Justices Find No Age Bias in Benefits Case

The Supreme Court on Tuesday rejected claims of reverse bias in the area of age discrimination, ruling that employers could not be sued for adopting benefit plans that favored older workers over younger ones.

Age “means ‘old age’ when teamed with ‘discrimination’ ” in the employment laws, the high court said in a 6-3 decision. It threw out a lawsuit brought by workers in their 40s who sued after a division of General Dynamics Corp. decided that only employees who were then over age 50 would be promised health benefits in their retirement.

Tuesday’s ruling, which maintains widespread employment practices, was seen as an important victory for corporate America. Employers feared the prospect of being sued by middle-aged workers if they offered buyouts or other retirement incentives to older workers, an increasingly common occurrence.

The Age Discrimination in Employment Act makes it illegal for an employer to discriminate against an employee “because of an individual’s age.” Congress said it was intended to protect older workers from being pushed aside or denied opportunities because of their age.

But the wording of the law applied to all employees over age 40, and it could be read to forbid discrimination against middle-aged workers as well as their elders. Two years ago, a federal appeals court in Ohio set off alarms among corporate lawyers when it ruled in this case that the law prohibited all age discrimination among employees, even when younger workers were complaining about preferences for their older colleagues.

Employment law experts said this was the first successful “reverse discrimination” claim in the area of age bias.

But it did not stand for long. The Supreme Court took up the employer’s appeal and ruled that the law was indeed intended to protect older workers, and not the younger ones who complained about advantages given to their elders. The law “does not mean to stop an employer from favoring an older employee over a young one,” said Justice David H. Souter in General Dynamics Land Systems Inc. vs. Cline.

The case arose when the company’s tank-manufacturing division, which had plants in Lima, Ohio, and Scranton, Pa., moved to change its policy on providing healthcare for retirees.

Before 1997, workers with more than 30 years of service could retire with full health benefits. But after 1997, only those employees who were at least 50 in 1997 could receive this benefit. Those younger than 50 would not be entitled to health benefits upon retirement, even if they ended up working at the company for more than 30 years.

Advocates for older Americans and industry experts said they were relieved by the decision. “This case would have had significant repercussions if it had been decided the other way,” said David Certner, director of federal affairs at AARP, the nation’s largest seniors advocacy group.

If the court had determined that age discrimination laws could go both ways -- protecting younger and older workers -- thousands of companies would have eliminated these clauses and simply cut benefits for everyone, said Lynn Dudley, vice president and senior counsel for the Washington-based American Benefits Council, which represents corporations that sponsor benefit programs.

No law requires companies to provide employee benefits, Dudley added, and cutting future benefits for everyone is the cheapest alternative. Yet many firms “grandfather” near-retirees, allowing them to maintain benefit plans that they may have relied on in their planning, simply because they are too close to retirement to make up for what they would otherwise lose.

“Companies recognize that older workers have a harder time replacing certain benefits than younger workers, who have more time to prepare and may be in better health,” Dudley added. “If the ruling had gone the other way, in favor of the younger workers, any time employers were making a change for the future, they would be forced to eliminate benefits for everyone.”

Thousands of employers adhere to this practice, Dudley added.

Experts said they believed the case would not affect pension plans, which also traditionally favor older workers, largely because pensions are governed by other age discrimination measures written into the Employee Retirement Income Security Act and the Internal Revenue Code.

The Supreme Court was probably not the best forum for making out a claim of youth discrimination. The justices in the majority range in age from 64 to 83.

The dissenters were led by the court’s youngest member, 55-year old Justice Clarence Thomas, who focused on the law’s words, not its intended purpose. It “clearly prohibits discrimination because of an individual’s age, whether the individual is too old or too young,” he said. He was joined by Justices Antonin Scalia and Anthony M. Kennedy.

The dispute resolved Tuesday echoed a similar disagreement in the 1970s over the federal law against racial bias in the workplace. Liberal justices said the purpose was to protect African Americans against racial bias, and they voted to uphold affirmative action policies that sometimes gave blacks preferences over whites.

But conservatives said the law prohibited discrimination based on race, regardless of who was the victim, and they voted to strike down such affirmative action policies as examples of reverse discrimination.

The split Tuesday reflected the same disagreement on reading the law. The justices in the majority said the intent of the age bias law was to protect older workers. The conservative justices, led by Thomas, said the words of the law covered the young as well as the old.

Times staff writer Kathy Kristof in Los Angeles contributed to this report.