Police officers and firefighters whose disability pensions were slashed because they started their careers at 31 or older will receive $250 million in a record age discrimination lawsuit settlement, California's main public employees retirement system announced Thursday.
The settlement of the suit by the federal Equal Employment Opportunity Commission ends an eight-year dispute initiated by a police officer in the San Francisco suburb of Fremont, which eventually became a class-action suit on behalf of hundreds of officers and firefighters.
The case, which went to the U.S. Supreme Court, alleged that officers and firefighters were unfairly given reduced disability pensions if they started their careers after 30 -- as prescribed under a 1980 state law. The agreement effectively kills the law and says that all employees must be paid under the same formula if they are injured while performing their duties as police, firefighters, prison guards or other public safety officers.
Los Angeles and some other public safety agencies were not parties to the lawsuit, which only involved cities whose disability retirement funds are administered by the California Public Employees Retirement System. The agreement pays $50 million in back benefits to 1,700 public safety officers who retired with job-related disabilities under the disputed law between 1992 and 2001. The same group is expected to accrue an additional $200 million in future benefits.
Until 1980, public safety officers sidelined by a job injury were eligible for an Industrial Disability Retirement equal to 50% of their salary. But the state lifted the age limit of 30 that had been in force for starting public safety jobs, at the same time implementing a formula that reduced disability retirement benefits for officers hired at 31 or older. Benefits were cut under the formula by about 2% for each year over the age of 30.
In some cases, disabled officers were living on as little as 12% of their former salaries, when they retired with an injury.
"I'm glad it's changed," said former Fremont Officer Ron Arnett, the lead plaintiff in the suit. "It shouldn't have taken 11 1/2 years."
The settlement, approved by U.S. District Judge Charles Breyer in San Francisco, frees the nation's largest retirement fund from the age-based benefit scheme. CalPERS viewed the age formula as inequitable and supported several unsuccessful efforts to repeal the law.
"This expedites a long-delayed benefit," said Robert Carlson, CalPERS acting president.
The disparity in disability retirements took effect Jan. 1, 1980, the same day the state abolished a law that required new police officers and firefighters to be 30 or younger.
California was one of many states forced to repeal the age limit for officers to comply with the Age Discrimination in Employment Act of 1967.
"It is certainly an irony that they replaced one form of age discrimination with another," said David F. Offen-Brown, an EEOC lawyer.
At the time the bill was debated, the impact of the age-based formula was well known. "This discriminates against the older person," said a 1979 analysis by the California Highway Patrol. "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."
Legislators justified the pension limits by suggesting that older hires were more liable to be injured and also more likely to feign injuries to curtail their careers with large benefits.
A chart by the chief legislative analyst showed that if forced to retire because of injury, a safety officer hired at 30 would receive 50% of his salary, while a similarly situated officer hired at 40 would receive 30%, and an officer hired at 50 would get 10%.
Cerritos employment lawyer Steven R. Pingle said he began seeing angry officers in the early 1990s.
"It hit me as a mean-spirited attempt in the state Legislature 20 years ago to cut pension costs on the backs of older public safety officers, and it stunk," said Pingle, who represented plaintiffs in the suit.
The law "didn't say older workers are toast," Pingle said. But in the Legislature, "people were talking about the fact that this bill will discriminate."
Arnett said he started his career at 24 with the Berkeley Police Department. He later joined the neighboring Oakland force and in 1987, when he was 43, became a patrol officer in Fremont.
As part of its fitness policy, the department allowed officers to work out at a local gym while on duty.
Arnett was doing sit-ups when he hurt his back in 1992. By the time he got back to the station, he could barely get out of his patrol car.
"I've never been back in a uniform since," said Arnett, 58, who sells residential real estate in Fremont and who fought the retirement that his superiors forced on him.
The department was afraid of the liability risk if Arnett further injured himself at work, he said. "They forced me to take a disability retirement," Arnett said. "I understand that, but I did fight the retirement."
Arnett assumed that he would collect half of his base pay for the rest of his life. "And then I got a letter from PERS," he said. "It was 32%. I called and said 'What's up with this? I'm paying into PERS just like everyone else and you're telling me I'm going to get less? And they said, 'Yes.' "
So began a long trip through the legal system that ended with Thursday's settlement.
The EEOC granted Arnett and others permission to sue, a prerequisite for federal anti-discrimination cases.
But in 2000, five years after Arnett and seven others filed suit, the case was thrown out in the wake of a U.S. Supreme Court ruling that individuals could not bring age discrimination suits against government agencies.
That's when the EEOC stepped back in, refiling the complaint on behalf of the officers.
Arnett estimates his monthly disability payments will increase by $600 to $700. As a real estate agent in a part of California where starter homes sell for $700,000, he does not need the money.
"All I ever wanted was what I thought was rightfully mine," Arnett said. "In order to get that I had to sue them.
"I have to say in all fairness my wife and I are financially comfortable with or without the money," he said. "But for someone that $700 may make a big difference. For them I'm really glad."
With $1.3 billion in assets, CalPERS, the nation's largest pension fund, can easily absorb the initial payout of $50 million, spokeswoman Pat Macht said. For future claims, employers will have to recalculate their contributions to reflect the age-neutral benefit scheme.
That may result in a slight increase for employers, but no change in employees' contributions, Macht said.
The total eventual recovery of $250 million set records. It is the largest for an age discrimination suit and the largest for any discrimination case brought by the EEOC.
The largest discrimination settlement of any kind was reached three years ago when the federal government agreed to pay $508 million to 1,100 women who said they were denied jobs at the now-defunct U.S. Information Agency because of gender bias.
EEOC officials said they are not aware of any other states that have such age biases in their disability payments.
"Hopefully this is a deterrent to other states," said William R. Tamayo, an EEOC attorney overseeing the San Francisco region.
The settlement also should serve as a warning to public employers that may believe they are immune from age-discrimination suits because of the Supreme Court ruling against individual suits, Tamayo said.
Total losses to the class of retirees to date were $100 million. By settling for an initial payment of half that, both sides avoided the time, expense and uncertainty of trial.
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Workplace bias settlements
The largest settlements in suits brought by the federal Equal Employment Opportunity Commission, 1965-2003:
*--* Amount (in Millions) Defendant Date Allegation $250.0 CalPERS Jan. 30, 2003 Age discrimination $81.5 Publix Super May 23, 1997 Sex Markets discrimination $47.0 Rent-a-Center Oct. 4, 2002 Sex discrimination $35.0 IDS Financial Aug. 27, 1992 Age discrimination Services $34.0 Mitsubishi June 23, 1998 Sexual harassment Motors $28.7 Pennsylvania Aug. 13, 1991 Age Discrimination State Police $28.1 Johnson & July 23, 1999 Age discrimination Higgins $25.1 United June 30, 1986 Age discrimination Airlines $25.0 Pacific July 13, 1999 Sex /pregnancy Bell/Nevada discrimination Bell $20.1 McDonnell Aug. 12, 1993 Age discrimination Douglas
Source: Equal Employment Opportunity Commission