Oakton Professors’ Age Claims Get Failing Grade

Nov 2, 2018

College ClassroomAn employer designed its hiring policy to avoid incurring a penalty under Illinois pension law. If the resulting policy shuns certain pension-eligible individuals, does it violate the federal Age Discrimination in Employment Act (ADEA)? A recent decision by the U.S. 7th Circuit Court of Appeals (whose rulings cover all Illinois employers) explains why the answer is no.

History

Oakton Community College, with campuses in Des Plaines and Skokie, participates in the State University Retirement System (SURS) under the Illinois Pension Code. Eligible employees make contributions to SURS until they retire, and then they may begin receiving a retirement annuity. Even after an individual retires and starts receiving benefits, she may return to work. Under SURS, however, she would be subject to earnings limitations.

For years, Oakton employed retired state employees as part-time and adjunct faculty. In 2012, the Illinois Legislature made the first in a series of amendments to the SURS return-to-work provisions to impose a penalty on covered employers that employ “affected annuitants.” Generally speaking, the amendments defined affected annuitants as those whose post-retirement teaching salaries garnered in excess of certain thresholds while also receiving a sizeable annuity under SURS (the details of the evolving changes to the system’s return-to-work rules aren’t important for our purposes here).

Economics

Oakton and other covered employers faced a penalty of 12 times the monthly retirement annuity payable to any “affected annuitants” they employed. Following the initial amendment to the law, the community college attempted to comply (and thus avoid the penalty) by monitoring the earnings of the annuity recipients it employed throughout the 2013-2014 academic year. Despite those efforts, a monitoring error led the college to employ affected annuitants, and the price tag for the mistake was $75,000.

When Oakton officials learned of the mistake, its advisory council considered how to respond. It understood that some annuity recipients the college employed weren’t at risk of becoming affected annuitants under the law. But after weighing the risk that another monitoring error might blow another hole in its budget, the council decided it would be fiscally irresponsible to employ any annuity recipient at all, regardless of whether he was likely to become an affected annuitant.

Accordingly, Oakton’s president decided the college should abandon employing any SURS annuitants.

Philosophy

In November 2014, Oakton announced its new policy to quit employing SURS annuitants effective July 1, 2015. In total, the college refused to rehire about 84 annuitants because of the new policy. Each was over the age of 55.

Three affected annuitants—Barry Dayton, Daniel Filikpe, and Donald Krzyzak—filed age discrimination claims, which were consolidated and certified as a class action, in federal court in Chicago. The district court entered judgment for Oakton without a trial. Dayton (but not Filipek or Krzyzak) appealed.

The ADEA prohibits taking adverse action against individuals age 40 or older because of their age. Here, the annuitants claimed that Oakton’s policy had a disparate impact on older individuals. As we have written before, a disparate impact theory doesn’t require proof of discriminatory motive. Instead, it requires a showing that an employer’s neutral employment practice caused a disproportionate adverse impact based on age.

Accounting

If an employee can demonstrate such an adverse impact, the employer may avoid liability by showing that the policy was based on a reasonable factor other than age (RFOA). The RFOA defense requires the employer to show that the policy adversely affecting older individuals was “reasonably designed to further or achieve a legitimate business purpose” and that it was “administered in a way that reasonably achieves that purpose in light of the particular facts and circumstances.” Unlike the “business necessity” test used to assess liability in disparate impact cases under Title VII of the Civil Rights Act of 1964, the RFOA defense under the ADEA doesn’t ask whether alternatives were available to achieve the employer’s goals without causing a disparate impact.

Dayton argued that Oakton had the burden to prove its policy didn’t have an adverse impact in the first place. Not so, ruled the 7th Circuit. The very premise of the RFOA defense is that an employer’s policy adversely affects older individuals. The defense focuses on whether the factor the employer relied on was reasonable.

Independent study

Dayton also argued that the trial judge hadn’t performed a fact-intensive inquiry in accordance with the Equal Employment Opportunity Commisison’s (EEOC) regulations interpreting the RFOA. Here again, the appellate court was unimpressed. In fact, the lower court had acknowledged that Oakton’s blanket ban on employing annuitants wasn’t the only option available. Nevertheless, the college established the relatively light burden of showing its policy was based on a reasonable factor other than age.

All told, the evidence showed Oakton adopted its blanket policy to prevent the mistaken employment of an affected annuitant and the resulting penalty. A reasonable jury would be compelled to find that the college’s reason was an RFOA. Case dismissed. Dayton v. Oakton Community College, No. 18-1668 (7th Cir., Oct. 11, 2018).

Employment 101

This case reminds us that employment policies can be challenged as having a “disparate impact” on a protected class (age in this instance) even without a showing of discriminatory intent. Further, the case illustrates one of the ways in which the ADEA differs in a material (or significant) way from Title VII (the bedrock federal antidiscrimination law).

If you have (or are considering) a policy that may adversely affect individuals based on age, sex, race, or other protected categories, don’t rely on a condensed summary of the law you can obtain from a Google search. Like a seasoned professor, competent employment counsel will serve you better in understanding the nuances you need to know to pass with flying colors.

Fox Swibel Attorney Steve BrennemanThis article was written by Steven L. Brenneman who is the Chair of the Employment Law Group at Fox Swibel, and an editor of the Illinois Employment Law Letter. He can be reached at [email protected].

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