A federal court in Pennsylvania has reversed its prior decision finding unlawful an EEOC regulation that exempts from the Age Discrimination in Employment Act (ADEA) "the practice of altering, reducing or eliminating employer-sponsored retiree health benefits when retirees become eligible for Medicare or a state-sponsored retiree health benefits program."
A federal court in Pennsylvania has reversed its prior decision finding unlawful an EEOC regulation that exempts from the Age Discrimination in Employment Act (ADEA) "the practice of altering, reducing or eliminating employer-sponsored retiree health benefits when retirees become eligible for Medicare or a state-sponsored retiree health benefits program." See AARP v. Equal Employment Opportunity Commission (September 27, 2005). In its prior decision (AARP I), the court held that the EEOC's regulation was contrary to law and Congressional intent under the ADEA, relying on a decision by the Third U.S. Circuit Court of Appeals.
In AARP I, the court also issued an injunction prohibiting the EEOC from publishing or otherwise implementing the regulation. Although the court's September 27 decision dissolves the previously issued injunction, in addition to reversing the summary judgment order, the court has stayed the portion of its decision dissolving the injunction pending appeal of the case to the Third Circuit. Thus, the injunction prohibiting the EEOC from issuing the regulation remains in place.
In the September 27 decision, the court reversed its decision in AARP I based on intervening case law that deals with the level of deference to which an agency determination in entitled. In National Cable and Telecommunications Association v. Brand X Internet Services (Brand X), the U.S. Supreme Court held that a court's interpretation of a statute only bars an agency from interpreting that statute differently if the court has determined the only possible meaning of the statute. In originally finding the EEOC regulation unlawful, the district court held that it was bound by the Third Circuit's decision in Erie County Retiree Association v. County of Erie. In that case, the Third Circuit held that the ADEA prohibits coordinating retiree health benefits with Medicare eligibility and that an employer cannot reduce benefits to Medicare-eligible retirees unless it can meet the conditions of the "equal benefit or equal cost" safe harbor of the ADEA.
The Supreme Court's decision in Brand X was issued after AARP I and made it clear that the district court was not bound by the Third Circuit's decision in Eerie County because the Third Circuit's determination was not the only possible meaning of the statute. Reconsidering its decision in light of Brand X, the district court held that the EEOC acted within its authority in issuing the regulation permitting employers to coordinate retiree health benefits with Medicare or state-sponsored retiree health benefits programs. Thus, in the September 27 order, the court granted summary judgment to the EEOC.
Employers Bottom Line:
The AARP is expected to appeal this latest ruling to the Third Circuit. While the ruling is favorable for the EEOC and employers offering retiree health benefits, the EEOC cannot release the regulation until resolution of the issue on appeal. In the meantime, employers who coordinate (or wish to coordinate) their retiree health plans with Medicare or a state-sponsored retiree health plan can take some comfort in knowing that the EEOC believes the practice should be exempt from the requirements of the ADEA.
If you have any questions regarding the issues addressed in this case or any other labor or employment related issue, please contact the Ford & Harrison attorney with whom you usually work or Penny Wofford, (864) 699-1100.