the Court in EEOC v. Westinghouse, 646 F. Supp. 555 (D. N.J. 1986), held that an employer had not acted willfully under Brock's reckless disregard standard. This Court finds there has been no willful violation of the ADEA.
Because there has been no willful violation of the ADEA, the two year statute of limitations for non-willful violations controls, and the cause of action grounded in the R16-73 plan must have been filed within two years of the last discriminatory act allegedly arising under that plan to be timely. This action was commenced February 26, 1986. The last discriminatory act allegedly arising under the R16-73 plan was the termination of disability benefit payments to James K. Gordon on June 22, 1983.
Because the cause of action grounded in the R16-73 plan was filed more than two years after the last discriminatory act allegedly arising under that plan, the cause of action grounded in the R16-73 plan is time-barred. Accordingly Mt. Lebanon is entitled to summary judgment on this cause of action.
The cause of action grounded in the MEIT plan is, however, timely. Because no employees have been adversely affected by the MEIT plan, the redress sought is injunctive relief on the EEOC's claim that the MEIT plan's schedule of duration of benefits violates the ADEA. It is to the cause of action grounded in the MEIT plan that the Court now turns.
Bona fide employee benefit plan
The EEOC contends Mt. Lebanon's disability plans do not come within the statutory exemption for bona fide employee benefit plans. Section 4(f)(2) of the ADEA, 29 U.S.C. § 623(f)(2), exempts bona fide employee benefit plans from the prohibitions against age discrimination. This section provides that it shall not be unlawful for an employer:
to observe the terms of . . . any bona fide employee benefit plan such as retirement, pension, or insurance plan which is not a subterfuge to evade the purposes of this chapter except that . . . no such . . . employee benefit plan shall require or permit the involuntary retirement of any individual.