AZ Appeals Court Backs School Retiree Pay System

August 27, 2004 ( - Phoenix school officials didn't violate the Arizona Civil Rights Act by paying retiring teachers under 65 more to substitute teach than those 65 or older, a state appeals court ruled.

Reversing the decision of a Maricopa County Superior Court judge, theArizona Court of Appeals ruled that the Phoenix school district’s lower pay level for older substitute teachers was part of an integrated retirement package to induce early retirement and “the reduction in compensation at age 65 was not based on a discriminatory intent but was part of the entire retirement incentive.”

According to the appeals court ruling, three Phoenix teachers complained to the state about the situation and the state sued the city of Phoenix. The state suit alleged Phoenix school officials discriminated against a class of employees and denied those employees the opportunity for equal employment. The trial court agreed with the state, awarding the employees back pay and barring the school district from continuing the practice; the district then appealed.

The appeals court ruled that pay practices in the district’s early retirement program (ERP) and voluntary incentive plans (VIP) were designed with a reasonable intent in mind.

Under the ERP, teachers who had at least 10 years of consecutive service and who were at least 50 could take early retirement. The ERP provided retiring teachers with health and life insurance benefits and, in exchange, the educators said they would work as a substitute teacher for anywhere from one to 40 days per school year. The ERP paid $112 to $200 per day for substitute teaching. According to the court, the standard pay for substitute teachers was $60 to $75 per day.

School officials also created three separate VIPs. There, teachers with at least 10 years of service could end their employment with the school district and, in exchange, would receive an annuity equal to his or her final annual salary payable in monthly installments over a period of eight to 10 years. In exchange for the VIP benefits, retiring teachers agreed to substitute teach eight to 10 days per year. However, unlike the ERP, teachers who participated in the VIP would receive the standard substitute teaching pay of $60 to $75 per day.

“Although the State contends that ERP members who turn age sixty-five seemingly become less valuable because they command only the standard rate of pay, the more obvious and less sinister explanation is that, at age sixty-five, the agreement that induced a teacher to retire already has ended,” Judge Susan Ehrlich said in writing for the court. The fact that other participants in the ERP who had not turned age sixty-five continued to receive the enhanced wage does not mean that those whose participation ended are being discriminated against because of their age. Rather, the younger ERP members are still eligible for the premium rate because they, unlike the ERP members past age sixty-five, have not yet received the full benefit of their bargain with the District.”

The case is Arizona v. Phoenix Union High School District No. 210, Ariz. Ct.App., No. 1 CA-CV 03-0518, 8/19/04). A copy of the full ruling is  here .