Equal Emp't Opportunity Comm'n v. Urbana Sch. Dist. No. 116, 18-cv-2212 (C.D. Ill. Nov. 7, 2023)

Avoiding Pension Contributions by Capping Salary Increases for Teachers Over Age 45 is Prohibited Age Discrimination

General Interest to School Officials
Case: Equal Emp't Opportunity Comm'n v. Urbana Sch. Dist. No. 116, 18-cv-2212 (C.D. Ill. Nov. 7, 2023)
Date: Tuesday, November 7, 2023

In 2005, the Illinois General Assembly made amendments to the Illinois Pension Code. One amendment requires additional employer contributions to the Teacher’s Retirement System (TRS), Illinois’s public-school teacher pension plan, under certain conditions if the teacher’s salary increases more than 6% over the previous year.

Under the TRS, pension payments depend on the “final average salary,” which is the average of the four highest consecutive salary years over the teacher’s final ten years before retirement. The amendment specifies that for any year used to determine the final average salary, if the teacher’s salary increased more than 6% from the previous year, the employer must contribute the present value of the increase in benefits resulting from the salary increase.

In 2007, the Urbana School District No. 116 (District) and the Urbana Education Association (Union) ratified a new collective bargaining agreement (CBA). The agreement included a provision limiting increases in “creditable earnings” to 6% for teachers within 10 years of retirement eligibility. Creditable earnings are defined as all wages, including salary and supplemental pay. Similar provisions were included in later CBAs until it was removed in the CBA ratified in 2020.

The District enforced the CBA provision by tracking creditable earnings for teachers over age 45 with more than one year of service. Notably, the District did not track the teachers’ hire dates, years of service, or when they would retire.

In August 2018, the Equal Employment Opportunity Committee (EEOC) sued on behalf of several teachers whose salaries or supplemental pay was reduced due to the District’s enforcement of the CBA provision. The EEOC claimed that the District’s method of enforcement violated Section 7(b) of the Age Discrimination in Employment Act of 1967 (ADEA) by limiting salary increases based on age. 

While the District claimed enforcement of the CBA provision based on a teacher’s years of service, the court held that the District discriminated by age. The District’s method of enforcement drew a line at age 45, so a 46-year-old teacher and a 44-year-old teacher with identical credentials and experience were not entitled to identical annual increases in pay.

Furthermore, the court held that the District did not have an affirmative defense of “identified practice or policy based on a reasonable factor other than age,” commonly referred to as RFOA. The court notes that the RFOA is not available as a defense to a claim of disparate treatment. In addition, federal regulation explicitly states that the ADEA does not excuse the payment of lower wages or salary to older employees on account of age.

The court granted the EEOC’s motion for summary judgment, holding that the District discriminated by age. The court also awarded back pay to the teachers whose earnings were reduced due to the District’s practices, subject to a final accounting of appropriate back pay.

Michelle Yang, IASB Law Clerk