Kathy Weddum Vs. Davenport Community School District ( 2008 )

IN THE SUPREME COURT OF IOWA
No. 51 / 07–0573
Filed June 6, 2008
KATHY WEDDUM,
Appellee,
vs.
DAVENPORT COMMUNITY SCHOOL DISTRICT,
Appellant.
Appeal from the Iowa District Court for Scott County, Nancy S.
Tabor, Judge.
School district seeks discretionary review of district court decision
denying motion for summary judgment in an age-discrimination action.
REVERSED AND REMANDED.
William C. Davidson, Mikkie R. Schiltz, and Wendy S. Meyer of
Lane & Waterman LLP, Davenport, for appellant.
Dorothy A. O’Brien, Davenport, for appellee.
Edward M. Mansfield of Belin Lamson McCormick Zumbach Flynn,
PC, Des Moines, for amicus curiae Iowa Association of School Boards.
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STREIT, Justice.
A school district denied a teacher’s application for early retirement
incentives because she did not meet the plan’s minimum age
requirement. She sued, arguing the school district’s decision violated the
Iowa Civil Rights Act’s prohibition on age discrimination. She and the
school district brought cross motions for summary judgment. Both were
denied. We granted the school district’s motion for interlocutory appeal
and now reverse. The district court should have granted the school
district’s motion because the early retirement incentive plan falls within
an express exception to the general prohibition on age discrimination.
I. Facts and Prior Proceedings.
Kathy Weddum had been a math teacher with the Davenport
Community School District since 1972. The school district implemented
an early retirement incentive plan for the 2004-2005 school year. The
plan provided a purpose statement:
The purpose of this plan is to provide the District’s
employees with the option and opportunity for early
retirement from their employment with the District. This
Early Retirement Incentive Plan is designed to show the
District’s appreciation for the services an employee has
rendered to the District, to aid the employee in their
transition from public service to retirement, and to save
District funds through a reduction in staff and/or
replacement savings.
To be eligible for the plan, an employee was required to satisfy the
following criteria:
(1) reached age fifty-five or older by June 30, 2005;
(2) completed at least twenty years of continuous
contracted service with the district by June 30, 2005;
(3) worked at least a minimum of six hours per day or had
a contract of at least 75% full time employment;
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(4) submitted an application for participation in the plan
to the school board prior to January 31, 2005; and
(5) agreed to retire at, and not before, the conclusion of
the contract or assignment year for 2004-2005 and no
later than June 30, 2005.
In return for meeting the terms of the plan, an employee received
the following benefits:
(1) the lesser of $25,000 or 50% of the employee’s 2004-
2005 salary to be paid into a 403(b) or Health Care
Savings Plan over five years; and
(2) continued participation of current coverage in a
medical plan by employee’s payment of the monthly
premium.
In late December 2004, Weddum submitted her application for
early retirement. She satisfied the years-of-service requirement but did
not reach the age of fifty-five until September 17, 2005, almost three
months after the deadline. The school district denied Weddum’s request
in a January 6 email.
On January 19, the school district notified employees of its
decision to expand the early retirement plan to employees who had
completed at least fifteen years of continuous contracted service. The
remaining eligibility requirements of the plan were unchanged. The
school district later extended the application deadline.
On January 31, Weddum wrote a letter to the school district
indicating her intent to retire at the end of the 2005 school year. The
letter stated “I have decided to retire and wish to resign from teaching in
the Davenport Community School District at the end of the 2004-2005
school year.” The school board accepted her resignation on February 14
but refused to categorize her departure as a retirement.
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After satisfying the administrative requirements, Weddum filed this
lawsuit contending the school district’s denial of early retirement benefits
violated the age discrimination prohibition found in the Iowa Civil Rights
Act (ICRA). Both Weddum and the school district moved for summary
judgment. Weddum argued the school district’s early retirement plan
amounted to overt and arbitrary age discrimination. Alternatively, she
argued summary judgment should not be granted in favor of the school
district because the district’s treatment of other employees created a
question of fact as to its motives for excluding Weddum from the plan.
The school district argued summary judgment should be granted in its
favor because its early retirement plan is consistent with the exception
for retirement plans found in the ICRA.
The court denied both motions, ruling there was a material
question of fact with respect to the school district’s motives that should
be decided by a jury. We granted the school district’s request for an
interlocutory appeal. We subsequently dismissed Weddum’s cross
appeal as untimely. For the reasons that follow, we reverse the decision
of the district court and remand for the court to enter judgment in favor
of the school district.
II. Scope of Review.
We review a district court’s ruling on a motion for summary
judgment for correction of errors at law. Stewart v. Sisson, 711 N.W.2d
713, 715 (Iowa 2006). Summary judgment is appropriate if, viewing the
evidence in the light most favorable to the nonmoving party, “the
pleadings, depositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any, show that there is no genuine
issue as to any material fact and that the moving party is entitled to a
judgment as a matter of law.” Iowa R. Civ. P. 1.981(3). An issue of fact
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is “material,” for summary judgment purposes, “only if ‘the dispute is
over facts that might affect the outcome of the suit, given the applicable
law.’ ” Lewis v. State ex rel. Miller, 646 N.W.2d 121, 124 (Iowa Ct. App.
2002) (quoting Fouts ex rel. Jensen v. Mason, 592 N.W.2d 33, 25 (Iowa
1999)). “When the only controversy concerns the legal consequences
flowing from undisputed facts, summary judgment is the proper remedy.”
Bob Zimmerman Ford, Inc. v. Midwest Auto. I, L.L.C., 679 N.W.2d 606,
608 (Iowa 2004).
III. Merits.
Weddum’s lawsuit contends the school district violated the ICRA
when it denied her early retirement benefits because she did not satisfy
the plan’s minimum age requirement—i.e., she was discriminated
against because she was not old enough.1 In considering age
discrimination claims brought under the ICRA, we turn to federal law
interpreting the Age Discrimination in Employment Act (ADEA). See
McMannes v. United Rentals, Inc., 371 F. Supp. 2d 1019, 1027 (N.D. Iowa
2005). In General Dynamics Land Systems, Inc. v. Cline, 540 U.S. 581,
584–85, 124 S. Ct. 1236, 1239, 157 L. Ed. 2d 1094, 1103 (2004), the
United States Supreme Court held the ADEA does not prohibit “reverse
age discrimination.” It found the Act’s prohibition of age-based
discrimination only forbade employers from favoring younger workers at
the expense of older workers. Gen. Dynamics Land Sys., Inc., 540 U.S.
at 600, 124 S. Ct. at 1248–49, 157 L. Ed. 2d at 1113 (“We see the text,
structure, purpose, and history of the ADEA, along with its relationship
1 Weddum also alleges the district court’s denial of early retirement benefits was
unconstitutional. However, because the district court did not rule on this issue, we will
not address it for the first time on appeal. DeVoss v. State, 648 N.W.2d 56, 63 (Iowa
2002) (holding the court will not consider a substantive or procedural issue for the first
time on appeal except for evidentiary rulings).
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to other federal statutes, as showing that the statute does not mean to
stop an employer from favoring an older employee over a younger one.”).
Weddum argues the ICRA is more expansive because it prohibits
age discrimination against all employees in contrast to the federal act
which only prohibits age discrimination against employees age forty
years or older. Compare Iowa Code § 216.6(1)(a), with 29 U.S.C. §
623(a)(1), 631(a). Indeed we recognized the ICRA is “age-neutral” in a
case brought by a thirty-nine year old employee. Hulme v. Barrett, 449
N.W.2d 629, 631–32 (Iowa 1989). However, in Hulme the plaintiff did not
allege she was being discriminated against because she was too young.
Rather, she alleged her employer violated the ICRA by reducing her
hours instead of the hours of newer, younger employees who were being
paid lower wages. Id. Thus, it remains an open question whether the
ICRA prohibits an employer from favoring older workers at the expense of
younger workers because of their age. We need not determine whether
the ICRA contemplates a cause of action for reverse age discrimination in
other contexts because we find the ICRA plainly allows early retirement
plans with minimum age requirements. Cf. Davis v. City of Waterloo, 551
N.W.2d 876, 881 (Iowa 1996) (stating ICRA protects Caucasians from
discrimination based on race as much as it does African-Americans and
members of other racial minorities).
Chapter 279 of the Iowa Code governs the powers and duties of
school boards. Iowa Code section 279.46 expressly gives school boards
the power to offer early retirement incentives to its employees
conditioned upon reaching a minimum age. It states:
The board of directors of a school district may adopt a
program for payment of a monetary bonus, continuation of
health or medical insurance coverage, or other incentives for
encouraging its employees to retire before the normal
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retirement date as defined in chapter 97B. . . . The age at
which employees shall be designated eligible for the program
shall be at the discretion of the board.
(Emphasis added.) While the ICRA makes it generally unlawful to
discriminate against an employee because of the employee’s age, see
Iowa Code § 216.6(1)(a),2 the Act provides a specific exception for
retirement plans. Iowa Code section 216.13 states:
The provisions of this chapter relating to discrimination
because of age do not apply to a retirement plan or benefit
system of an employer unless the plan or system is a mere
subterfuge adopted for the purpose of evading this chapter.
A “subterfuge” is a “ ‘scheme, plan, stratagem, or artifice of
evasion.’ ” Pub. Employees Ret. Sys. of Ohio v. Betts, 492 U.S. 158, 167,
109 S. Ct. 2854, 2861, 106 L. Ed. 2d 134, 148 (1989) (quoting United Air
Lines, Inc. v. McMann, 434 U.S. 192, 203, 98 S. Ct. 444, 450, 54 L. Ed.
2d 402, 413 (1977)); see also Merriam-Webster’s Collegiate Dictionary
1171 (10th ed. 2002) (defining “subterfuge” as “a deceptive device or
stratagem”). There is no evidence in the record to suggest the school
district acted with age-related animus toward Weddum. Nor is there
evidence to suggest Weddum was otherwise being singled out. To the
contrary, two other employees did not qualify for the early retirement
plan because they were also too young.
Moreover, the school district provided a legitimate reason for
setting the minimum age requirement. According to the school district,
the early retirement program is primarily driven by financial savings.
Teachers’ salaries are paid out of the school district’s general fund.
2 Iowa Code § 216.6(1)(a) states “[i]t shall be an unfair or discriminatory practice
for any . . . [p]erson to refuse to hire, accept, register, classify, or refer for employment,
to discharge any employee, or to otherwise discriminate in employment against any
applicant for employment or any employee because of the age . . . of such applicant or
employee, unless based upon the nature of the occupation.”
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Replacing a senior teacher with a more junior teacher results in a cost
savings because a teacher’s salary is based on years of experience.
Additionally, chapter 279 allows school districts to pay early retirement
incentives out of their “management levy” funds (i.e. local tax revenues).
See Iowa Code § 279.46. This funding avenue for the incentives frees up
more money in the school districts’ general funds for other needs.
However, in order to utilize management levy funds to pay early
retirement incentives, the employees receiving the funds must be
between the ages of fifty-five and sixty-five at the time of their
retirement.3 Id. Thus, the school district in this case was not willing to
extend its early retirement plan to teachers who were not at least fifty-
five years old on June 30 because the cash incentive would have to come
out of the general fund if it did so.
After the plan was originally offered, fewer than expected
employees chose to retire. The school district expanded the pool of
employees qualified for the plan by lowering the years-of-service
requirement from twenty years to fifteen years. The school district chose
this route to make more employees eligible because the use of
management levy funds is not dependent upon how many years the
employees worked.
Weddum notes the school district offered a similar early retirement
incentive plan during the previous school year which required employees
to be at least fifty-five by September 30.4 Weddum’s birthday is
September 17. Had the school district used the same date in the year
Weddum retired, she would have been eligible for the early retirement
3 The school district’s plan does not have a maximum retirement age.
4 The school district chose the later cut-off date the year before in order to
induce a teacher with performance problems to accept the early retirement incentive.
She had a September birth date.
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benefits plan. However, Iowa law expressly gives school districts the
discretion to determine the age upon which employees are eligible for
early retirement benefits. Iowa Code § 279.46. School districts are
under no obligation to offer the same plan (or any plan) from year to
year.
Our conclusion is also supported by federal case law. The ADEA
provides a safe harbor provision for “voluntary early retirement incentive
plan[s] consistent with the relevant purpose or purposes of this chapter.”
See 29 U.S.C. § 623(f)(2)(B)(ii). Recently, the eighth circuit held a plan
similar to the one at issue here fell within this exception. Morgan v. A.G.
Edwards & Sons, Inc., 486 F.3d 1034 (8th Cir. 2007). There, employees
age fifty or older with at least fifteen years of service were given one year’s
salary and other benefits in return for retiring. Id. at 1037. The Morgan
court distinguished one of its earlier decisions upon which Weddum
relies. See Jankovitz v. Des Moines Indep. Cmty. Sch. Dist., 421 F.3d 649
(8th Cir. 2005). In Jankovitz, the eighth circuit found an early retirement
incentive plan violated the ADEA because benefits were cut off by an
upper age limit of sixty-five. Id. at 655 (“The basis for our conclusion
that the amended [early retirement incentive plan] is inconsistent with a
purpose of the ADEA is the fact that the amount of available early
retirement benefits drops to zero upon an employee’s attainment of the
age of 65.”); see also Auerbach v. Bd. of Educ. of the Harborfields Cent.
Sch. Dist., 136 F.3d 104, 114 (2d Cir. 1998) (“An early retirement
incentive plan that withholds or reduces benefits to older retiree plan
participants, while continuing to make them available to younger retiree
plan participants so as to encourage premature departure from
employment by older workers conflicts with the ADEA's stated purpose to
prohibit arbitrary age discrimination in employment.”). The Morgan
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court found the early retirement incentive plan lawful because it did not
include a maximum age requirement. Morgan, 486 F.3d at 1042.
Similarly, the school district’s plan in the present case “offered the
same incentives to all eligible persons and did not employ an age-based
phase-out where plan benefits decreased over time or were reduced to
zero upon a certain age in order to encourage employees to participate in
the plan.” Id. Moreover, there was no evidence to suggest the plan was
“a mere subterfuge adopted for the purpose of evading” the ICRA. Iowa
Code § 216.13. The school district was entitled to a judgment in its favor
as a matter of law.
IV. Conclusion.
In summary, the school district’s early retirement incentive plan
fell squarely within the ICRA exclusion for retirement plans. Therefore, it
was error to deny the school district’s motion for summary judgment.
REVERSED AND REMANDED.