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Insurance Not Proxy for Age According to Seventh Circuit Court of Appeals

Beginning in 2008, Lake County, Indiana had large cash problems. To help cut costs, the town offered “retirement incentives to employees age 65 or older.” One of the packages gave the retirees five years of paid supplemental insurance (secondary to Medicare coverage) for those individuals willing to retire and then be re-hired as part-time at-will employees. Some employees took advantage of this offer. In 2013, Lake County learned that current employees were not eligible for supplemental insurance and that the presence of the rehired but formerly retired employees would cause the plan to lose its exemption under federal law. Thus, the rehired employees were fired. In the letters of termination, four reasons were given: they were retired and re-hired; they were 65 and older; they received Medicare; and lastly that they received the supplemental insurance.

Their case for age discrimination came before the Seventh Circuit Court of Appeals. It was confirmed by the appellate court that “retiree only” plans receive special exemptions under federal law and that each plaintiff was a part-time rehire covered by the supplemental insurance. Approximately 10% of Lake County’s workforce was 65 and older and was not enrolled in the supplemental plan. While being over 65 years old was a common characteristic to all of the plaintiffs, the court of appeals did not see age as the impetus for Lake County’s decision. These employees were fired because of their presence on the supplemental health plan, which current employees were not permitted to participate in. The court rejected the argument that termination “based on such insurance coverage is a form of implicit age discrimination.” As the employer had only fired older employees on the supplemental plan, many older workers who were not enrolled remained employed. Moreover, the “undisputed facts” showed that, “economic and regulatory pressures” drove the decision and not perceptions about the abilities of older workers. These plaintiffs could not establish that the policy had a significant disproportionate adverse impact on older workers, nor that they were treated less favorably than employees outside their protected class as there was no appropriate comparator group.