HR News Update

Is 'You're Too Young to Retire' Age Bias?

A long-time Iowa math teacher applied to take advantage of her school system's early retirement incentives--continued group rates for healthcare coverage and a large deposit into a savings account. However, the incentives offered for the 2004-2005 school year required that she turn 55 by June 30, 2005. Thereby hangs this tale.

What happened. When the early retirement program in question was announced, a woman had been teaching math in the Davenport Community School District since 1972. The district's purpose in encouraging early retirement, it said, was to save money through staff reduction and/or replacement of retirees at lower salaries. Along with the "turn 55 by June 30" requirement, there were several others: Complete 20 continuous years' service to the school district of no less than 75 percent of full time or 6 hours per day, fill out an application to participate in the program, and agree not to retire until June 30.

In return, early retirees would receive $25,000 or 50 percent of salary, whichever was less, deposited into either a retirement savings or health savings account, along with continued healthcare coverage at group premium rates. The teacher certainly had the required length of service and more, and she readily agreed to stay through the full school year and prepared her application for the program. But there was a major problem: Having begun teaching right out of college, she wouldn't turn 55 until September 17, 2005, nearly 3 months after the deadline. So the district rejected her application for early retirement. It modified the program about 2 weeks later, but only to reduce the required years of service to 15: The deadline for 55th birthdays remained the same. Later, the district extended the deadline for applications to participate, but it still didn't modify the age requirement.

The teacher knew that the early retirement plan offered for the 2003-2004 year required that applicants turn 55 by September 30, 2004, and she probably expected the following year's program to remain the same, because she would have been eligible. The deadline change no doubt surprised her, and she apparently hoped the district would make an exception for her. But it argued that to do so would be expensive: State law permitted the district to pay retirement incentives out of management levy funds when the early retirement program in question was announced--but only to teachers who retired between the ages of 55 and 65. Payments to a 54-year-old retiree would have to come out of the schools' general fund.

The teacher sued, charging violation of the Iowa Civil Rights Act (ICRA), which bars any form of age discrimination. A judge in state district court ruled in her favor, questioning the district's motives, and the district appealed to Iowa's highest court.

What the court said. State justices agreed that ICRA is age neutral, noting that in 1989 they had ruled in favor of a 39-year-old. Accordingly, they agreed that the state law's protections are broader than those of the federal Age Discrimination in Employment Act, which bars bias only against employees ages 40 or older. Meanwhile, the U.S. Supreme Court ruled in a 2004 case, General Dynamics Land Systems v. Cline, that federal law does not prohibit decisions that favor older workers over younger ones. So plaintiffs can't charge reverse age bias under federal law.

But Iowa justices didn't need to deliberate about whether Davenport Community School District's decision to reject the teacher's application was discriminatory. That's because ICRA specifically exempts school districts from its coverage regarding age bias, allowing them to create any early retirement plan and incentives that meet their particular needs. A justice wrote, "Iowa law expressly gives school districts the discretion to determine the age upon which employees are eligible for early retirement benefits. School districts are under no obligation to offer the same plan (or any plan) from year to year." So the teacher lost her lawsuit. Weddum v. Davenport Community School District, Supreme Court of Iowa, No. 51/07-0573 (6/3/08).

Point to remember: An Iowa plaintiff can presumably sue for reverse age discrimination under state law--as long as he or she is not disputing a school system's early retirement program.

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