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Third Circuit Upholds Encouraging Long-Term Employees to Retire

In a case arising out of the U.S. Virgin Islands, the Third Circuit Court of Appeals has upheld the right of that government to encourage 30 plus year employees to retire. This “encouragement” was part of a law enacted to help address a severe budget crisis and required employees with 30 years plus of service to contribute an additional three percent of their income to the pension system or retire with a $10,000 bonus.
Two employees, both of whom had been government employees for more than 30 years and were over 40 years of age, claimed the new law targeted older workers in violation of the Age Discrimination in Employment Act. These employees did not wish to retire and believed that the increased contribution requirement was discriminatory. They argued the law was discriminatory in its disparate treatment of older workers and its disparate impact on them; the circuit court disagreed on both counts.
With regard to the disparate treatment, the court did not accept the argument that the government was trying to discriminate against older workers. Not all of the members in the protected age class had hit the 30-year mark and the employees failed to show that the tenure number was a proxy for age. As to the disparate impact claim, the appellate court determined that the Government had a legitimate factor other than age to support its decision to require extra contributions from employees serving longer than 30 years. It was a reasonable means to reduce costs and support the solvency of the pension plan.