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10/13/89 Babcock & Wilcox Company, v. the Department of Human

October 13, 1989

BABCOCK & WILCOX COMPANY, PETITIONER

v.

THE DEPARTMENT OF HUMAN RIGHTS ET AL., RESPONDENTS



APPELLATE COURT OF ILLINOIS, SECOND DISTRICT

545 N.E.2d 799, 189 Ill. App. 3d 827, 137 Ill. Dec. 146 1989.IL.1630

Petition for review of order of Human Rights Commission.

APPELLATE Judges:

JUSTICE NASH delivered the opinion of the court. WOODWARD, J., concurs. JUSTICE LINDBERG, Dissenting.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE NASH

This case was initiated by a complaint filed with the Illinois Human Rights Commission (the Commission) by the Department of Human Rights (the Department) on behalf of certain former employees of petitioner, the Babcock & Wilcox Company . The complaint charged that B&W violated section 2-102of the Illinois Human Rights Act (Ill. Rev. Stat. 1987, ch. 68, par. 2-102) (Human Rights Act) by maintaining and implementing a severance pay policy which denied severance pay to complainants because they were eligible to retire on pensions, which was alleged to be an impermissible age-related criterion. The Department moved for partial summary judgment before the Commission, and B&W sought dismissal of the complaints. B&W now appeals from the order and decision of the Commission which granted the Department's motion for summary judgment, contending that (1) ineligibility for a termination allowance based on immediate eligibility for retirement benefits was not impermissible age discrimination because age was not the differentiating factor and there was no intent of the employer to discriminate because of age; (2) that the challenged action is exempt from the prohibitions of the Human Rights Act because it was taken pursuant to a retirement system that is not used as a subterfuge for and does not have the effect of unlawful discrimination; and (3) the claims of those complainants who were hourly employees were waived by a contract entered into between B&W and their collective bargaining representatives, the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America and its Local 528 (the Union). We reverse.

The individual complainants each filed charges with the Department alleging that B&W violated the Illinois Human Rights Act when it denied them severance pay on the ground they were eligible to retire and receive pensions. The Department filed a complaint with the Commission pursuant to section 7-102 of the Human Rights Act (Ill. Rev. Stat. 1987, ch. 68, par. 7-102) which alleged, and B&W's answer admitted, that complainants Roland Berglund, Margaret Dreesen, and John Campbell were each salaried employees of B&W, over the age of 40, with more than 15 years of service with B&W at the time it ceased its Illinois operations on October 31, 1983; the remaining complainants were B&W hourly employees between the ages of 40 and 70 at the time of their separation from B&W's employ and were production workers subject to the terms of a contract entered into on March 22, 1983, between B&W, UAW, and the Union, which provided for a separation allowance to employees meeting the eligibility requirements contained therein. The complaint further alleged that, but for B&W's claimed age-discriminatory separation allowance policy, and other acts of discrimination, the complainants would have been eligible for a separation allowance.

The Department moved for partial summary judgment, and B&W filed an affidavit in opposition to that motion and in support of its cross-motion for summary judgment. While B&W's counteraffidavit is part of the record on appeal, its cross-motion for summary judgment is not. The Department's motion and B&W's counteraffidavit show that in 1963 B&W acquired its Rockford, Illinois, facilities and its operations there were part of its Automated Machine Division . AMD performed nuclear core structural work and produced automated machines in the Rockford facilities. In the spring of 1981, the nuclear core structural work was transferred from AMD to another B&W group, and in 1982, the Rockford plant was transferred to Acme Precision Products (Acme), an unaffiliated company. Acme continued the automated machine activities formerly conducted by B&W, employing some former B&W salaried employees associated with the automated machine activities. Litigation respecting B&W's denial of termination benefits to those employees was resolved in Arnold v. Babcock & Wilcox Co. (1987), 154 Ill. App. 3d 863, 507 N.E.2d 218, aff'd (1988), 123 Ill. 2d 67, 525 N.E.2d 59.

B&W subsequently leased space from Acme at the Rockford plant for the purpose of performing its nuclear core structural work and all complainants continued their employment with B&W for that purpose until about October 31, 1983, when B&W ceased its Rockford operation. All of the complainants were denied a termination allowance by B&W.

HOURLY EMPLOYEES

On March 22, 1983, UAW and the Union entered into a contract with B&W on behalf of the hourly employees in contemplation of the plant closing, which provided that an active employee "who is not eligible for a normal, early, special early or disability retirement under the Service Benefit Pension Plan" would be entitled to a separation allowance based on years of service. A minimum of three years' seniority was necessary to be eligible for the allowance, and the agreement provided that the separation allowance would be paid in a lump sum and would not be considered as a payment in lieu of wages.

Generally, any person who was an hourly employee on December 31, 1975, became a member of the Company Service Benefit Pension Plan, and any person becoming an hourly employee thereafter became a member of the plan upon the latter of the date the employee completed one year of continuous service or reached age 25. An employee's membership in the plan ceased upon termination of his employment unless such termination was by reason of retirement. Eligibility for normal, early, and special early retirement was as follows:

"1. Normal Retirement: a member who is 65 years of age on the retirement date. Benefits equal a specified monthly amount for each year of credited service.

2. Early Retirement: a member who has at least 15 years of service and is age 55 or older on the retirement. Benefits are computed in accordance with the normal retirement provisions contained in the plan but are reduced by 4/10 of 1% for each month by which the member has not attained age 62 at the time of retirement.

3. Special Early Retirement: a member who has at least 10 years of service and age 62 or older on the retirement date.

4. Disability Retirement: a member who has at least 10 years of service and has a permanent and total disability on the retirement date. If the pension commenced prior to age 55, the maximum pension was the equivalent actuarial value to the maximum pension payable at age 55."

All of the hourly employee complainants were ages 55 through 64 except for Thomas Ivy, who was 65 years old, and, pursuant to the terms of the plant closing agreement, these employees were denied a termination allowance because they were eligible to retire. The collective bargaining agreement which was in effect from March 28, 1980, through October 31, 1983, has no provision for a separation allowance, and neither that contract nor the service benefit pension plan states that an hourly employee who is eligible for a retirement pension will not be eligible for a separation allowance.

SALARIED EMPLOYEES

At the time B&W ceased its Rockford operations, its policy and procedure No. 1414--A1 regarding termination benefits for salaried employees provided that the termination pay awarded was to assist financially those permanently terminated salaried employees during their reemployment adjustment period. Policy and procedure No. 1414--A1 provides that termination allowances were not available if a salaried employee was immediately eligible to retire pursuant to the employee retirement plan (the retirement plan). A salaried employee over 45 years of age was eligible for the termination allowance if he had one or more years of service; all salaried employees with five or more years of service were eligible regardless of age. A copy of policy and procedure No. 1414--A1 was available for employee inspection in the personnel department and had been in effect since at least 1960.

Membership in the salaried employees' retirement plan was generally the same as that under the hourly employees' pension plan and, like that plan, a salaried employee's membership ended upon termination of employment. Salaried employees were eligible for retirement benefits as follows:

"1. Normal Retirement: a member who is 65 years of age on the retirement date. The minimum annual pension payable to a member who has completed 15 or more years of credited service is $1,500; the minimum pension payable to a member with less than 15 years of service is equal to $1,500 multiplied by the ratio that years of credited service bears to 15.

2. Early Retirement: a member who has at least 15 years of service and age 50 or older on the retirement date. Benefits are computed in accordance with the normal retirement provisions contained in the plan but if the total of the member's age and years of credited service is less than 75, certain reductions in benefits are set forth in the plan.

3. Disability Retirement: a member who has at least 15 years of service and a permanent and total disability on the retirement date."

The current retirement plan, effective March 1, 1979, did not state that termination allowances would be denied if a salaried employee was eligible for immediate retirement. The summary plan description, dated May 1976, provided, however, that an employee's pension would be reduced by any dismissal allowance, and that "[t]his booklet summarizes only the main features of the Employee Retirement Plan and does not attempt to cover all details. These are provided in the official plan text and Trust Agreement which legally govern the operation of the plan. Copies of these documents . . . are available for review by any plan member at your local personnel office." The retirement plan, effective January 1, 1972, as well as other prior versions of the retirement plan dating back to 1955, provided that the amount of pension payable to a retired employee would be reduced by the amount of any dismissal allowance paid or payable to a retired or terminated employee.

In summary, the undisputed facts show that B&W denied a termination allowance to those complainants who were salaried employees in accordance with its long-established written company policy and procedure and that those complainants who were hourly employees were denied termination pay as was provided in the plant closing agreement entered into between B&W and the hourly employees' union representatives. Further, the established company retirement plans for both hourly and salaried employees do not state that retirement-eligible employees would be denied termination pay.

The Department moved for partial summary judgment on the issue of liability, and B&W apparently filed a cross-motion for summary judgment seeking dismissal of the complaint. Initially, we note that the administrative law Judge made inconsistent findings of fact regarding the status of complainants Berglund, Dreesen, and Campbell as salaried or hourly employees. As the Department's complaint and B&W's answer make clear, these are salaried employees, and neither B&W nor the Department disputes this fact on appeal.

The ALJ, in her interim recommended order and decision, concluded that B&W's policy of denying severance pay to employees eligible to retire with a pension resulted in age discrimination prohibited by section 2-102of the Illinois Human Rights Act (Ill. Rev. Stat. 1987, ch. 68, par. 2-102) and that complainants were thus treated disparately from nonpension-eligible employees who received the severance pay. The ALJ also concluded that B&W's severance pay policy was not exempt as a merit or retirement system under section 2-104(5)(a) of the Human Rights Act (Ill. Rev. Stat. 1987, ch. 68, par. 2-104(5)(a)), and that B&W's affirmative defense of waiver was not a defense to the Human Rights Act's prohibition against unlawful discrimination on the basis of age. In concluding that B&W's severance pay policy was not exempt under section 2-104(5)(a) of the Human Rights Act, the ALJ recommended that the Human Rights Commission adopt the rationale of some Federal cases which have interpreted an analogous Federal provision under the Federal Age Discrimination in Employment Act of 1967 (29 U.S.C. § 623(f)(2) (1982)). These cases hold that age-based distinctions in employee benefit plans must be justified by significant cost considerations and, because the age of an employee has no relation to the cost of severance pay to an employer, a severance pay policy which denies the award to the older worker is age discriminatory. B&W filed exceptions to the interim recommended order and decision, and the ALJ thereafter entered her recommended order and decision sustaining the complaints.

On June 28, 1988, the Commission entered an order affirming the recommended order and decision, finding that B&W's severance policy was facially discriminatory, and B&W's exceptions were denied. Because the Department does not argue that B&W's failure to file its exceptions to the recommended order and decision waives those exceptions, we do not consider the issue. Cf. Glassworks, Inc. v. Human Rights Comm'n (1987), 164 Ill. App. 3d 842, 849, 518 N.E.2d 343 (where objections were filed with the ALJ as to the interim recommended order and decision and not to the recommended order and decision as is required under section 8-107of the Human Rights Act (Ill. Rev. Stat. 1987, ch. 68, par. 8-107), the objections were not preserved for review).

On July 8, 1988, B&W filed a motion with the Human Rights Commission to modify its order, alleging that an earlier action entitled Equal Employment Opportunity Comm'n v. Babcock & Wilcox Co. (W.D. Mo. filed June 13, 1986), No. 86--0762--CV--W--6, superseded this action insofar as the salaried employees are concerned. The record discloses that in that case, the Federal Equal Employment Opportunity Commission filed a complaint on behalf of certain unnamed salaried employees alleging that B&W had violated the Federal Age Discrimination in Employment Act of 1967 (29 U.S.C. § 621 et seq. (1982)) by denying those employees a termination allowance. That case was settled by a consent decree entered on December 8, 1987. In its memorandum in support of its motion to modify the Commission's order in this case, B&W argued that upon the commencement of an action under the Federal Age Discrimination Act, any State action is superseded, and that any action on behalf of the salaried employees in this case was accordingly precluded. The Commission and the Department note in their brief that on January 6, 1989, the Commission entered a supplemental order, which is not part of the record of this case on appeal, deleting its order for severance payments to the three complainants who were salaried employees, and that a motion by the Department to vacate or modify that supplemental order is still pending before the Commission. The Commission and the Department also note in their brief in this court that the Department had filed a brief with the Commission in opposition to B&W's motion to modify its order in December 1988, and state that the brief "was inadvertently not before the Commission at the time of the January, 1989 modification. . . . The State Respondents will inform this Court of any ruling and make a motion to supplement the record, if necessary." This matter has not been noted or addressed in B&W's brief.

On August 1, 1988, B&W filed a petition for review of the Commission's order by this court pursuant to section 8-111 of the Human Rights Act, which permits a party to obtain judicial review of a final order of the Commission by filing a petition for review in the appellate court within 35 days after entry of the Commission's order. (See Ill. Rev. Stat. 1987, ch. 68, par. 8-111.) The parties have not appealed to this court from the later supplemental order which was apparently entered by the Commission which is stated to have modified the decision relating to the salaried employees and which we are asked to review in this appeal. We note too that B&W has not complied with Supreme Court Rule 341(e)(4)(ii), which requires that an appellant's brief contain a statement of jurisdiction (122 Ill. 2d R. 341(e)(4)(ii)).

We consider first whether the Commission's order affirming the ALJ's recommended order and decision is final and appealable. Section 8-111(1) of the Human Rights Act (Ill. Rev. Stat. 1987, ch. 68, par. 8-111(1)) provides that a petition for review to the appellate court should be filed in accordance with Supreme Court Rule 335 (107 Ill. 2d R. 335), which makes section 3-101 of the Code of Civil Procedure (Ill. Rev. Stat. 1987, ch. 110, par. 3-101) applicable to a direct review of an ...


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