Retiree Salary Hike Deemed Discriminatory

June 26, 2002 ( - A federal judge has ruled that a New York state school district violated federal antidiscrimination laws by designing compensation plan that would encourage certain teachers to retire.

US District Judge Colleen McMahon said the Board of Education of the Wappingers Central School District violated the Age Discrimination in Employment Act (ADEA) and the Older Workers’ Benefit Protection Act (OWBPA).

In dispute was a memorandum signed by both the school district and the union which said that teachers who opted against a $20,000 termination bonus contained in a 1998 union contract were still eligible for an additional $7,000 per year for up to three years.

The memorandum stated that teachers who were eligible but did not accept the $20,000 bonus before the memorandum’s date were excluded from participating in the bump-up option.

In order to qualify for the $20,000 payout, teachers had to:

  • have 15 years of district service,
  • have 20 years of member service in the New York State Teachers’ Retirement System,
  • be eligible to retire under the New York State Teachers’ Retirement System

The issue spilled over into the courts when teachers who were eligible for the termination bonus but who declined it, filed suit alleging the bump-up agreement violated the ADEA and the OWBPA.

Other Teachers Complained

The teachers alleged that by not making the salary hike available to them, the district and the teachers’ group discriminated against them because of their age.

Legally, the case centered on whether the temporary salary hike is an incentive or an employee benefit. If considered a benefit, federal laws dictate how companies can make it available to different kinds of workers.

The problem with the bump-up option is that, while “the laws of economics and psychology suggest that people who elect [the option] SHOULD retire at the end of three years,” nothing “COMPELS them to retire, and experience tells us that some teachers will not retire,” McMahon said in finding that the option was an employee benefit. “However, by giving the teacher the freedom to take the money and run or take the money and stay, the (school) District provided a temporary employment benefit to any individual who elects to continue working. And that violates ADEA.”

The case is Abrahamson v. Board of Education of the Wappingers Central School District, S.D.N.Y., No. 01 Civ. 10859 (CM), 6/21/02.