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Decided: March 31, 2014

The Fourth Circuit held that a provision in Baltimore County (the County), Maryland’s employee retirement benefit plan unlawfully discriminated against older County employees on the basis of age, in violation of the Age Discrimination in Employment Act (ADEA).  The Court upheld the district court’s grant of partial summary judgment for the plaintiff’s on the issue of the County’s liability for violating the ADEA, and remanded the case for further proceedings on the issue of damages.

The County’s original plan, the Employee Retirement System (the plan) required that employees contribute a fixed percentage, based on the employees’ age at the time of enrollment, of their annual salaries over the course of their employment.  Under the plan, older employees were required to contribute a higher percentage of their salaries than younger employees because their contributions would earn interest for fewer years.  Later amendments to the plan provided separate provisions for service-based eligibility that allowed employees to retire after a certain number of years of service irrespective of their age, but didn’t change the contribution rates.  Two officers that were enrolled in the plan, Wayne A Lee and Richard J. Bosse, Sr, ages 51 and 64, respectively, filed charges with the Equal Employment Opportunity Commission (EEOC) alleging that the County’s plan, and disparate contribution rates, discriminated against them based on their ages.  The EEOC filed suit against the County, on behalf of the two officers, and other similarly situated employees.  The EEOC alleged that the plan facially discriminated based on employees’ ages at the time of enrollment by requiring them to pay higher pension contributions than their younger counterparts.  In its defense, the County argued that the disparate rates were a permissible objective because of the “time value of money” because the plan was funded entirely by the County.  The County also claimed that it was shielded from liability through the plan’s “safe harbor provision.”

The Fourth Circuit relied on the statutory language set forth in 29 U.S.C. §§ 623, 630, and 631.  The Court asserted that the ADEA prohibits employers from discriminating against any person “because of” age with all employee benefits.  Thus, a plan that treats older employers differently from younger employees violates the ADEA, unless the disparate treatment “is based on reasonable factors other than age.” The County argued that the U.S. Supreme Court’s decision in Kentucky Retirement v. EEOC, 554 U.S. 135 (2008), allowed the County’s pension plan.  In that case, the Supreme Court held that Kentucky’s retirement plan, which treated employees differently based on their pension status, did not violate the ADEA because the disparate treatment was not “actually motivated” by an employee’s age.  However, the Fourth Circuit noted that unlike Kentucky’s plan, the County’s plan did not consider an employee’s pension status.  Rather, the different contribution rates “escalated explicitly in accordance with employee’s ages at the time of enrollment.”  The Court rejected the County’s claim that the “time value of money” was a reasonable factor to justify the treatment because the plan required employees to contribute with age-based rates regardless of when they chose to retire.  Thus, the Court concluded that the disparate treatment was “because of” age.  The Fourth Circuit also concluded that the safe harbor provision was inapplicable because it failed to address employee contribution rates.

Full Opinion

– Abigail Forrister