United Air Lines, Inc. v. McMann

434 U.S. 192, 98 S. Ct. 444, 54 L. Ed. 2d 402, 1977 U.S. LEXIS 162

Opinions

Mr. Chief Justice Burger,

delivered the opinion of the Court.

The question presented in this case is whether, under the Age Discrimination in Employment Act of 1967, retirement of an employee over his objection and prior to reaching age 65 is permissible under the provisions of a bona fide retirement plan established by the employer in 1941 and joined by the employee in 1964. We granted certiorari to resolve a conflict between the holdings of the Fifth Circuit in Brennan v. Taft Broadcasting Co., 500 F. 2d 212 (1974), and the Fourth Circuit now before us. See Zinger v. Blanchette, 549 F. 2d 901 (CA3 1977), cert. pending, No. 76-1375.

I

The operative facts were stipulated by the parties in the District Court and are not controverted here. McMann joined United Air Lines, Inc., in 1944, and continued as an employee until his retirement at age 60 in 1973. Over the years he held various positions with United and at retirement held that of technical specialist-aircraft systems. At the time McMann was first employed, United maintained a formal retirement income plan it had inaugurated in 1941, in which McMann was eligible to participate, but was not compelled to join.¹ He voluntarily joined the plan in January 1964. The application form McMann signed showed the normal retirement age for participants in his category as 60 years.

McMann reached his 60th birthday on January 23, 1973, and was retired on February 1, 1973, over his objection. He then filed a notice of intent to sue United for violation of the Act pursuant to 29 U. S. C. § 626 (d). Although he received an opinion from the Department of Labor that United's plan was bona fide and did not appear to be a subterfuge to evade the purposes of the Act, he brought this suit.

McMann’s suit in the District Court seeking injunctive relief, reinstatement, and backpay alleged his forced retirement was solely because of his age and was unlawful under the Act. United's response was that McMann was retired in compliance with the provisions of a bona fide retirement plan which he had voluntarily joined. On facts as stipulated, the District Court granted United’s motion for summary judgment.

In the Court of Appeals it was conceded the plan was bona fide “in the sense that it exists and pays benefits.” ² But McMann, supported by a brief amicus curiae filed in that court by the Secretary of Labor, contended the enforcement of the age-60 retirement provision, even under a bona fide plan instituted in good faith in 1941, was a subterfuge to evade the Act.³

The Court of Appeals agreed, holding that a pre-age-65 retirement falls within the meaning of “subterfuge” unless the employer can show that the “early retirement provision . . . ha[s] some economic or business purpose other than arbitrary age discrimination.” 542 F. 2d 217, 221 (1976). The Court of Appeals remanded the case to the District Court to allow United an opportunity to show an economic or business purpose and United sought review here.

We reverse.

II

Section 2 (b) of the Age Discrimination in Employment Act of 1967, 81 Stat. 602, recites that its purpose is

“to promote employment of older persons based on their ability rather than age; to prohibit arbitrary age discrimination in employment; to help employers and workers find ways of meeting problems arising from the impact of age on employment.” 29 U. S. C. § 621 (b).

Section 4 (a)(1) of the Act, 81 Stat. 603, makes it unlawful for an employer

“to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s age . . . .” 29 U. S. C. § 623 (a)(1).

The Act covers individuals between ages 40 and 65, 29 U. S. C. § 631, but does not prohibit all forced retirements prior to age 65; some are permitted under §4 (f)(2), 81 Stat. 603, which provides:

“It shall not be unlawful for an employer ... or labor organization to observe the terms of a bona fide seniority system or any bona fide employee benefit plan such as a retirement, pension, or insurance plan, which is not a subterfuge to evade the purposes of this [Act], except that no such employee benefit plan shall excuse the failure to hire any individual 29 U. S. C. § 623 (f)(2).

See infra, at 198-202.

McMann argues the term “normal retirement age” is not defined in the plan other than in a provision that “A Participant’s Normal Retirement Date is the first day of the month following his 60th birthday.” From this he contends normal retirement age does not mean mandatory or compelled retirement at age 60, and United therefore did not retire him “to observe the terms” of the plan as required by §4 (f)(2). As to this claim, however, we accept the analysis of the plan by the Court of Appeals for the Fourth Circuit:

“While the meaning of the word 'normal’ in this context is not free from doubt, counsel agreed in oral argument on the manner in which the plan is operated in practice. The employee has no discretion whether to continue beyond the 'normal’ retirement age. United legally may retain employees such as McMann past age 60, but has never done so: its policy has been to retire all employees at the 'normal’ age. Given these facts, we conclude that for purposes of this decision, the plan should be regarded as one requiring retirement at age 60 rather than one permitting it at the option of the employer.” 542 F. 2d, at 219. (Emphasis supplied.)

McMann had filed a grievance challenging his retirement since, as a former pilot, he held a position on the pilots’ seniority roster. In that arbitration proceeding he urged that “normal” means “average” and so long as a participant is in good health and fit for duty he should be retained past age 60. The ruling in the arbitration proceeding was that “ ' [n] ormal’ means regular or standard, not average, not only as a matter of linguistics but also in the general context of retirement and pension plans and the settled practice at United.” It was also ruled that the involuntary retirement of McMann “was taken in accordance with an established practice uniformly applied to all members of the bargaining unit.”

Though the District Court made no separate finding as to the meaning of “normal” in this context, it had before it the definition ascribed in the arbitration proceeding and that award was incorporated by reference in the court’s findings and conclusions. In light of the facts stipulated by the parties and found by the District Court, we also accept the Court of Appeals’ view as to the meaning of “normal.” ⁴

In Brennan v. Taft Broadcasting Co., 500 F. 2d, at 215, the Fifth Circuit held that establishment of a bona fide retirement plan long before enactment of the Act, “eliminated] any notion that it was adopted as a subterfuge for evasion.” ⁵ In rejecting the Taft reasoning, the Fourth Circuit emphasized that it distinguished between the Act and the -purposes of the Act. The distinction relied on is untenable because the Act is the vehicle by which its purposes are expressed and carried out; it is difficult to conceive of a subterfuge to evade the one which does not also evade the other.

McMann argues that § 4 (f) (2) was not intended to authorize involuntary retirement before age 65, but was only intended to make it economically feasible for employers to hire older employees by permitting the employers to give such older employees lesser retirement and other benefits than provided for younger employees. We are persuaded that the language of § 4 (f) (2) was not intended to have such a limited effect.

In Zinger v. Blanchette, 549 F. 2d 901 (1977), the Third Circuit had before it both the Taft and McMann decisions. It accepted McMann’s distinction between the Act and its purposes, which, in this setting, we do not, but nevertheless concluded:

“The primary purpose of the Act is to prevent age discrimination in hiring and discharging workers. There is, however, a clear, measurable difference between outright discharge and retirement, a distinction that cannot be overlooked in analyzing the Act. While discharge without compensation is obviously undesirable, retirement on an adequate pension is generally regarded with favor. A careful examination of the legislative history demonstrates that, while cognizant of the disruptive effect retirement may have on individuals, Congress continued to regard retirement plans favorably and chose therefore to legislate only with respect to discharge.” 549 F. 2d, at 905. (Emphasis supplied; footnote omitted.)

The dissent relies heavily upon the legislative history, which by traditional canons of interpretation is irrevelant to an unambiguous statute. However, in view of the recourse to the legislative history we turn to that aspect to demonstrate the absence of any indication of congressional intent to undermine the countless bona fide retirement plans existing in 1967 when the Act was passed. Such a pervasive impact on bona fide existing plans should not be read into the Act without a clear, unambiguous expression in the statute.

When the Senate Subcommittee was considering the bill, the then Secretary of Labor, Willard Wirtz, was asked what effect the Act would have on existing pension plans. His response was:

“It would be my judgment . . . that the effect of the provision in 4 (f) (2) [of the original bill] ... is to protect the application of almost all plans which I know anything about. ... It is intended to protect retirement plans.” Hearings on S. 830 before the Subcommittee on Labor of the Senate Committee on Labor and Public Welfare, 90th Cong., 1st Sess., 53 (1967) (hereafter Senate Hearings) .⁶

When the present language of § 4 (f) (2) was later proposed by amendments, Mr. Wirtz again commented that established pension plans would be protected. Hearings on H. R. 4221 et al. before the General Subcommittee on Labor of the House Committee on Education and Labor, 90th Cong., 1st Sess., 40 (1967).

Senator Javits' concern with the administration version of §4 (f)(2), expressed in 1967 when the legislation was being debated, was that it did not appear to give employers flexibility to hire older employees without incurring extraordinary expenses because of their inclusion in existing retirement plans. His concern was not, as inferred by the dissent, that involuntary retirement programs would still be allowed. He said,

“The administration bill, which permits involuntary separation under bona fide retirement plans meets only part of the problem. It does not provide any flexibility in the amount of pension benefits payable to older workers depending on their age when hired, and thus may actually encourage employers, faced with the necessity of paying greatly increased premiums, to look for excuses not to hire older workers when they might have hired them under a law granting them a degree of flexibility with respect to such matters.

“That flexibility is what we recommend.

“We also recommend that the age discrimination law should not be used as the place to fight the pension battle but that we ought to subordinate the importance of adequate pension benefits for older workers in favor of the employment of such older workers and not make the equal treatment under pension plans a condition of that employment.” Senate Hearings 27.⁷

In keeping with this objective Senator Javits proposed the amendment, which was incorporated into the 1967 Act, calling for “a fairly broad exemption ... for bona fide retirement and seniority systems which will facilitate hiring rather than deter it and make it possible for older workers to be employed without the necessity of disrupting those systems.” Id., at 28.

The true intent behind § 4 (f) (2) was not lost on the representatives of organized labor; they viewed it as protecting an employer’s right to require pre-65 retirement pursuant to a bona fide retirement plan and objected to it on that basis. The legislative director for the AFD-CIO testified:

“We likewise do not see any reason why the legislation should, as is provided in section 4(f)(2) of the Administration bill, permit involuntary retirement of employees under 65. . . . Involuntary retirement could be forced, regardless of the age of the employee, subject only to the limitation that the retirement policy or system in effect may not be merely a subterfuge to evade the Act.” Senate Hearings 96.

In order to protect workers against involuntary retirement, the AFL-CIO suggested an “Amendment to Eliminate Provision Permitting Involuntary Retirement From the Age Discrimination in Employment Act, and to Substitute Therefor Provision Safeguarding Bona Fide Seniority or Merit Systems,” which would have deleted any reference to retirement plans in the exception. Id., at 100. This amendment was rejected.

But, as noted in Zinger, 549 F. 2d, at 907, the exemption of benefit plans remained in the bill as enacted notwithstanding labor’s objection, and the labor-proposed exemption for seniority systems was added. There is no basis to view the final version of § 4 (f) (2) as an acceptance of labor’s request that the benefit-plan provision be deleted; the plain language of the statute shows it is still there, albeit in different terms.

Also added to the section when it emerged from the Senate Subcommittee is the language “except that no such employee benefit plan shall excuse the failure to hire any individual.” Rather than reading this addendum as a redundancy, as does the dissent, post, at 212, and n. 5, it is clear this is the result of Senator Javits’ concern that observance of existing retirement plan terms might discourage hiring of older workers. Supra, at 200. Giving meaning to each of these provisions leads inescapably to the conclusion they were intended to permit observance of the mandatory retirement terms of bona fide retirement plans, but that the existence of such plans could not be used as an excuse not to hire any person because of age.

There is no reason to doubt that Secretary Wirtz fully appreciated the difference between the administration and Senate bills. He was aware of Senator Javits’ concerns, and knew the Senator sought to amend the original bill to focus on the hiring of older persons notwithstanding the existence of pension plans which they might not economically be permitted to join. See Senate Hearings 40. Senator Javits’ view was enacted into law making it possible to employ such older persons without compulsion to include them in pre-existing plans.

The dissent misconceives what was said in the Senate debate. The dialogue between Senators Javits and Yarborough, the minority and majority managers of the bill, respectively, is set out below⁸ and clearly shows awareness of the continued vitality of pre-age-65 retirements.

III

Iii this case, of course, our function is narrowly confined to discerning the meaning of the statutory language; we do not pass on the wisdom of fixed mandatory retirements at a particular age. So limited, we find nothing to indicate Congress intended wholesale invalidation of retirement plans instituted in good faith before its passage, or intended to require employers to bear the burden of showing a business or economic purpose to justify bona fide pre-existing plans as the Fourth Circuit concluded. In ordinary parlance, and in dictionary definitions as well, a subterfuge is a scheme, plan, stratagem, or artifice of evasion. In the context of this statute, “subterfuge” must be given its ordinary meaning and we must assume Congress intended it in that sense. So read, a plan established in 1941, if bona fide, as is conceded here, cannot be a subterfuge to evade an Act passed 26 years later. To spell out an intent in 1941 to evade a statutory requirement not enacted until 1967 attributes, at the very least, a remarkable prescience to the employer. We reject any such per se rule requiring an employer to show an economic or business purpose in order to satisfy the subterfuge language of the Act.⁹

Accordingly, the judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent with this opinion.

Reversed and remanded.

1 The plan paid retirement benefits pursuant to a group annuity contract between United and two life insurance companies.

2 The same concession was made in this Court.

3 No brief amicus was filed on behalf of the Department of Labor in this Court, but after submission of the case following oral argument the Solicitor General wrote a letter to the Clerk of this Court stating that the Government agreed with the Eourth Circuit and was prepared to file a brief amicus within three weeks. The Rules of this Court do not allow the filing of briefs amicus after oral argument. See Rule 42. No motion for leave to file a brief amicus was filed.

4 We note, too, that the Department of Labor’s interpretation of § 4 (f) (2), issued nearly contemporaneously with the effective date of the Act, was that the meaning did not turn on whether or not all employees under a plan are required to retire at the same age.

“The fact that an employer may decide to permit certain employees to continue working beyond the age stipulated in the formal retirement program does not, in and of itself, render an otherwise bona fide plan invalid, insofar as the ¡exception provided in Section 4 (f) (2) is concerned.” 29 CFR §860.110 (a) (1976).

The Department’s more recent position on the section is that pre-65 retirements “are unlawful unless the mandatory retirement provision . . . is required by the terms of the plan and is not optional . . . .” U. S. Department of Labor, Annual Report on Age Discrimination in Employment Act of 1967, p. 17 (1975). Having concluded, as did the Court of Appeals, that the United plan calls for mandatory retirement at age 60, however, we need not consider this further.

5 Similarly, in De Loraine v. MEBA Pension Trust, 499 F. 2d 49 (CA2), cert. denied, 419 U. S. 1009 (1974), the court said a bona fide pension plan ¡established in 1955 was not a subterfuge. That case did not properly present the question of whether the Act forbade involuntary retirement before age 65 and the court did not purport to decide it. 499 F. 2d, at 51 n. 7. Steiner v. National League of Professional Baseball Clubs, 377 F. Supp. 945, 948 (CD Cal. 1974), aff’d, No. 74-2604 (CA9, Oct. 15, 1975), likewise rejected the idea that a pension plan established long before the Act could be a subterfuge saying: “Obviously it could not have been evolved in an attempt to circumvent any public policy or law.”

6 Section 4 (f)(2) of the original administration bill provided: “It shall not be unlawful for an employer ... to separate involuntarily an employee under a retirement policy or system where such policy or system is not merely a subterfuge to evade the purposes of this Act . . . .”

7 Legislative observations 10 years after passage of the Act are in no sense part of the legislative history. See post, at 218.

8 “Mr. YARBOROUGH. I wish to say to the Senator that that is basically my understanding of the provision in line 22, page 20 of the bill, clause 2, subsection (f) of section 4, when it refers to retirement, pension, or insurance plan, it means that a man who would not have been employed except for this law does not have to receive the benefits of the plan. Say an applicant for employment is 55, comes in and seeks employment, and the company has bargained for a plan with its labor union that provides that certain moneys will be put up for a pension plan for anyone who worked for the employer for 20 years'so that a 55-year-old employee would not be employed past 10 years. This means he cannot be denied employment because he is 55, but he will not be able to participate in that pension plan because unlike a man hired at 44, he has no chance to earn 20 years retirement. In other words, this will not disrupt the bargained-for pension plan. This will not deny an individual employment or prospective employment but will limit his rights to obtain full consideration in the pension, retirement, or insurance plan.

“Mr. JAVITS. I thank my colleague. That is important to business people.” 113 Cong. Rec. 31255 (1967).

9 Reference is made by the dissent, post, at 219 n, 13, to a recital on §4 (f)(2) in the House Report. The House Report states:

“[Section 4 (f) (2)] applies to new and existing employee benefit plans, and to both the establishment and maintenance of such plans. This exception serves to emphasize the primary purpose of the bill — hiring of older workers — by permitting employment without necessarily including such workers in employee benefit plans. The specific exception was an amendment to the original bill, is considered vita[l] to the legislation, and was favorably received by witnesses at the hearings.” H. R. Rep. No. 805, 90th Cong., 1st Sess., 4 (1967). (Emphasis supplied.)

The italicized portion shows quite clearly that the primary purpose of the bill was the hiring of older workers. A quite different question would be presented if a pre-existing bona fide plan were used as a reason for refusing to hire an older applicant for employment.