Supreme Court Won’t Hear IBM Pension, Worker Retaliation Cases

The Supreme Court this week refused to consider an appeal brought by a group of IBM Corp. employees who accused the company of age discrimination when it altered its pension plan. The lawsuit could have cost the company $1.4 billion.

The court also declined to rule on a separate dispute between IBM and a former employee who accused the company of retaliating against him after he complained about how company managers handled overtime.

In the pension case, a former IBM employee named Kathi Cooper served as the lead plaintiff in a class-action suit brought on behalf of 250,000 current and former IBM workers. The suit argued that IBM’s “cash balance” pension plan was discriminatory because it allowed younger workers to accrue benefits in the plan at a faster rate than older workers.

IBM switched to a cash balance plan in 1999. Such plans provide workers with individual accounts that can be cashed out when they leave the company and are intended to appeal to younger workers who are more likely to switch jobs.

The IBM case has been closely watched, as roughly 1,500 companies have adopted cash-balance plans. The company earlier agreed to settle the case for $1.4 billion if it lost in the courts.

But the 7th District Court of Appeals, based in Chicago, sided with IBM in August, ruling that the “terms of IBM’s plan are age-neutral.”

In addition, Congress passed legislation, also in August, that clarified that cash balance plans complied with the age discrimination provisions of ERISA, the Employee Retirement Income Security Act.

Cooper’s lawyers argued in court papers that the legislation applied only to future cash balance plans, and did not affect existing cases such as IBM’s.

The case is Cooper v. IBM, 06-760.

In the employment retaliation case, an IBM employee named Michael Saville worked for the company for 32 years before accepting early retirement in October 1998. Saville filed suit in August 2000, arguing that he was forced to leave the company in retaliation for his complaints that IBM was violating federal labor law by requiring employees to work overtime without being paid.

The company responded in court filings that Saville was offered a choice to take early retirement or undergo a performance review due to unsatisfactory job performance, not because of his complaints about overtime. Saville voluntarily chose early retirement, the company said.

Furthermore, Saville only made general, limited complaints about overtime that did not qualify for protection under the Fair Labor Standards Act, the company argued.

A federal district court in Utah sided with IBM, and so did the 10th Circuit Court of Appeals, which ruled in June 2006 that Saville chose to leave the company and was not forced out in retaliation for his complaints.

Saville’s lawyers argued that it is not clear under previous Supreme Court rulings whether forced early retirement qualifies as an unfair employment action that a company might take in retaliation against an employee. IBM argued that the law is clear and the lower courts applied it correctly.