The Third Circuit recently issued a significant opinion in Bryan v. Government of the Virgin Islands, Case No. 18-1941, 2019 WL 661822 (3rd Cir. February 19, 2019) holding that the Virgin Islands did not violate the Age Discrimination in Employment Act (ADEA) when, in an effort to keep the retirement system solvent, it required employees with 30 years of service or more to contribute an additional 3 percent of their pay to the pension system.

In 2011, the Virgin Islands enacted the Virgin Islands Economic Stability Act (VIESA), a law that sought to reduce government spending by reducing payroll in the face of a severe budget crisis. The Act encouraged employees with over 30 years of service, who were some of the Government’s most expensive for payroll purposes, to retire by offering them $10,000. Those who declined to retire had to contribute an additional 3% of their salary to the pension plan. The plaintiffs, two employees with over 30 years of service who chose not to retire, brought disparate treatment and disparate impact claims against the Government based on the additional contribution requirement.

The plaintiffs claimed that because only workers over 40 had the 30 years of service that triggered the extra contribution, the government must have targeted older workers. However, the Court was not persuaded by the plaintiffs’ disparate treatment argument, noting that not every government worker in the protected class had achieved 30 years of service and that plaintiffs had not presented any evidence in the record to “suggest that the Government used thirty years of credited service as a proxy for age.” Id. at 7.

The plaintiffs also pursued a disparate impact claim, arguing that even if the VIESA was not motivated by discriminatory intent, it violated the ADEA because it disproportionately impacted older workers. However, the Court found the Government had a legitimate reasonable-factor-other-than-age that explained its decision to implement the requirement for the extra contribution from individuals who had 30 years of service or more. The Court found that the law reasonably sought to reduce payroll costs and increase the pension plan’s solvency, and thus, the Government was not motivated by the affected employees’ age. The Court found that even though the additional 3% contribution disproportionately affected older workers, “the action reasonably targets long-tenured employees with higher salaries—not all older workers—to encourage them to retire from the Government payroll and to pay more into the pension system.” Id. at 10. Accordingly, the Government was not liable under a disparate impact theory.

The Court’s holding is a reminder that seniority, rank, and years of service may serve as valid factors to justify an employer’s business decisions in the context of disparate treatment and disparate impact claims under the ADEA.