Seventh Circuit Court of Appeals Holds Lake County Firings Were Not Age Discrimination

By: Melanie M. Dunajeski, Drewry Simmons Vornehm, LLP

The U.S. Seventh Circuit Court of Appeals recently upheld the decision of the USDC for the Northern District of Indiana’s grant of summary judgment in favor of Lake County and against 28 fired retirement-aged employees on their claims of age discrimination. (Aaron Carson et al. v. Lake County Indiana,  7th Cir. Ct. Appeals No. 16-3665, decided July 26, 2017).  The case arose from a fiscal emergency Lake County faced beginning in 2008 and leading up to a crisis in 2013. As part of its efforts to “staunch financial bleeding”, the County offered retirement incentive packages to employees aged 65 and over.  One of these packages offered retirement with 5 years of supplemental insurance (over Medicare) paid by the County on an Aetna retiree plan, with the employee free to be rehired on a part-time basis.  A number of employees accepted this offer, retired, enrolled in the supplement, and returned to work on a part-time basis – but by October of 2013, Aetna notified the County that the practice of including current employees on the supplemental plan disqualified the County from favorable tax treatment.  If continued, plan costs would skyrocket.  Since the County had undertaken the retirement incentives to save money, it opted to notify all the affected rehired, part-time employees that their employment would end.  Notably, these terminated employees retained access to the Aetna supplemental plan.  In holding that the County had not discriminated against the terminated employees on the basis of their age, the court noted that nearly 150-200 employees, nearly 10% of the County’s workforce was age 65 and older, but that the 28 affected workers were all persons who had (1) accepted the County’s offer to retire and rehire on a part-time basis; (2) were age 65 or older; (3) had Medicare as their primary insurance; and (4) had enrolled in the Aetna supplemental plan.  The court determined that age was not the “protected trait” that actually motivated the County’s decision; but rather it was their impermissible participation in the retiree supplemental insurance plan as current employees and the County’s desire to preserve the affordable supplemental coverage offered under the plan to all of its retirees that was the impetus for the firings.  While the court agreed that the County could have offered these employees the choice of retaining their employment or their supplemental coverage, the fact that it did not choose to do so was not driven by employee age, noting that other employees aged 65 and older who did NOT participate in the Aetna plan did not lose their jobs.

What can we all draw from this?  There are frequently some intersections between age and cost of employment – such as higher salaries paid to employees with long years of experience, or as here – where retirement incentives were offered as part of an employer retrenchment.  Further, it is possible to conduct RIFs in a legal and unbiased way, even where age may play a necessary factor in identifying persons eligible to participate.  Finally, wherever employee benefits are part of the equation, you must be certain that the benefit you are seeking to extend can be legally offered to the class of employees you have targeted.