PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 13-1106
EQUAL EMPLOYMENT OPPORTUNITY COMMISSION,
Plaintiff - Appellee,
v.
BALTIMORE COUNTY,
Defendant – Appellant,
and
AMERICAN FEDERATION OF STATE, COUNTY & MUNICIPAL EMPLOYEES
LOCAL #921; BALTIMORE COUNTY FEDERATION OF PUBLIC EMPLOYEES,
FMT,AFT,AFL-CIO; BALTIMORE COUNTY SHERIFF'S OFFICE FRATERNAL
ORDER OF POLICE/LODGE NUMBER 25; BALTIMORE COUNTY LODGE NO.
4 FRATERNAL ORDER OF POLICE INCORPORATED; BALTIMORE COUNTY
FEDERATION OF PUBLIC HEALTH NURSES; BALTIMORE COUNTY
PROFESSIONAL FIRE FIGHTERS ASSOCIATION INTERNATIONAL
ASSOCIATION FIRE FIGHTERS LOCAL 1311-AFL-CIO,
Defendants.
Appeal from the United States District Court for the District of
Maryland, at Baltimore. Benson Everett Legg, Senior District
Judge. (1:07-cv-02500-BEL)
Argued: January 30, 2014 Decided: March 31, 2014
Before GREGORY, SHEDD, and KEENAN, Circuit Judges.
Affirmed by published opinion. Judge Keenan wrote the opinion,
in which Judge Gregory and Judge Shedd joined.
ARGUED: James Joseph Nolan, Jr., BALTIMORE COUNTY OFFICE OF LAW,
Towson, Maryland, for Appellant. Paul D. Ramshaw, U.S. EQUAL
EMPLOYMENT OPPORTUNITY COMMISSION, Washington, D.C., for
Appellee. ON BRIEF: Michael E. Field, BALTIMORE COUNTY OFFICE
OF LAW, Towson, Maryland, for Appellant. P. David Lopez,
Lorraine C. Davis, Daniel T. Vail, Office of General Counsel,
U.S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Washington, D.C.,
for Appellee.
2
BARBARA MILANO KEENAN, Circuit Judge:
In this interlocutory appeal, we consider whether an
employee retirement benefit plan (the plan) maintained by
Baltimore County, Maryland (the County) unlawfully discriminated
against older County employees based on their age, in violation
of the Age Discrimination in Employment Act (ADEA), 29 U.S.C.
§§ 621 through 634. The challenged plan provision involved the
different rates of employee contribution to the plan, which
required that older employees pay a greater percentage of their
salaries based on their ages at the time they enrolled in the
plan.
The district court initially determined that the plan did
not violate the ADEA, holding that the disparate rates were
based on permissible financial objectives involving the number
of years an employee would work before reaching “retirement
age.” In the first appeal of this matter, we concluded that the
district court failed to consider a critical component of the
plan regarding retirement eligibility, namely, that an
employee’s years of service could qualify the employee to retire
irrespective of the employee’s age. Thus, we vacated the
judgment and remanded the case for further consideration.
On remand following the first appeal, the district court
concluded that the plan violated the ADEA, and awarded partial
summary judgment in favor of the Equal Employment Opportunity
3
Commission (EEOC) on the issue of the County’s liability. The
County filed this interlocutory appeal. Upon our review, we
hold that the district court correctly determined that the
County’s plan violated the ADEA, because the plan’s employee
contribution rates were determined by age, rather than by any
permissible factor. We further conclude that the ADEA’s “safe
harbor provision” applicable to early retirement benefit plans
does not shield the County from liability for the alleged
discrimination. 1 Accordingly, we affirm the district court’s
award of summary judgment on the issue of liability, and remand
the case for consideration of damages.
I.
In 1945, the County established a mandatory Employee
Retirement System (the plan) for all “general” County employees. 2
At that time, the plan provided that employees were eligible to
retire and to receive pension benefits at age 65, regardless of
the length of their employment.
1
The ADEA “safe harbor provision” at issue in this case is
set forth in 29 U.S.C. § 623(l)(1)(A)(ii)(I).
2
Employees ages 59 and older when hired by the County were
not required to participate in the plan. All other employees
were required to enroll in the plan within two years from the
first date of their employment.
4
The County did not fully fund the plan but instead required
that employees contribute a certain fixed percentage of their
annual salaries over the course of their employment (employee
contribution rates or the rates). The employee contribution
rates were established based on calculations developed by Buck
Consultants (Buck), an actuarial firm employed by the County.
The County directed Buck to calculate rates to ensure that
employees’ contributions, as well as earnings on those
contributions, would fund about one-half of employees’ pension
benefits. The County’s contributions to the plan and related
earnings would fund the remaining one-half of the pension
benefits.
To achieve these objectives and to ensure that all
employees received the same level of pension benefits, Buck
based its calculations for employee contribution rates on the
number of years that an employee would contribute to the plan
before being eligible to retire at age 65. Buck also considered
numerous actuarial factors, including anticipated percentage
increases in salaries, probable lengths of employees’ careers,
the potential interest rates on earnings, mortality rates, and
the likelihood of employees’ withdrawal from the plan before
retirement.
Using the retirement age of 65, Buck ultimately concluded
that older employees who enrolled in the plan should contribute
5
a higher percentage of their salaries, because their
contributions would earn interest for fewer years than the
younger employees’ contributions. The County adopted Buck’s
recommended rates and determined that “[t]he rate of
contribution of the employee shall be determined by the
employee’s age at the time the employee actually joins” the
plan. Balt. Cnty. Code § 5-1-203(1) (2006). Thus, under the
County’s decision, the older that an employee was at the time of
enrollment, the higher the rate that the employee was required
to contribute. 3
The County modified the plan several times since its
inception in 1945. In 1959, the County expanded the plan to
include employees who worked in fire and police departments and
permitted those employees to retire at age 60, or after 30 years
of service regardless of age. By 1973, the County had reduced
the “retirement age” for general County employees from 65 to 60.
The County also added an alternative term of retirement
eligibility that permitted general employees to retire after 30
years of service irrespective of their age. Correctional
officers later became eligible to retire after only 20 years of
service, regardless of age, or at age 65 with 5 years of
3
In 2007, the County altered the contribution rates so that
all employees paid an equal percentage of their salaries
regardless of their age. That version of the plan is not at
issue in this appeal.
6
service. The plan referred to all these pension benefits as
“normal service retirement benefits.”
In 1990, the County expanded the plan to permit “early
retirement” for general employees. Under this provision,
employees who were at least 55 years old and who had completed
20 years of service could retire, but would receive a reduced
amount of pension benefits.
Despite the many changes to the plan over the years
regarding retirement eligibility, the employee contribution
rates were amended only one time during the relevant period
between 1945 and 2007. The sole adjustment to the rates
occurred in 1977, when the rates were lowered slightly based on
expected increases to the rate of return on invested
contributions. This reduction did not alter the fact that rates
were based on an employee’s age at the time of plan enrollment
and were higher for older employees. For example, after 1977,
employees who enrolled in the plan at age 20 contributed 4.42%
of their annual salaries, while employees who enrolled in the
plan at age 40 and 50 contributed 5.57% and 7.23% of their
annual salaries, respectively.
In 1999 and 2000, two County correctional officers, Wayne
A. Lee and Richard J. Bosse, Sr., aged 51 and 64, respectively,
filed charges of discrimination with the EEOC alleging that the
County’s plan and disparate contribution rates discriminated
7
against them based on their ages. The EEOC conducted an
investigation and, after the parties were unable to reach a
conciliation agreement, the EEOC filed the present action in the
district court in September 2007.
The EEOC filed its complaint against the County on behalf
of Lee, Bosse, and a class of similarly situated County
employees, who were in the protected age group of 40 years of
age and older when they enrolled in the plan. 4 The EEOC alleged
that the plan discriminated against these employees in violation
of the ADEA by requiring them to pay higher contribution rates
than those paid by younger employees. The EEOC requested
injunctive relief and reimbursement of “back” wages for affected
employees. In response, the County denied that the plan
violated the ADEA.
After conducting discovery, the parties filed cross-motions
for summary judgment. In January 2009, the district court
granted summary judgment to the County. EEOC v. Baltimore
Cnty., 593 F. Supp. 2d 797 (D. Md. 2009). Relying on the
Supreme Court’s holding in Kentucky Retirement Systems v. EEOC,
4
The EEOC’s amended complaint also named as defendants
American Federation of State; County & Municipal Employees Local
#921; Baltimore County Federation of Public Employees; Baltimore
County Sheriff’s Office Fraternal Order of Police, Lodge Numbers
4 and 24; Baltimore County Federation of Public Heath Nurses;
and Baltimore County Professional Fire Fighters Association. We
refer to the defendants collectively as the County.
8
554 U.S. 135 (2008), the district court concluded that the
plan’s employee contribution rates were not motivated by age,
but by the number of years remaining until an employee reached
retirement age. 593 F. Supp. 2d at 802. Because the County
intended to make “relatively equal contributions on behalf of
all plan members” and “older new-hires ha[d] less time to accrue
earnings on their contributions,” the court concluded that age-
based rates were permissible based on the financial
consideration of “the time value of money.” Id. at 801-02.
On appeal, we vacated the district court’s judgment. See
EEOC v. Baltimore Cnty., 385 F. App’x. 322 (4th Cir. 2010)
(unpublished opinion). We held that the district court’s
decision focused only on age-based retirement eligibility, and
failed to consider the plan’s separate provision for service-
based eligibility irrespective of age. Id. at 325. We
explained the significance of this omission by providing the
following example. If two correctional officers, ages 20 and
40, enrolled in the plan at the same time, both employees would
become eligible for retirement after 20 years of service,
irrespective of their ages when completing the years-of-service
requirement. Id. Yet, the 40-year-old in this situation would
be required to contribute 5.57% of his annual salary while the
20-year-old would be required to contribute only 4.42%. Id. We
concluded that “[t]his disparity is not justified by the time
9
value of money because both employees contribute for the same
twenty years.” Id. (footnote omitted). Therefore, we remanded
the case for the district court to determine whether the
disparate rates were supported by “permissible financial
considerations.” Id.
On remand, after conducting additional discovery, the
parties again filed cross-motions for summary judgment. On the
issue of liability, the district court concluded that the “but-
for” cause of the disparate treatment was age. EEOC v.
Baltimore Cnty., 2012 U.S. Dist. LEXIS 149812 (D. Md. Oct. 17,
2012). Thus, the court granted partial summary judgment for the
EEOC, holding that the County was liable for violating the ADEA.
Id. at *2. Before the court considered the issue of damages,
the County filed this interlocutory appeal. 5
II.
We review the district court’s award of summary judgment de
novo. Baldwin v. City of Greensboro, 714 F.3d 828, 833 (4th
Cir. 2013). According to the County, the district court erred
as a matter of law in concluding that the plan violated the
ADEA. The County contends that the district court’s fundamental
5
The district court granted the County’s request to
certify the order for interlocutory appeal under 28 U.S.C. §
1292(b). This Court granted the County’s petition for
permission to appeal.
10
error was its failure to apply the factors identified by the
Supreme Court in Kentucky Retirement, 554 U.S. 135, which the
County argues would have established that “the time value of
money,” rather than employees’ ages, motivated the plan’s
disparate employee contribution rates.
The County maintains that the “time value of money”
remained a reasonable justification for the disparate rates,
even after the plan began to permit service-based retirement
irrespective of age, because those service-based benefits were
funded entirely by the County while employee contributions
continued to subsidize only the age-based benefits.
Additionally, the County asserts that the ADEA’s “safe harbor
provision” relating to early retirement benefit plans, 29 U.S.C.
§ 623(l)(1)(A)(ii)(I), authorized the County’s subsidies to the
plan and shielded the County from liability. We disagree with
the County’s arguments and address them in turn.
The ADEA prohibits employers from refusing to hire,
discharging, or otherwise discriminating against any person who
is at least 40 years of age “because of” the person’s age. 29
U.S.C. §§ 623(a)(1), 631(a). The ADEA prohibits discrimination
with respect to “compensation, terms, conditions, or privileges
of employment,” which includes “all employee benefits, including
such benefits provided pursuant to a bona fide employee benefit
plan.” 29 U.S.C. §§ 623(a)(1), 630(l). Accordingly, it
11
generally is unlawful for an employer to maintain a retirement
benefit plan that treats older employees in the protected age
group differently from younger employees, unless the
differentiation “is based on reasonable factors other than age.”
29 U.S.C. § 623(f)(1).
An employer violates the ADEA either by relying on a
“formal, facially discriminatory policy requiring adverse
treatment of employees” or by acting on an “ad hoc, informal
basis” motivated by an employee’s age. Hazen Paper Co. v.
Biggins, 507 U.S. 604, 609 (1993) (citations omitted). In the
present case, the EEOC alleges that the County’s plan was
facially discriminatory.
To prove facial discrimination under the ADEA, a plaintiff
is not required to prove an employer’s discriminatory animus. 6
Rather, a policy that explicitly discriminates based on age is
unlawful regardless of the employer’s intent. Ky. Ret. Sys.,
544 U.S. at 147-48 (stating that a “policy that facially
discriminates based on age suffices to show disparate treatment
under the ADEA”); see also Int’l Union v. Johnson Controls,
Inc., 499 U.S. 187, 199-200 (1992) (explaining in the context of
a Title VII sex discrimination challenge that “[w]hether an
employment practice involves disparate treatment through
6
The parties agree in this case that there is no evidence
of any discriminatory intent by the County.
12
explicit facial discrimination does not depend on why the
employer discriminates but rather on the explicit terms of the
discrimination”). A plaintiff nonetheless must demonstrate that
the employer engaged in disparate treatment “because of” the
employee’s age and, accordingly, age must be the “but-for” cause
of such treatment. Gross v. FBL Fin. Serv., 557 U.S. 167, 177-
78 (2009) (rejecting “mixed motive” theory of liability for
claims brought under the ADEA).
Initially, we disagree with the County’s contention that
the district court was required to apply the ADEA discrimination
factors discussed by the Supreme Court in Kentucky Retirement.
See 554 U.S. at 143-47. In that case, the EEOC asserted that
Kentucky’s retirement plan for state employees discriminated
against employees who were over 55 and became disabled, by not
giving them the same additional retirement credits awarded to
younger employees who became disabled. Id. at 140.
The Kentucky plan at issue permitted certain state
employees to retire with “normal retirement benefits” after 20
years of service, irrespective of age, or at age 55 with five
years of service. Id. at 139. However, under that plan, when
an employee became disabled before qualifying for normal
retirement benefits, the plan imputed enough years of service to
permit immediate retirement and included those imputed years in
the calculation of pension benefits. Id. at 139-40. In
13
contrast, when an employee became disabled after qualifying for
normal retirement benefits, the plan did not impute any
additional years of service to the calculation of pension
benefits. Id. at 140.
In analyzing Kentucky’s plan, the Supreme Court considered
several factors that primarily focused on the question whether
“pension status” unlawfully constituted a “proxy for age.” 7 Id.
at 142-43 (citing Hazen Paper, 507 U.S. at 613). The Court
ultimately concluded that the plan did not violate the ADEA
because the disparate treatment between the two classes of
employees was not “actually motivated” by an employee’s age.
Id. at 147.
In contrast to Kentucky’s plan, which treated employees
differently based on their pension status rather than on their
age, the County’s plan mandated different contribution rates
that escalated explicitly in accordance with employees’ ages at
the time of their enrollment in the plan. Under the County’s
plan, an employee’s “pension status,” or eligibility to retire,
had no bearing on the disparate treatment requiring that older
employees at plan enrollment contribute a higher percentage of
7
Other factors considered by the Court included whether
the plan always resulted in more advantageous results to younger
employees, whether the plan relied on any “stereotypical
assumptions that the ADEA sought to eradicate,” and whether the
alleged disparity could be corrected. Id. at 143-147.
14
their salaries than younger employees. Thus, unlike in Kentucky
Retirement, the district court in the present case was not
confronted with the question whether “pension status” unlawfully
constituted a “proxy for age,” but was required to determine
whether the different contribution rates based on age could be
justified on any permissible basis. Accordingly, the Kentucky
Retirement factors were not germane to the issue before the
district court.
We find no merit in the County’s argument that the employee
contribution rates lawfully were based on a reasonable factor
other than age, namely, the “time value of money.” While this
justification may have explained the basis for the disparate
rates at the plan’s inception, when the only possible basis for
retirement was reaching retirement age, the County amended the
plan in 1959 and in 1973 to permit employees to retire based
solely on years of service. The County did not modify the rates
after employees were permitted the alternative benefit of
retiring after working a fixed number of years.
Additionally, the County’s greater subsidies for service-
based benefits that were unrelated to age did not provide a
reasonable basis for the disparate treatment in this case. The
example we provided in our initial decision continues to
illustrate the defect in the County’s position. If a 20-year-
old correctional officer and a 40-year-old correctional officer
15
enrolled in the plan at the same time, and both employees chose
to retire after 20 years of service, the older employee
contributed a larger percentage of his annual salary to the
plan, despite receiving the same level of pension benefits as
the younger employee. This disparity in the employees’
contributions would occur even though the County subsidized both
employees’ pension benefits.
The County’s plan required that employees contribute in
accordance with the age-based rates regardless whether they
chose to retire after reaching retirement age or after working
the required number of years. Therefore, the number of years
until an employee reached retirement age could not have served
as the basis for the disparate rates. Because those disparate
rates were not motivated by either the “time value of money” or
other funding considerations, we conclude that the plan treated
older employees at the time of enrollment less favorably than
younger employees “because of” their age.
Our conclusion is not altered by the County’s reliance on
the ADEA’s “safe harbor provision” in 29 U.S.C. § 623
(l)(1)(A)(ii)(I). As relevant to this appeal, that provision
states that “it shall not be a violation” of the ADEA “solely
because” a retirement benefit plan “provides for . . . payments
[by the employer] that constitute the subsidized portion of an
early retirement benefit . . . .” Id. The County asserts that
16
it is shielded from liability in the present case because the
safe harbor provision authorizes the County to subsidize pension
benefits awarded based on employees’ years of service. We
disagree.
Even if we assume, without deciding, that the service-based
pension benefits qualified as an “early retirement benefit”
under the safe harbor provision, we conclude that the safe
harbor provision is not a defense to the challenged disparate
treatment. As the district court observed, the safe harbor
provision permits an employer to subsidize early retirement
benefits without violating the ADEA. However, the provision
does not address employee contribution rates nor does it permit
employers to impose contribution rates that increase with the
employee’s age at the time of plan enrollment. Thus, we
conclude that the safe harbor provision is inapplicable here.
III.
For these reasons, we hold that the district court did not
err in granting partial summary judgment in favor of the EEOC on
the issue of the County’s liability for maintaining a retirement
plan in violation of the ADEA. We remand the case for further
proceedings to address the issue of damages.
AFFIRMED
17