Posts Tagged ‘Early Retirement Incentive Program’

“Early Retirement” Program Discriminates On Basis Of Age

JUNE 28, 1999 VOLUME 6, NUMBER 52

Beginning in 1970, the Gary, Indiana public school system was faced with a major problem. Student enrollment was declining rapidly (the number of students was to drop by one third in the next fifteen years), and the school system found itself laying off teachers and administrators.

In 1982, the Gary Teacher’s Union proposed a solution that seemed like a good idea. If the school district offered an early-retirement incentive, those teachers near retirement age might choose to leave early, reducing the need for layoffs. Furthermore, the teachers who left under such a system would tend to be higher-paid teachers, so that the effect on school budgets would be lessened.

In 1984, Gary Community School Corporation formally adopted an Early Retirement Incentive Program. Under the Program, teachers aged 58 to 61 were offered between 40% and 50% of the starting salary for a new teacher in special incentives to stop teaching. At age 62, the incentives would end; by that age, the teachers would qualify for regular retirement benefits. A few years later, a similar program was offered to school administrators.

Federal law (the Age Discrimination in Employment Act, or ADEA) prohibits employers from discriminating against any employees based solely on age. Thirty four Gary teachers and administrators brought suit against the school system, alleging that the Early Retirement Incentive Program did just that.

The school system argued that the program did not discriminate on the basis of age. Any teacher or administrator who chose to retire at age 58 (instead of the “normal” retirement age of 62) could qualify for the incentive program, reasoned the school system. No employee was either required to retire or prohibited from retiring early.

The U.S. Seventh Circuit Court of Appeals sided with the complaining teachers. By way of illustration, the Court of Appeals described two hypothetical teachers–one aged 58 and the other aged 66. If both teachers had decided they wanted to teach for four more years, and retire at ages 62 and 70, respectively, they would be in identical positions except for their ages. But under the Early Retirement Incentive Program, the 58-year-old teacher could instead elect to retire “early” and collect a bonus. While the 66-year-old teacher could retire on his or her “regular” retirement, he or she would nonetheless be retiring “early” and would experience a reduction in the retirement benefit he or she had planned for. Since the only difference between the two hypothetical teachers is their age, the Gary school system’s Early Retirement program discriminates on the basis of age and violates the ADEA.

The court was also asked to address the proper calculation of damages for each of the plaintiffs. At trial, the jury had decided that the Gary school system’s actions had not been willful; had the ruling been otherwise, the plaintiffs would have been entitled to greater damages. The Court of Appeals, however, upheld the trial court’s finding on damages. As a result, each of the complaining teachers and administrators was awarded the same amount of money they would have received in Early Retirement Incentives had they decided to retire at age 58. Solon v. Gary Community School Corporation, June 14, 1999.

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