Photo by Dan Peebles
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Simple Justice
By Diane Harris, July-August 2003
The story behind a record-setting age discrimination settlement and what it could mean in your workplace
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The case began inauspiciously enough during a routine workout on a routine day in one California policeman's life. It was 1992, and Fremont patrol officer Ron Arnett was doing sit-ups on a slant board at a gym in the San Francisco suburb, when he felt a twinge in his back. Arnett, then 48, regularly exercised during his shift, a practice his department encouraged to keep officers in shape. At first, he thought he'd pulled a muscle. But within half an hour, the pain grew, and Arnett could barely walk. "After that day," he says, "I never put on a police uniform again."
Tests revealed that Arnett had a fractured vertebra. The injury kept him off the beat and in a body cast for the next few months. When the cast came off, doctors advised against returning to patrol work, warning that re-injuring his back in the line of duty could leave Arnett paralyzed. The city sent him a letter saying he'd have to retire. Reluctant to leave the force, Arnett appealed the decision, but lost. "I didn't like it, but I understood it," he says. "You can't have every desk job taken by the sick and lame."
That was the injury. The insult came a few weeks later, when Arnett applied for disability retirement pay from the California Public Employees' Retirement System (CalPERS), the agency that provides benefits for most state and many local public employees in California. The nation's largest public pension fund, with assets of $133 billion, CalPERS typically paid members forced into retirement by an on-the-job injury half of their former salary, plus any other retirement benefits to which they might be entitled. But Arnett got only 32 percent of his former pay. The reason: a 1980 state law that tied public safety officers' disability benefits to the age at which they were hired. The older you were beyond age 30 at the time of employment, the less money you got.
Arnett had joined the Fremont police department at 43. He'd been a cop early in his career, but quit after a dozen years or so to become a minister. After pastoring in several northern California churches during the 1980s, Arnett found that he missed police work. So in 1987, he decided to go back. He applied to three departments, eventually settling on Fremont. He went back through police training and was valedictorian of his 30-person class.
As it turned out, one of those classmates became disabled about the same time as Arnett. That officer, who injured his knee, also took disability retirement. Unlike Arnett, he got half his regular pay. "Everything about us was the same—we joined the force at the same time, paid the same amount into our pension plans, got injured, and left at the same time," Arnett says. "The only difference was our ages when we were hired: He was 29, I was 43."
Arnett was outraged. "It was bad enough being forced out of a career that I loved," he says. "But the unfairness of getting shortchanged just because of my age was a bitter pill to swallow."
The fight was on. Arnett filed an age discrimination complaint with the Equal Employment Opportunity Commission (EEOC), the federal agency responsible for enforcing the country's anti-discrimination employment laws. Someone at the EEOC referred him to Steven Pingel, a private lawyer near Los Angeles, who was putting together a class-action lawsuit aimed at challenging the state law that governed CalPERS' payment of benefits to disabled public safety officers.
By the time Arnett called his office in 1994, Pingel had been working on the suit for two years. He'd found seven people who fit the plaintiff profile and were willing to join the suit and 1,700 others he believed fit the class. Arnett, neither the first nor the last disgruntled public safety officer to cross Pingel's path, became the lead plaintiff—in essence, the poster child for age discrimination—because the court papers listed the names alphabetically and he was the only "A" in the group.
If ever a cause needed a big win, it was age discrimination—especially amid what has become an avalanche of new accusations of age bias in the workplace. Since hitting a 10-year low in 1999, the number of age discrimination charges filed with the EEOC jumped 41 percent as of last year—from 14,141 to 19,921—compared with a 2 percent increase in all other types of discrimination charges during the same period. Yet only 14 percent of age-related complaints led to a settlement or other positive outcome. That's the lowest success rate among any of the eight types of discrimination (including sex, race, and religion) prohibited by law.
Blame the sudden upsurge in complaints on the lousy economy, which usually hits older workers hardest. When business is bad, the thinking goes, employers look to shed their most expensive workers, who disproportionately are their oldest. Some bosses may also stereotype older workers as less efficient and less technologically savvy and, therefore, more dispensable. Then, too, in a tight job market older workers are likely to find it more difficult to land comparable jobs after they've been laid off. And with stock prices pummeled to the ground, many no longer have adequate savings to fall back on while they look for work.
Anyone hit with this kind of financial quadruple whammy might well wonder if they were being treated unfairly. Notes William Tamayo, regional attorney for the EEOC's San Francisco office, which ultimately prosecuted the Arnett case, "People don't complain to us unless they feel as if they have no other options."
Demographics are undoubtedly contributing to the escalation in charges, too. By next year, even the youngest baby boomers will be turning 40, the magic number at which federal protection against age bias kicks in. By 2005, nearly 57 million people age 45 and older will be in the workforce. Many boomers will find themselves hitting a gray ceiling, as those in their 40s and 50s compete for a shrinking number of middle- and upper-level management jobs, warns Howard Eglit, a professor at the Chicago-Kent College of Law, who specializes in age and employment issues. "Given the combination of bad economy, limited jobs, and incredible growth in age-prime victims, it's inevitable that we're going to see an explosion in age complaints," says Eglit. "It's going to be a laywer's holiday."
Attorney Steven Pingel and lead plaintiff Ron Arnett did not have much to celebrate in the early years of their lawsuit. Federal judges dismissed the case not once, but twice, citing inadequate evidence. Then, in 1998, one of the original seven plaintiffs named in the suit died. Says Pingel, "One of our ongoing burdens in this case was the knowledge that some of our plaintiffs wouldn't live to see justice done."
Lawyers who represent employees contend that judges often set the proof bar higher for age cases than for suits claiming sex, race, religion, and other types of discrimination covered by Title VII of the Civil Rights Act of 1964. The language of the 1967 Age Discrimination in Employment Act (ADEA) is strikingly similar to that of Title VII, but judges have interpreted the two laws very differently. Title VII plaintiffs have long been able to call on two different legal theories to support their cases: "disparate treatment" (that the behavior or policy in question is intentionally discriminatory) or "disparate impact" (that the effect of the policy is discriminatory, though maybe not intentionally so). Although the disparate impact argument has been tapped successfully by plaintiffs in other protected groups—women and minorities, for example—many federal courts simply don't allow age discrimination victims to use it.
The early problems in the Arnett case reflected that challenge. Aware that some judges don't accept the unintentional discrimination argument in age cases, Pingel and his co-counsel, Tom Frankovich, decided to argue in their initial 1995 filing that their clients had been intentionally discriminated against. Notes Tom Osborne, AARP senior attorney, "Intentional harm is a lot harder to prove than inadvertent discrimination, and that makes age cases a lot harder to win." The centerpiece of their claim: a simple chart showing that all else being equal—date of hire, subsequent promotions, the date and nature of the disability—two hypothetical public safety officers, one age 30 when he started the job and the other age 40, would receive vastly different amounts in disability pay for no reason other than their ages at the time they were hired. To bolster their claim that the discrimination was knowing and intentional, the lawyers offered passages from the legislative record during the debate over the law they were challenging. One example: a California Highway Patrol analysis, which bluntly stated, "This [measure] discriminates against the older person... They face the same risks as the younger member, hurt and bleed just as much, face a harder time rehabilitating into other jobs, but under this bill, would also be penalized by receiving a lower retirement."
Lawmakers, the attorneys argued, had been put on notice prior to the law's passage that it was built on bias, but had ignored its unfairness.
The first federal judge to hear the case ruled against the plaintiffs, dismissing the intentional harm argument in 1996. She did allow the lawyers to amend their complaint to make the unintentional discrimination argument. By the time the lawyers were ready to refile charges, the case had been reassigned to federal Judge Charles Breyer of San Francisco, who dismissed the rest of the case in 1998.
Pingel and Frankovich quickly appealed, and persuaded major civil rights advocacy groups (including AARP), as well as the EEOC, to file friend-of-the-court briefs in their support. The strategy worked. In June 1999, the appeals court ruled decisively in their favor, stating that the California statute did indeed discriminate on the basis of age. The high court did not resolve the matter of whether there might be a legal defense for the discrimination, leaving the question to the lower court.
Meanwhile, in an entirely separate case about the same time, the United States Supreme Court ruled that individuals did not have the right to sue a state for damages under federal age discrimination laws, a decision that appeared to render a fatal blow to the claims of Arnett and his 1,700 fellow public safety officers.
The plaintiffs needed someone to ride in and save the day. The most likely candidate—indeed, the only candidate—was the EEOC. While the Supreme Court ruling meant that Arnett and company could no longer sue the state-governed CalPERS, nothing kept the U.S. government from suing a state on an individual's behalf. At Pingel's request, that's just what the EEOC decided to do in July 2000. "Federal law trumped state law," explains Raymond Cheung, a trial attorney in the EEOC's San Francisco office. "Without our intervention, this case would have died."
Although such interventions are unusual—making up less than 1 percent of the lawsuits that the agency files—the decision to intercede in the Arnett case wasn't hard, according to the EEOC's William Tamayo. "The discrimination was very clear," Tamayo says. "These were public safety officers who had been injured at work. We had a class of over 1,700 people who might be impacted. We were talking about big money. And we were the only ones who could help. If not this case, then what case?"
Certainly, the EEOC stood to benefit from a big victory. The agency is chronically understaffed, underfunded, and, in the eyes of employee advocates, underwhelming in its role as chief enforcer of the nation's civil rights laws. Despite a 17 percent increase in all discrimination complaints over the past decade, the agency's full-time staff has dropped by 3 percent. The EEOC budget has grown by 12 percent in real terms since 1994, an increase that by all accounts hasn't been nearly enough to accommodate its rising workload.
While Pingel, Frankovich, and the EEOC lawyers worked on gathering evidence for a trial, Judge Breyer began pushing both sides to negotiate a settlement. "He clearly believed that justice delayed was justice denied," recalls Cheung.
For lawyers on both sides, the prospect of a settlement began to look more attractive the longer the case went on. Pingel had already invested close to a decade of his time on the lawsuit and, with Frankovich, an estimated $200,000 or so of their own money. For CalPERS, the prospect of a jury trial could not have been enticing, either. Although judges are generally thought to be tough on age bias plaintiffs, juries are usually sympathetic to them. A 1996 study of age suits filed in federal court found that, while defendants won two-thirds of the cases overall, plaintiffs were victorious in nearly 90 percent of the cases tried before a jury.
"Juries tend to be made up of older males, all of whom have been employees and most of whom have experienced problems of their own in the workplace," says Professor Howard Eglit, who conducted the study. "The thinking is that they identify with the plaintiff, saying to themselves, 'I'm not going to let him get screwed the way I was screwed.' "
More than a year after the EEOC intervened, settlement talks got serious. On January 30, 2003, a deal was finally announced: CalPERS agreed to pay $50 million in retroactive benefits, or about $30,000 apiece, to each of the 1,700 affected officers—half of what they would have gotten had the law not been in place. The pension fund is to pay another $200 million in future benefits, and agreed it would no longer use the old age-based formula in calculating disability pay, in effect nullifying the discriminatory law. The $250 million settlement was nearly five times the amount recovered on behalf of all older workers last year and was by far the largest in the EEOC's history, eclipsing the previous record—a 1997 sex discrimination
judgment for $81.5 million—by a wide margin.
The plaintiffs' lawyers were jubilant. "After more than 10 years of effort, our position was finally validated and we got closure for our clients," says Pingel. Defense lawyers also deemed the agreement "fair." CalPERS officials noted that the agency had during the 1990s supported repealing the offending statute. "We were only following the law at the time," says CalPERS spokesperson Darin Hall.
Plaintiffs, though, label the victory bittersweet—in some cases, just bitter. Wayne Lord, an engineer operator at a youth correctional facility when he became disabled in 1992, says he's had to dip into his life savings to cover his bills over the past 10 years because his benefits from CalPERS amounted to just 23 percent of his former salary. Lord is angry that CalPERS won't be forced to make full restitution. "This deal doesn't erase all the years of financial hardship, and it certainly doesn't make us whole again," he says.
Arnett himself has mixed emotions. Now 58 and a real estate agent, he calculates that his back pay is worth about $80,000; his disability checks have already grown by $800 a month. But like Lord, he's unhappy that CalPERS must pay only half of the back benefits owed to the plaintiffs, without interest. "I understand that our legal system works on negotiation, and something is certainly better than nothing," he says. "But essentially CalPERS has been rewarded for knowingly doing the wrong thing for more than a decade."
With the ink barely dry on the settlement papers, it is too soon to tell how broad an impact the decision will have beyond the borders of California and the particular law and people involved. "The facts of this case are not generally applicable to other age discrimination complaints, which usually involve an older worker getting fired or laid off," says Frank Morris, head of the labor and employment practice in the Washington, D.C., office of Epstein Becker & Green, a law firm that typically represents employers. (Among the employers Morris's firm has represented is AARP.) In fact, more than half of the age-related charges filed with the EEOC last year involved terminations, while another one quarter were disputes over a company's failure to hire an older worker. Says Morris, "I don't see a lot of private-sector [human resources] directors losing sleep over this."
Big-money verdicts do get publicity, though, and that puts the spotlight on the issue of age discrimination, heightening awareness among workers and bosses alike. "Every headline about a winning case is another little piece of deterrence for employers," says Eglit. Laurie McCann, a senior attorney at AARP, agrees. "Whenever a favorable age discrimination result gets good press, people come to understand a little bit more about their rights and employers become a little more diligent."
The limelight may particularly benefit the EEOC, both by boosting morale within the sometimes beleaguered agency and by demonstrating to critics and supporters alike its willingness to step up when the stakes are high.
As of press time, Arnett, Pingel, and the other plaintiffs and lawyers were still holding off on celebrating their victory. CalPERS had sent out most of the checks for back pay owed and expected the rest to be paid by June 1. The agency had also increased the monthly benefit payments due to the 1,700 participants in the suit. Pingel and Frankovich, meanwhile, were still negotiating with CalPERS and the federal court to get compensation for the thousands of hours they've spent working on the case. Once everyone is paid in full, Pingel plans to schedule a victory get-together. For the majority of the participants, the event will be the first time they meet each other face to face. Throughout the case, most of the principals, including Arnett and Pingel, communicated entirely by phone, letter, and e-mail.
These days, Ron Arnett is mostly just relieved that the lawsuit is over. "It's been an emotional roller coaster," he says. "I never cared about the notoriety, and it's never really been about the money for me. All I ever wanted was what's right."
Contributing editor Diane Harris writes regularly about personal finance and career issues.
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