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Henn v. National Geographic Society

decided: May 29, 1987.


Appeal from the United States District Court for the Northern District of Illinois, Eastern Division, No. 84 C 5125, Harry D. Leinenweber, Judge.

Bauer, Chief Judge, and Posner and Easterbrook, Circuit Judges.

Author: Easterbrook

EASTERBROOK, Circuit Judge.

Experiencing a decline in advertising, the National Geographic Society decided to reduce the number of employees selling ads. The Society offered every ad salesman over age 55 the option of early retirement. The Society made the offer in June 1983; the recipients had more than two months to think it over. The Society offered: a severance payment of one year's salary, retirement benefits calculated as if the retiree had quit at 65, medical coverage for life as if the employee were still on the payroll, and some supplemental life insurance coverage. The letter extending the offer stated that this was a one-time opportunity. Twelve of the fifteen recipients took the offer; the three who declined are still employed by the Society. All twelve have received the promised benefits. Four of the twelve filed this suit, contending that their separation violated the Age Discrimination in Employment Act, 29 U.S.C. §§ 621-34.

The district court granted summary judgment to the Society. It concluded that early retirement violates the ADEA only if the alternative is "constructive discharge" - that is, working conditions so onerous or demeaning that the employee has effectively been fired in place and compelled to leave. See Bartman v. Allis-Chalmers Corp., 799 F.2d 311, 314 (7th Cir. 1986); Brown v. Brienen, 722 F.2d 360, 365 (7th Cir. 1983). The court thought it undisputed that plaintiffs' working conditions were unchanged from what they had always been; there was pressure to perform and dark hints that failure to sell more ads would have unpleasant consequences, but the judge concluded that these went with the territory. Each person's decision to retire was his own, and any pressure he felt was the product of the downturn in sales and the risks of a salesman's job.

The plaintiffs' brief on appeal is principally devoted to insisting that there was enough evidence of constructive discharge to require a trial. The case has been complicated, however, by Paolillo v. Dresser Industries, Inc., 813 F.2d 583 (2d Cir. 1987), which holds that every retirement under an early retirement plan creates a prima facie case of age discrimination, and that the employer must show both that the details of the plan have solid business justification and that each decision to retire is "voluntary" - by which the Second Circuit apparently meant "without undue strain". If Paolillo correctly interprets the ADEA, this case must be tried. We conclude, however, that the parties and the district court, rather than Paolillo, took the right approach. Only a constructive discharge, where an actual discharge would violate the ADEA, supports a claim of the sort plaintiffs pursue.

To determine the proper treatment of early retirement, we start by assuming that the employer is complying with the ADEA. (Whether the Society was doing so is a question to which we return.) Now the employer adds an offer of early retirement. Provided the employee may decline the offer and keep working under lawful conditions, the offer makes him better off. He has an additional option, one that may be (as it was here) worth a good deal of money. He may retire, receive the value of the package, and either take a new job (increasing his income) or enjoy new leisure. He also may elect to keep working and forfeit the package. This may put him to a hard choice; he may think the offer too good to refuse; but it is not Don Corleone's "Make him an offer he can't refuse." "Your money or your life?" calls for a choice, but each option makes the recipient of the offer worse off. When one option makes the recipient better off, and the other is the status quo, then the offer is beneficial. That the benefits may overwhelm the recipient and dictate the choice cannot be dispositive. The question "Would you prefer $100,000 to $50,000?" will elicit the same answer from everyone, but it does not on that account produce an "involuntary" response.

Section 4(a)(1) of the ADEA, 29 U.S.C. § 623(a)(1), makes it unlawful to "discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's age". Because an offer of early retirement is valuable, the sort of thing many people would pay to receive, it might be thought to "discriminate against" those who do not get the offer. But people under 40 are not protected by the ADEA, 29 U.S.C. § 631(a), and some distinctions within the group of employees 40 and over are allowed by § 4(f)(2), which permits an employer "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 [the ADEA]". This section allows distinctions to be drawn on account of age when, for example, calculating insurance premiums. The employer may charge older employees more for term insurance; the employer may offer lower monthly payments to employees who retire early. Such plans have sound actuarial foundations, and § 4(f)(2) permits their use. The employer also may make decisions based on seniority, even though seniority correlates with age. Several cases, including Paolillo, have assumed that an early retirement plan that excludes some people in the protected age group must be examined under § 4(f)(2), which requires the employer to show both a sound business purpose for the structure of the plan and the absence of "subterfuge". E.g., Cipriano v. Board of Education, 785 F.2d 51 (2d Cir. 1986); Patterson v. Independent School District, 742 F.2d 465 (8th Cir. 1984). See also 29 C.F.R. § 860.120(a)(1), discussing the function of § 4(f)(2) and the burden it imposes on employers. (The legislative history of § 4(f)(2) is discussed in EEOC v. Borden's, Inc., 724 F.2d 1390, 1395-96 (9th Cir. 1984).)

Section 4(f)(2), however, is a defense. The employer need not mount a defense unless the employee makes out a prima facie case. An employee excluded from the early retirement plan (as in Cipriano, which excluded employees 60 and over), or treated adversely under it (as in Patterson, dealing with a plan whose benefits diminished with age), has stated a claim of discrimination. An employee to whom the offer has been extended - such as our four plaintiffs - is the beneficiary of any distinction on the basis of age. None can claim to be adversely affected by discrimination in the design or offer of the early retirement package. Cf. Dorsch v. L.B. Foster Co., 782 F.2d 1421, 1427-29 (7th Cir. 1986). So in a suit by someone in the favored group, § 4(f)(2) never comes into play.

Paolillo concluded, however, that retirement under an early retirement plan is a prima facie case of age discrimination against the person who retires. That forced the employer to rely on § 4(f)(2), the Second Circuit believed, and it added an obligation that the employer not only justify the structure of its plan but also show that each decision to retire was "voluntary" in the sense of "without undue mental strain". The court thought this a natural interpretation of Cipriano. It is not, because Cipriano dealt with people excluded from the plan. The discrimination against the plaintiff called for explanation; there was no similar discrimination against the plaintiff in Paolillo. The Second Circuit also disregarded several earlier cases that had held that early retirement is not the basis for an inference of discrimination. E.g., Gray v. New England Telephone & Telegraph Co., 792 F.2d 251, 255 (1st Cir. 1986); Coburn v. Pan American World Airways, Inc., 229 U.S. App. D.C. 61, 711 F.2d 339 (D.C. Cir. 1983); Ackerman v. Diamond Shamrock Corp., 670 F.2d 66 (6th Cir. 1982). These courts treated offers of early retirement benefits in the way we have found natural - as favors to the older employees, about which they cannot complain. See Diamond, 670 F.2d at 71 ("Diamond appears to have been rather generous with Ackerman. Rather than simply terminating him or switching him to a lower paying or less prestigious job, Diamond offered him an opportunity to retire with dignity."); Coburn, 711 F.2d at 344 (early retirement "is a humane practice" that "supports not a hint of age discrimination."). Paolillo created a conflict among the circuits.

In characterizing retirement under an early retirement program as presumptiveley discriminatory, Paolillo overlooked the regulation governing early retirement plans, 29 C.F.R. § 1625.9(f). This provides: "Neither section 4(f)(2) nor any other provision of the Act makes it unlawful for a plan to permit individuals to elect early retirement at a specified age at their own option." This plausible construction of the ADEA is entitled to considerable weight where, as here, Congress never considered the matter. Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843, 81 L. Ed. 2d 694, 104 S. Ct. 2778 (1984). The legislative history of the ADEA is unilluminating about early retirement plans. Given that, § 1625.9(f), and the fact that the offer of early retirement is beneficial to the recipient, there is no reason to treat every early retirement as presumptively an act of age discrimination.

The "prima facie case" in the law of discrimination is a shorthand for the constellation of events that raises a suspicion of discrimination - enough so to require the employer to explain his conduct. See Texas Department of Community Affairs v. Burdine, 450 U.S. 248, 253, 67 L. Ed. 2d 207, 101 S. Ct. 1089 (1981); Furnco Construction Corp. v. Waters, 438 U.S. 567, 577, 57 L. Ed. 2d 957, 98 S. Ct. 2943 (1978); McDonnell Douglas Corp. v. Green, 411 U.S. 792, 36 L. Ed. 2d 668, 93 S. Ct. 1817 (1973). When a court can identify some circumstances that "give rise to an inference of unlawful discrimination" (Burdine, 450 U.S. at 253) it may treat similar circumstances as creating a presumptive case of discrimination in the future. When similar circumstances would not support an inference, they should not be treated as a prima facie case of discrimination. Mason v. Continental Illinois National Bank, 704 F.2d 361, 364-66 (7th Cir. 1983). Retirement is an innocuous event, coming once to many employees and more than once to some. Retirement is not itself a prima facie case of age discrimination, not unless all separations from employment are. And as we have explained, an offer of incentives to retire early is a benefit to the recipient, not a sign of discrimination. Taken together, these two events - one neutral, one beneficial to the older employee - do not support an inference of age discrimination. We agree with Coburn and Diamond that an early retirement package is a boon; we therefore must disagree with Paolillo's conclusion that early retirement presumptively establishes age discrimination.

What distinguishes early retirement from discharge is the power of the employee to choose to keep working. This must mean a "voluntary" choice. But what does "voluntary" mean? We could ask, as the court did in Paolillo, whether the employee had enough time to mull over the offer and whether the choice was free from "pressure". (In Paolillo the employees had less than a week, which the court thought suspiciously short.) Yet the need to make a decision in a short time, under pressure, is an unusual definition of "involuntary". A criminal defendant may be offered a plea bargain on a take-it-or-leave-it basis, knowing that if he does not act quickly the prosecutor may strike a deal with another defendant instead; the need to act in haste does not make the plea "involuntary" if the defendant knows and accepts the terms of the offer. A suspect being interrogated may confess in a flash; his naivete and the shortness of time do not make the confession involuntary. "Involuntariness" is a term of art dealing with certain tactics that the Constitution places off limits to interrogators. Colorado v. Connelly, 479 U.S. 157, 107 S. Ct. 515, 521-22, 93 L. Ed. 2d 473 (1986). A commodities trader may have only seconds to buy or sell huge quantities in response to movements in price; neither the shortness of time nor the fear of financial loss would enable the trader to undo as "involuntary" choices that turned out, in retrospect, to be unhappy. An employee offered a new job with higher pay (good) in a new city (bad) may have only a short time to decide; neither the brevity of the time nor the difficulty of the choice makes the decision "involuntary".

The "voluntariness" question in these and many more examples of important choices turns on such things as: did the person receive information about what would happen in response to the choice? was the choice free from fraud or other misconduct? did the person have an opportunity to say no? A very short period to make a complex choice may show that the person could not digest the information necessary to the decision. This would show that the offer of information was illusory and there was no informed choice. But when the employee has time to consult spouse and financial adviser, the fact that he still found the decision hard cannot be decisive. A person contemplating an offer of early retirement may find the choice ...

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