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FINNEGAN v. TWA

April 29, 1991

JOAN FINNEGAN, et al., Plaintiffs,
v.
TRANS WORLD AIRLINES, INC., Defendant


James B. Moran, Chief United States District Judge.


The opinion of the court was delivered by: MORAN

JAMES B. MORAN, CHIEF UNITED STATES DISTRICT JUDGE

 Following the imposition by defendant Trans World Airlines (TWA) of a four-week cap on the amount of vacation time noncontract employees could accrue each year, a number of senior employees who had earned vacation time in excess of four weeks per year before imposition of the cap filed the instant suit, claiming that TWA had adopted the new policy in violation of the Age Discrimination in Employment Act, 29 U.S.C. ยงยง 621-34 (ADEA). TWA has moved for summary judgment. Plaintiffs, in turn, have filed a cross-motion for summary judgment. For the reasons stated herein, this court grants TWA's motion.

 BACKGROUND

 The following facts are undisputed by the parties. *fn1" In 1985 TWA, a major domestic and international air carrier, was in dire financial straits. *fn2" That year a group of investors led by Carl Icahn began acquiring control of TWA, completing their acquisition in January 1986 (Def. Ex. 1 at 1; Def. Mulvany Dep. at 5; Def. Glass Dep. at 13-14, 24-25). As the acquisition progressed, Icahn directed TWA to reduce its employment costs for all employee groups by $ 300 million (Def. Pearson Dep. at 6, 15, 74-75; Def. Punwani Dep. at 11; Def. Glass Dep. at 26; Def. Mulvany Dep. at 18). Even before Icahn's involvement, TWA had made earlier efforts to reduce its operating costs. In 1984 TWA implemented a second wage scale (the "B" scale) under which agents, clerical, and management employees hired on or after March 1, 1984, received less in compensation and benefits than employees hired before that date (Def. Ex. 10 at 10-11). Among the benefits reduced for B-scale employees was the amount of vacation benefits that could be earned in a year. The old policy, which had applied to all noncontract employees, was as follows: Number of Full Years Active Service with Company Completed Domestic U.S. Nationals On or Before Jan. 15 of Year Employees Based Overseas Vacation is Due to be Taken (Work Days) (Work Days) 1 through 4 years 10 22 5 through 9 years 15 22 10 through 16 years 20 22 17 through 24 years 25 25 25 through 29 years 30 30 30 years and over 35 35

 (Def. Ex. 28; Pl. Ex. 47). The new policy, which applied to all noncontract new hires as of March 1, 1984, was as follows: Number of Full Years Active Service with Company Completed Vacation On or Before Jan. 15 of Year Allowance Vacation is Due to be Taken (Work Days) 1 through 5 years 10 6 through 15 years 15 16 through 25 years 20 26 years and more 25

 (Def. Ex. 28; Def. Ex. 10 at 10-11; Def. Ex. 4 at 25-27; Pl. Ex. 47). *fn3"

 Icahn's directive spurred TWA's senior management into action. In late August, 1985, Charles Glass, then TWA's senior vice-president and controller, outlined for Richard Pearson, then TWA's president, a "possible reassessment of benefit programs to mitigate noncontract pay cuts" that included a " rough set of estimates of the annual effect of certain benefit reductions related to the noncontract work force" *fn4" (Pl. Dep. Ex. 1). Among the benefits Glass proposed for reduction were vacation days, floating and birthday holidays, management overtime, the medical and dental plans, and the thrift plan (Id.). According to Glass' estimates, imposing a four-week vacation cap would save TWA some $ 1.2 million in replacement costs and $ 4 million from a one-time favorable impact on TWA's income statement. *fn5" Glass also estimated the savings that could be realized from a three-week cap.

 TWA announced its cost reduction plan to its noncontract employees in stages, beginning in October 1985. On October 18, 1985, Pearson announced that, effective November 1, 1985, TWA would reduce the wages for all salaried employees by 14% to a minimum of $ 1400 per month, or $ 6.90 per hour; reduce the number of management employees by 15% and the number of nonmanagement, noncontract employees by two percent; and undergo a departmental reorganization in order to move toward a "more cost-effective operation" (Def. Pearson Dep. at 11-12, 16; Pl. Dep. Ex. 7). In an accompanying statement, Icahn announced that all noncontract employees whose pay was being reduced would take part in a profit-sharing plan that was being developed (Pl. Dep. Ex. 13).

 On October 30, 1985, Pearson and Icahn announced that in addition to the previously announced cuts *fn6" cost reduction for noncontract employees would also include: 1) a 50% reduction in advertising for the remainder of 1985; 2) a hiring freeze for the remainder of 1985; 3) elimination of floating and birthday holidays; 4) revision of the medical and dental plans; and 5) the capping of vacation benefits at four weeks per year (Pl. Dep. Ex. 8). In late 1985, TWA added one more element to its cost-reduction plan by establishing a voluntary termination program (VTP) for salaried employees who had been hired on or before December 31, 1976, and were either active or on an approved medical leave as of October 1, 1985 (Def. Pearson Dep. at 31; Def. Ex. 3). *fn7"

 Although it considered several alternative methods of reducing vacation benefits, TWA ultimately decided to adopt the four-week vacation cap as part of its cost-reduction plan. Like the old vacation plan, employees would accrue vacation time over the course of one year for use during the next. Under the new plan, however, employees could accrue no more than four weeks vacation time -- twenty work days -- per year. The four-week cap, which went into effect on January 1, 1986, worked in the following manner: For employees hired before March 1, 1984: Number of Full Years Active Domestic Employees Service with TWA On or Before and U.S. Nationals Jan. 15 of Year Vacation is Based Overseas Due to be Taken (Work Days) 1 through 4 years 10 5 through 9 years 15 10 years and over 20 For employees hired after March 1, 1984: Number of Full Years Active Service with TWA On or Before Vacation Jan. 15 of Year Vacation is Allowance Due to be Taken (Work Days) 1 through 5 years 10 6 through 15 years 15 16 years and over 20

 (Pl. Ex. 47). *fn8" Because they already had been accrued, the number of vacation days actually taken in 1986 was based on the former policy. Under the new policy, beginning January 1, 1986, noncontract employees began accruing the vacation days that would be taken in 1987.

 Finally, TWA implemented a profit-sharing plan in which noncontract employees participated, under which TWA would return up to 20% of any annual "adjusted income" for 1986, 1987 and 1988 (Pl. Dep. Exs. 33, 34; Def. Pearson Dep. at 42-43, 45). Under the plan each employee would receive a profit share based upon the sum of his individual contribution, as a percentage of the total savings contributed by all noncontract and passenger service employees. The contribution for each employee was based upon the dollar value of their pay reduction, a $ 1260 credit for tax and benefit savings, and the dollar value of the amount of annual vacation time they had lost as a result of the four-week vacation cap (Id.; Pl. Exs. 50, 51). Because TWA suffered a $ 75.2 million operating loss in 1986, there was no profit-sharing distribution for that year. In 1987, however, TWA operated at a profit and $ 2,488,000 was distributed to eligible employees (Pl. Dep. Ex. 33 at 17; Pl. Dep. Ex. 32). *fn9"

 Plaintiffs, all current TWA employees, had been sufficiently senior under TWA's prior vacation plan to have been earning in excess of four weeks annual vacation at the time the four-week cap was imposed and lost as much as three weeks vacation time under the new policy. Claiming that the four-week cap violates the ADEA, they filed their complaint with this court on May 16, 1988, after first having filed administrative charges with the Illinois Department of Human Rights and the Equal Employment Opportunity Commission. Plaintiffs later filed a second amended complaint as well. Subsequently, TWA filed its motion for summary judgment, to which plaintiffs filed their cross-motion for summary judgment. It is to those motions that we now turn.

 DISCUSSION

 I. Summary Judgment Standard

 Summary judgment is appropriate where there exists no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Schroeder v. Copley Newspaper, 879 F.2d 266, 268 (7th Cir. 1989). The movant bears the burden of specifying "those portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986) (quoting Fed. R. Civ. P. 56(c)). In response, the nonmovant "must set forth specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56(e). "Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial." Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986). Summary judgment motions ...


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