United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
JOHNSON COLEMAN United States District Judge.
First Amended Complaint alleges discrimination in violation
of the Age Discrimination in Employment Act of 1967, as
amended, 29 U.S.C. §621 et seq. (“ADEA”)
against defendant Caterpillar, Inc.
(“Caterpillar”) and on behalf of a purported
class of similarly situated individuals. Plaintiffs move for
partial summary judgment in their favor , claiming the
undisputed facts demonstrate that Caterpillar's
Supplemental Unemployment Benefit (“SUB”) Plan
liquidation program caused a significant disparate impact on
older workers. Caterpillar moves for summary judgment in its
favor , arguing the undisputed facts demonstrate that
plaintiffs cannot establish disparate impact and Caterpillar
based its decision on a reasonable factor other than age. For
the reasons stated below, this Court denies summary judgment
for plaintiffs and grants summary judgment for Caterpillar.
The following facts are undisputed for purposes of deciding
this motion. Caterpillar is a Delaware corporation with
headquarters in Peoria, Illinois. (Dkt. 65, Pls.'s Resp.
to Def.'s L.R. 56.1 Statement of Facts, at ¶1).
Caterpillar has several manufacturing locations, including
one in Joliet, Illinois. Id. Plaintiffs are 48
current employees or the estates of deceased former employees
of Caterpillar's Joliet plant. Id. at ¶2.
Since 1951, Joliet production and maintenance employees,
including plaintiffs, have been represented for collective
bargaining purposes by the International Association of
Machinists and Aerospace Workers, AFL-CIO and its affiliated
Local Lodge No. 851 (collectively “IAM” or
“the Union”). Id. at ¶4.
Caterpillar negotiates with the Union concerning terms and
conditions of employment because the Union is the exclusive
bargaining representative for the Joliet employees.
Id. at ¶5. Caterpillar and the Union have
negotiated a series of collective bargaining agreements
covering the Joliet bargaining unit employees. These
agreements typically have consisted of a main labor contract
and separate contracts covering benefits. Id. at
¶6. The bargaining unit (Local Lodge) must ratify any
agreement reached between the Union and Caterpillar.
Id. at ¶7.
the 1950s, the Joliet labor contract included a pension plan
and, until 2012, it included a Supplemental Unemployment
Benefit (“SUB”) plan. Id. at ¶9-10.
The SUB plan provided supplemental compensation to eligible
employees who were laid off. Id. In March 2012,
Caterpillar and the Union began renegotiating the collective
bargaining agreement (“CBA”) that had been in
effect from May 2, 2005, to May 1, 2012 (“the 2005
CBA”). Id. at ¶18. One of
Caterpillar's objectives in the renegotiation was to
eliminate the Joliet SUB plan. Id.
2005 CBA contained a “New Hire Competitive Base Rate
Schedule, ” applicable to employees hired after May 2,
2005, which provided a compensation package significantly
lower than that provided to employees hired before May 2,
2005. Id. at ¶11. Under this CBA the cost
difference between a new hire employee and a standard wage
employee, including differentials in wages and benefits, was
approximately $18.00 per hour worked. Id. The
pension plan in the 2005 CBA applied to Joliet bargaining
unit employees hired before May 2, 2005. Covered employees
became retirement-eligible by meeting one of the following
four criteria: (a) the employee reached age 65 with 5 or more
years of credited service, including at least one hour of
credited service on or after December 1, 1989; (b) the
employee reached age 60 with 10 or more years of credited
service; (c) the employee reached age 55 and his/her age plus
years of credited service totaled at least 85; or (d) the
employee at any age accumulated 30 or more years of credited
service. Id. at ¶13; Dkt. 67, Def.'s Resp.
to Pl.'s LR 56.1 Statement of Facts at ¶9. Because
the pension plan provided that an employee could become
retirement-eligible by accumulating 30 or more years of
credited service, regardless of age, there were
retirement-eligible employees in the Joliet bargaining unit
who were younger than certain of their
non-retirement-eligible co-workers. Dkt. 65 at ¶14.
2005 CBA limited SUB plan participation to Joliet bargaining
unit employees who were hired before 1999. Id. at
¶15. The Union and Caterpillar agreed during
negotiations in 1999 to limit the SUB. Id. All
Joliet bargaining unit employees who were SUB participants
were also pension plan participants. Id. Caterpillar
made contributions to the SUB through a trust based on hours
worked by SUB participants each month. Id. at
¶16. The specific amount of the SUB benefit depended on
the funded status of the plan at the time the payments were
made. Id. SUB payments were made during periods of
layoff and thus were infrequent. Id. at 17. Between
1998 and 2012, there were only four years when more than 20
SUB participants received any payment. Id. The
average individual monthly SUB payment was $483 and the
average total amount of benefits received was $1, 890.
when Caterpillar and the Union began renegotiating the 2005
CBA, Caterpillar wanted to eliminate the SUB in Joliet for
several reasons. Id. at ¶19. The SUB
administration system was aged and required investment to
update, and the SUB “tied up” money in the fund
that could be used for other purposes. Id.
Caterpillar also wanted to use the accumulated SUB funds to
incentivize retirements among retirement-eligible employees,
so their positions could be filled by newly-hired employees
who would be subject to the lower “new hire”
compensation package. Id. at ¶20. The 2012
negotiations was not the first time that Caterpillar had
proposed eliminating the SUB plan. Id. at ¶21.
It was the first time that Caterpillar proposed using funds
liquidated from the SUB plan for an incentive retirement
program. Dkt. 67 at ¶19.
April 5, 2012, Caterpillar made its first contract proposal
to the Union. Dkt. 65 at ¶22. The proposal included the
elimination of the SUB and the pro rata distribution of the
accumulated SUB funds as a retirement incentive for
retirement-eligible SUB participants who retired before the
end of 2012 pursuant to a “metering” chart, which
was intended to regulate departures to avoid operation
disruptions. Id. The Union rejected
Caterpillar's first SUB proposal. Id. at
¶23. Caterpillar presented a second proposal on April
24, 2012. Id. at ¶24. The Union rejected
Caterpillar's second SUB proposal, stating that it was
not interested in eliminating the SUB. Id. at
¶25. During further negotiations, Caterpillar told the
Union that it believed it could not include non-SUB
participants in the SUB distribution because the SUB plan
provided that the accumulated funds could only be used for
the benefit of the participants. Id. at ¶26.
The Union rejected additional proposals from Caterpillar
because it did not want to eliminate the SUB plan.
Id. at ¶27.
1, 2012, the 2005 CBA expired without an agreement between
Caterpillar and the Union and the Union went on strike.
Id. at ¶28. On May 17, June 27, August 14,
2012, the parties met with a federal mediator. Id.
at ¶29-31. The parties reached a tentative agreement on
August 14, 2012. Id. at ¶31. The Union
presented the tentative agreement to the Joliet bargaining
unit for a ratification vote, which passed. Id. at
agreement provided for termination of the SUB plan as of
August 20, 2012. Id. at ¶34. Caterpillar would
distribute the SUB fund assets in equal shares to two groups:
(1) SUB participants who were retirement-eligible under the
pension plan and who voluntarily retired between October 1,
2012, and January 1, 2013; and (2) SUB participants who were
not eligible to retire under the pension plan but who
remained employed and were participants in the 401(k) tax
deferred retirement plan as of January 1, 2013. Id.
The first group received their distributions directly. The
second group received their distribution through a one-time
contribution to their 401(k) accounts. Id. at
¶36. Retirement-eligible SUB participants were given the
option to retire, it was not mandatory. Id. at
never proposed an individual's age as the criterion for
receipt of SUB funds. Caterpillar's position was always
that it wanted to use the distribution of SUB funds as an
incentive for retirement-eligible employees to retire, which
would allow Caterpillar to realize cost savings by hiring
replacement employees at the lower, second-tier compensation
package. Id. at ¶39. Caterpillar did not
calculate the savings that would result. Dkt. 67 at ¶23.
Distribution of the SUB funds allowed Caterpillar to
incentivize retirement without spending any money since
Caterpillar had already contributed the funds. Id.
Caterpillar agreed to distribute SUB funds to non-retirement
eligible employees in order to reach an agreement with the
Union. Dkt. 65 at ¶40. Caterpillar knew this proposal
would dilute the incentive for retirement-eligible
participants to retire because it would add over 80 people to
the pool that would share the funds. Dkt. 67 at ¶35.
Under Caterpillar's original proposal if every
retirement-eligible employee retired, then each would receive
$38, 000. Under the proposal that was ultimately ratified,
each participant would receive approximately $28, 000.
the Joliet bargaining unit ratified the new labor agreement,
Caterpillar distributed the $7.8 million in SUB plan funds in
two stages. Dkt. 65 at ¶42. The retirement-eligible
participants who opted to retire between October 1, 2012, and
January 1, 2013, received the first wave of payments of $28,
800 each upon their retirement. Id. On January 1,
2013, Caterpillar determined the full pro rata distribution
amount based on the actual number of SUB participants who
elected to retire and receive a SUB distribution. Caterpillar
then distributed the balance of their full share of $37,
836.51, first to the retired SUB plan participants, followed
by a one-time disbursement of the full $37, 836.51 to the
401(k) accounts of the non-retirement eligible SUB plan
participants. Id. at ¶43.
beginning of negotiations in March 2012, Caterpillar had 796
employees in the Joliet bargaining unit. Id. at