FLORIDA ET AL. v. LONG ET AL.
No. 86-1685
Supreme Court of the United States
Argued February 22, 1988—Decided June 22, 1988
487 U.S. 223
Charles T. Collette argued the cause for petitioners. With him on the briefs was Bruce A. Minnick.
Woodrow M. Melvin, Jr., argued the cause for respondents. With him on the brief were David Popper and Keith Olin. Respondent David V. Kerns filed a brief pro se.*
The questions presented for decision here are the date upon which pension funds covered by
The issues before us turn on whether Manhart‘s invalidation of discriminatory contributions necessarily apрrised employers that plans which were nondiscriminatory as to contributions must in every case be nondiscriminatory as to
I
Since 1970, the State of Florida has operated the Florida Retirement System (Florida System) for state employees and employees of over 1,100 participating local governments.
The state legislature periodically reviews the Florida System‘s finances and operation, аnd determines the appropriate contribution rates for government employers as a percentage of the gross compensation of participating employees.
Florida calculates an employee‘s normal retirement benefit as a product of two variables, with the first variable a statutorily determined percentage of the employee‘s average monthly compensation upon retirement and the second variable the employee‘s credited years of employment.
Immediately after our decision in Norris, Florida acted to adopt unisex actuarial tables for all employees in the Florida System retiring after August 1, 1983. Under the unisex tables, male and female retirees similarly situated receive equal monthly pension benefits under any of the offered
II
Retirees Hughlan Long and S. Dewey Haas brought this suit in the United States District Court for the Northern District of Florida against Florida and various of its officials with responsibility for management of the Florida System. They alleged that petitioners were violating
On January 20, 1983, the District Court approved respondents’ class action, certifying a class consisting of male retirees who elected one of the optional plans and who retired after March 24, 1972,1 and before August 1, 1983. After an orderly progress to the merits, the District Court entered summary judgment in respondents’ favor, holding that Florida‘s optional pension plans discriminated against male employees in violation of
The Court of Appeals for the Eleventh Circuit affirmed. 805 F.2d 1542, rehearing denied, 805 F.2d 1552 (1986) (per curiam). It held, in sum, that our decision in Manhart had placed employers on notice that pension benefits, not just contributions, must be calculated without reliance on sex-based actuarial tables. Id., at 1547-1548, 1551. We granted certiorari, 484 U.S. 814 (1987), to consider these issues, and we reverse.
III
Two aspects of retroactivity analysis are presented by this case. The first is whether Manhart or Norris establishes the appropriate date for commencing liability for employer-operated pension plans that offered discriminatory payment options. We discuss below the retroactivity principles already explored in the pension cases and determine that Norris is the controlling liability date and that liability may not be imposed for pre-Norris conduct. The seсond question concerns the proper implementation of our nonretroactivity determination. This requires us to determine whether benefit adjustments ordered by the District Court should be classified as retroactive or prospective. We hold the adjustments are retroactive and that pre-Norris retirees are not entitled to adjusted benefits for the violations claimed here.3
We have identified three criteria for determining whether retroactive awards are appropriate in
The first criterion, the extent to which new principles of law have been established, is of particular significance to our holding today. The Court of Appeals held that Manhart placed Florida on notice that optional pension plans offering sex-based benefits violated
We recognized that “[t]here can be no doubt that the prohibition against sex-differentiated employee contributions represents a marked departure from past practice.” Id., at 722. Our decision stated two principal limits on the potential liability of employer-operated pension plans. First, we limited the holding to the fact pattern then before us. We stated:
“Although we conclude that the Department‘s practice [of requiring discriminatory pension contributions on the basis of sex] violated Title VII, we do not suggest that the statute was intended to revolutionize the insurance and pension industries. All that is at issue today is a requirement that men and women make unequal contributions to an employer-operated pension fund.” Id., at 717.
Second, we confined the reach of our decision by recognizing the potential for interaction between an employer-operated pension plan and pension рlans available in the marketplace. We said:
“Nothing in our holding implies that it would be unlawful for an employer to set aside equal retirement contributions for each employee and let each retiree purchase the largest benefit which his or her accumulated contributions could command in the open market.” Id., at 717-718.
Our references to contributions, as distinct from benefits payments, and our recognition of open market forces limited the decision and left some doubt regarding its command. Ensuing decisions expressed conflicting views of Manhart‘s reach.4 Commentators also expressed conflicting opinions
Not until Norris, decided five years after Manhart, did we address the matter of unequal benefits payments and the open market exception. Norris extended the principle of nondiscrimination to unequal benefits, stating that “the classification of employees on the basis of sex is no more per-
In view of thе substantial departure from existing practice that Manhart ordered, pension fund administrators could rely with reasonable assurance on its express qualifications and conclude that it was confined to cases of sex-based contributions. A few months before our decision in Norris, the United States Department of Labor completed a study of pension plans and the financial impact of an Equal Employment Opportunity Commission proposal to adopt an equal benefits rule. United States Dept. of Labor, Cost Study of the Impact of an Equal Benefits Rule on Pension Benefits (Jan. 1983) (hereinafter Cost Study). The Cost Study found that “[s]ubstantial percentages of both [defined benefit and defined contribution] types of pension plans follow the customary insurance industry practice of using sex-segregated mortality tables in calculating annuity benefits.” Id., at 2. It estimated that 45% of the participants in defined benefit plаns like the Florida System and 74% of the participants in
The Florida experience further illustrates the difficulty of determining the requirements for full compliance. Since its inception, the Florida System not only required equal contributions for male and female employees but also provided a primary single life benefit with equal payments to similarly situated male and female employees. The primary single life benefit is of particular significance, for it complied with both Norris and Manhart. See Cost Study 11-12; Hager & Zimpleman, The Norris Decision, Its Implications and Application, 32 Drake L. Rev. 913, 938 (1982-1983) (Norris decision will “have little effect upon defined benefit plans so far as the normal form pension benefit is concerned... [since that benefit] already pays equal annuity incomes“).
The provision of optional annuity plans in the Florida System prоvided employees with a range of choices for their convenience. Before Norris, Florida could conclude reasonably that, once employees were offered a unisex primary benefit, Manhart did not prevent the offering of sex-based annuities as options. The alternative for employers who wished to control, or were unable to finance, the costs of unisex options would be to eliminate optional benefits entirely and offer the primary benefit alone. See Hager & Zimpleman, 32 Drake L. Rev., at 938-939. Employees do not benefit from the reduction of their pension plan options, and Florida may have assumed we did not intend to eliminate an employee‘s flexibility in choosing a retirement option, so long as the options presented included a sex-neutral benefit.
In Norris itself we recognized that Manhart had reserved the determination of some major issues. While we narrowed the open market exception to include only pension plans where employers set aside an equal lump-sum payment and the individual employee purchased an annuity from a private pension company, 463 U.S., at 1088, we recognized that employers “reasonably could have assumed that it would be law-
Florida‘s continuance of the optional plans until the Norris decision does not justify imposition of a retroactive award. We note, moreover, that while Florida‘s offer of the nondiscriminatory benefit makes its case against retroactivity more compelling, this particular feature is not essential to establish that Norris is the effective date for conforming bеnefit structures. The considerations discussed below are also of relevance.
The second and third criteria of retroactivity analysis also support our determination that Norris, and not Manhart, provides the appropriate date for determining liability and relief. In the pension context, we have considered whether retroactive awards are necessary to further the purposes of
Finally, we conclude here, as in Manhart and Norris, that the imposition оf retroactive liability on the States, local governments, and other employers that offered sex-based pension plans to their employees is inequitable. The effect of “drastic changes in the legal rules governing pension and insurance funds” on the provision of reserves for unexpected
In Norris, we reaffirmed our conclusion that retroactive liability was inappropriate in
Respondents argue that Florida‘s pension administrators had “actual notice from internal memoranda and discussions” that the continuation of the sex-based optional pension plans after Manhart violated
While we hold that Manhart did not establish the date for Florida to conform its payment options to unisex standards, we do not hesitate to say that Norris did so. If Florida had continued to use sex-based actuarial tables to calculate benefits for its pension plans after Norris, the case before us would have been an altogether different one. Norris informed covered employers with pension plans of the obligation under
B
We next consider implementation of our nonretroactivity determination. The District Court made two separate awards. The first, for back compensatory payments to employees who retired after Manhart and before Norris and covering the entire period from Manhart to the date of its judgment, is retroactive without doubt and is, by our decision here, impermissible. The second award required that payments after judgment be adjusted for all pre-Norris male retirees who are receiving lower benefits. The District Court, and the Court of Appeals in affirming, labeled this latter award prospective relief. We disagree.
The distinction between retroactive and prospective rеlief is not always self-evident. An order requiring adjusted future payments for pre-Norris retirees may contain the essential elements of a retroactive order. Unlike an ordinary injunction against future conduct, the effect of an order that increases pension benefits to employees who have already retired may be retroactive in a fundamental sense if it corrects a fixed calculation based on assumptions that both the State and the retiree held when the retirement occurred. Benefits are altered despite the circumstance that past contributions were keyed to lower benefit payments, which undermines the basic financial calculus of a pension plan that determines contribution rates to support a predicted level of payments. See Norris, 463 U.S., at 1092 (MARSHALL, J., concurring in judgment in part). Such changes in benefits based on past contributions and actuarial assumрtions may create a deficiency in the pension fund, requiring additional funds from the State and other employers to meet the increased benefits liability or forcing the pension plan to violate its contractual benefit guarantee to other retirees. In sum, an award in many cases may be retroactive in nature “[w]hen a court di-
It is not correct to consider payments of benefits based on a retirement that has already occurred as a sort of continuing violation. Our decision in Bazemore v. Friday, 478 U.S. 385 (1986), is not to the contrary. Bazemore concerned the continuing payment of discriminatory wages based on employer practices prior to
We applied these principles in Norris and held that an order to adjust future annuity payments to female retirees to reach equality with payments to similarly situated men was “fundamentally retroactive in nature.” 463 U.S., at 1105, n. 10. The District Court‘s award here is indistinguishable in principle from the one found retroactive in Norris. The State of Florida determined contribution rates by relying on a precise assessment of expected future pension benefits for covered state and local government employees. The Constitution of the State of Florida mandated that the fund be maintained on a sound actuarial basis.
Under the Florida plan, no adjustment in benefits payments is required for employees who retired before the effective date of our decision in Norris. As the class here consists only of employees who retired before Norris, it is not entitled to the relief ordered by the District Court.
The judgment of the Court of Appeals for the Eleventh Circuit is reversed.
It is so ordered.
JUSTICE BLACKMUN, with whom JUSTICE BRENNAN and JUSTICE MARSHALL join, concurring in part and dissenting in part.
The Court‘s decision today denies respondents retroаctive relief on the ground that equitable considerations prevent imposition of liability for Florida‘s actions taken prior to the effective date of our decision in Arizona Governing Committee for Tax Deferred Annuity and Deferred Compensation Plans v. Norris, 463 U.S. 1073 (1983). Because I conclude that the same equitable considerations mandate retroactive liability for Florida‘s
I
Until its amendment in August 1983, the pension plan the State of Florida operated for its employees discriminated on the basis of sex in a manner prohibited by
The issue in this case, of course, is not whether the pension plan Florida operated is barred by
In denying retroactive relief to the post-Manhart retirees in this case, the Court concludes that it was not until the decision in Norris in 1983 that Florida had notice that its pеnsion plan was unlawful. It is on this point, in my view, that the Court goes astray.
In Manhart, we were faced with a plan which required female employees to make greater contributions out of their paychecks than their male counterparts in order to obtain the same monthly pension benefits upon retirement. The employer sought to justify this difference by noting that since, as a group, female employees lived longer than male employees, “[t]he cost of a pension for the average retired female is greater than for the average male retiree because more monthly payments must be made to the average woman.” 435 U.S., at 705. This difference in cost, argued the employer, allowed the difference in contributions. The Manhart Court accepted as true the employer‘s proffered rationale for its distinction, but nonetheless concluded that the plan violated
It is difficult to see any important distinction between that case and this one. The Court today relies on the fact that the pension plan at issue in Manhart discriminated at the contribution stage, while in this case the discrimination surfaced at the payment stage. In my view, it was always clear that this was a distinction without a difference. In Manhart, one sex took home less pay than the other in order to receive the same benefits upon retirement. Here, the take-home pay was the same, but one sex received a greater benefit upon retirement than the other. Both plans violated
Manhart‘s “open-market exception” cast no doubt on this fundamental holding. The majority focuses on the statement in Manhart that it might be lawful for “an employer to set aside equal retirement contributions for each employee and let each retiree purchase the largest benefit which his or her accumulated contributions could command in the open market,” 435 U.S., at 717-718. The Court ignores, however, the explanatory footnote to that statement, which clearly articulated its rationale: ”
Our decision in Norris confirms, rather than casts doubt on, the conclusion that the unlawfulness of Florida‘s pension plan was established and made manifest by our decision in Manhart. The five Justices in Norris who found the type of plan there at issue barred by
“We have no hesitation in holding, as have all but one of the lower courts that have considered the question, that the classification of employees on the basis of sex is no more permissible at the pay-out stage of a retirement plan than at the pay-in stage.” 463 U.S., at 1081 (footnotes omitted).
“[I]t is just as much discrimination ‘because of... sex’ to pay a woman lower benefits when she has made the same contributions as a man as it is to make her pay larger contributions to obtain the same benefits.” Id., at 1086.
The Norris majority‘s rejection of the contribution/benefit distinction was based almost entirely on the reasoning of Manhart, and came without mention of the open-market exception. See 463 U.S., at 1081-1086. See also id., at 1108-1109 (O‘CONNOR, J., concurring) (”
Nor, finally, does the ultimate conclusion of five Justices in Norris that retroactive liability was inappropriate in that case call for a like conclusion here. The majority‘s decision that Manhart did not provide notice that the plan at issue in Norris violated
Because I conclude that the unlawfulness of Florida‘s pension plan was “clearly foreshadowed” by our decision in Manhart, and did not depend on a “new principle of law” аnnounced in Norris, 463 U.S., at 1109 (O‘CONNOR, J., concurring), I naturally disagree with the Court‘s conclusion that retroactive liability would be “inequitable.” To the contrary, I believe such relief is clearly appropriate. See id., at 1093. Cf. Chevron Oil Co. v. Huson, 404 U.S. 97, 106 (1971) (“[T]he decision to be applied nonretroactively must establish a new principle of law“) (emphasis added). I note, in addition, that no special factors are presented here that would make an award of retroactive relief inequitable.
While I conclude that our decision in Manhart put Florida on notice that its pension plan violated
In summary: I conclude that our decision in Manhart supplies the date after which Florida should be held liable for its failure to use unisex tables in calculating retirement benefits. Accordingly, I concur in that part of the Court‘s judgment that denies relief to pre-Manhart retirees, but, for the reasons stated above, I dissent from that part of its judgment that categorically denies relief to post-Manhart retirees.
JUSTICE STEVENS, dissenting.
All of us agree that discrimination in the collection of contributions from employees prior to our decision in Los Angeles Dept. of Water and Power v. Manhart, 435 U.S. 702 (1978), cannot be remedied retroactively. A somewhat different issue is presented, however, when there is discrimination in the payment of benefits to employees who retired before Manhart was decided. The District Court and the Court of Appeals in this case agreed that it would be inequitable to grant retroactive relief that would adjust the benefits paid to pre-Manhart retirees for the period of unlawful discrimination that occurred prior to the dаte the District Court entered its judgment. Both of those courts concluded, however, that it would be appropriate to grant prospective relief that would increase the benefits payable to male retirees in the future. I agree.
It must be conceded that there is no recovery for any violation that occurred prior to our decision in Manhart. In the present case, however, I think it clear that each month‘s disparate retirement check constitutes a separate violation. Unlike Arizona Governing Committee for Tax Deferred Annuity and Deferred Compensation Plans v. Norris, 463 U.S. 1073, 1105, n. 10 (1983), the District Court‘s order in this case does not call upon the State “to fund retroactively the deficiency in past contributions made by its... retirees.” (Powell, J., dissenting in part and concurring in part). Rather, even to the extent that the plan was in the past par-
I am in complete accord with the result reached by the District Court and the Court of Appeals. Accordingly, while I also agree with JUSTICE BLACKMUN‘s exposition of the flaws in this Court‘s analysis, I would affirm the judgment of the Court of Appeals in its entirety.