Arizona School District Settles with EEOC Over Violation of Age Discrimination in Employment Act

On November 17, 2014, the United States District Court for Arizona approved the settlement of Equal Employment Opportunity Commission v. Murphy School District No. 21, in which the Defendant agreed to pay $138,000 to twenty-three plaintiffs as compensation for denial of benefits based on recipients’ age. More significantly, the school district agreed to re-write its policy quickly, undertake training programs, and subject itself to ongoing scrutiny and enforcement by the Commission.

The policy in question, as set out in the Complaint, on its face discriminates based on age, with younger retirees receiving substantially greater benefits than older in proportion to their age:

(a) Employees retiring with five through nine years of service:
Age Percentage
64 salary plus 3%
63 salary plus 6%
62 salary plus 9%
61 salary plus 12%
60 salary plus 15%
Less than 60 salary plus 15%

(b) Employees retiring with ten through twenty-four years of service:
Age Percentage
62 salary plus 2%
61 salary plus 3%
60 salary plus 6%
59 salary plus 11%
58 salary plus 16%
57 salary plus 21%
Less than 57 salary plus 21%

(c) Employees retiring with twenty-five or more years of service:
Age Percentage
60 salary plus 3%
59 salary plus 5%
58 salary plus 10%
57 salary plus 15%
56 salary plus 20%
55 salary plus 25%
Less than 60 salary plus 25%

The EEOC argued that this Early Retirement Incentive Program (“ERIP”), the explicit purpose of which was to encourage younger workers to retire, violated the Age Discrimination in Employment Act (“ADEA”) by basing compensation on a retiree’s age.

Policies like this one became unlawful in 1992, when the ADEA was amended by the Older Workers Benefit Protection Act (“OWBPA”), which explicitly outlawed retirement plans like the one above that discriminate based on age. With the OWBPA in place, organizations employing twenty or more people, including government entities, were prohibited from calculating retirement benefits based on an employee’s age. As Congress stated in a 1990 Senate Report: “Early retirement incentive plans that deny or reduce benefits to older workers while continuing to make them available to younger workers may encourage premature departure from employment by older workers. This not only conflicts with the purpose of eliminating age discrimination in employee benefits; it also frustrates (rather than promotes) the employment of older persons.”

Mary Jo O’Neill, Regional Attorney for the EEOC, points out the symbolic significance of this case for the many organizations that continue to have policies like the Defendant’s: “Early retirement incentive plans which are facially discriminatory need to be changed. Discrimination on the basis of age is simply illegal. People in their 60’s should not be penalized merely because they want to continue working. A retirement plan which states, for example, that employees 52 years old will receive a greater economic benefit than an employee 61 years old for retiring early is discriminatory on its face.”

If you believe your employer has discriminated against you based on your age, please contact The Harman Firm, LLP.