Thursday, September 6, 2018
County’s Revocation of Retirees’ Subsidy Wasn’t Age Bias
By a MetNews Staff Writer
Orange County’s decision to increase premiums for its retired employees’ medical coverage was not age discrimination under the state’s Fair Employment and Housing Act, the Ninth U.S. Circuit Court of Appeals held yesterday.
The opinion, by Ninth Circuit Judge Marsha S. Berzon, is the latest chapter in the long-running litigation against the county since its 2006 revision to the way it calculates premiums for current and retired employees.
The ruling comes in a class action brought on behalf of the retirees. The operative complaint alleges that Orange County violated the Fair Employment and Housing Act (“FEHA”) by basing the decision to change the calculus of the premiums on the retirees’ age.
U.S. District Judge Andrew J. Guilford of the Central District of California dismissed the complaint on the FEHA cause of action as well as two contractual causes of action.
Retiree Premium Subsidy
The opinion refers to the county’s original calculation method as resulting in a “retiree premium subsidy.” The subsidy resulted from the pooling of current and retired employees by the county when it calculated the medical insurance premiums paid by each type of employee.
Under the pre-2006 calculation, all current and retired employees would pay the same premiums.
“By allowing retirees to participate in a single unified pool, the County effectively established a health insurance subsidy for retirees, lowering their premiums while raising active employee premiums (largely paid by the County) above the actual cost of covering active employees as a separate group.”
In 2006, the county separated the two groups of employees into separate pools for purposes of calculating the insurance premiums owed by each.
Federal Law Applied
Berzon noted that the plaintiffs’ claim was one which California courts have not addressed, and in dealing with novel issues relating to the FEHA, California courts look to federal cases interpreting the analogous Age Discrimination in Employment Act (“ADEA”).
“First,” she wrote, “this circuit has not decided whether the ADEA applies to retirees. We hold that it does.”
Berzon noted that the law applies to “employees,” but that cases interpreting that term as used in other laws had held it to include retired employees.
She also noted that FEHA itself does not have an actual definition of employees, and simply lists types of employee who are excluded from the law, such as close relatives of an employer. That list does not exclude retirees.
Retirees Separately Situated
Berzon pointed out that retirees are not situated similarly to employees, not being entitled to medical coverage absent a contract. In a 2014 opinion in a parallel case, Retired Employees Association of Orange County v. County of Orange, the Ninth Circuit had held that there was no such contract for the subsidy.
At oral argument in Pasadena on February 6, 2014, Berzon asked the retirees’ attorney, Michael P. Brown:
“So what if they said we don’t want to have any health benefits for retirees because they’re so old and expensive?”
The lawyer replied:
“I think that that would give rise to a claim if they were acting based on age.”
Berzon was not persuaded that the county had acted based on age.
The jurist wrote:
“Crucially, however, the County’s elimination of the subsidy does not discriminate among retirees based on age.…Nor does the subsidy elimination distinguish among active employees based on age, or against active employees who are old enough to retire but have not.”
She acknowledged that the county had eliminated the subsidy based on the higher average premium of retirees as a group, in which the group’s average age plays a notable role.
This, however, was not discrimination under the law, because it was motivated not by age, but by retirement status, and an employer is permitted to treat differently situated groups differently.
“The County does not, among retirees, charge more to older than younger retirees….By adopting the split-roll for the purpose of calculating premiums for medical insurance, the County was simply following through on its determination that already retired persons, who have ceased providing any services to the County, are a separate ‘force’…from the ‘force’ of active employees.”
The complaint also asserted that Orange County had impliedly promised, under several memoranda of understanding between the county and its employees’ union, to continue a program under which retirees a monthly “grant” to defray costs of health care premiums.
The panel reversed Guilford’s dismissal of that claim, holding that the plaintiffs had alleged the existence of a contract and an implied lifetime term for the grant. Allegations in the complaint were sufficient to survive a motion to dismiss, Berzon said.
A request by the retirees for assignment of the case on remand to a different judge was spurned. Berzon wrote:
“There is no claim of personal bias here, and the record reveals none. Nor do we find any ‘unusual circumstances’ warranting reassignment.”
She added that Guilford has not been “inflexible” and it would take considerable time for another judge to get up to speed in the case.
The case is Harris v. County of Orange, No. 13-56061.
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