Early retirement incentive programs “ERIPs” are extremely common in South Dakota and Nebraska school districts. In both South Dakota and Nebraska, ERIPs are subject to federal law limitations, and you should be sure your programs are compliant.
Okay, cool, can we keep our current program? It depends. Teachers generally appreciate these programs because they provide a nice payout upon retirement while also benefiting the school. Teachers positioned at the “top left” of the salary schedule typically have a lower salary cost than those at the “bottom right” who may be eligible. But what happens to the employee who wants to keep teaching beyond your current eligibility limits? Many districts have a contract provision or board policy that cuts off eligibility for early retirement incentives at a certain age (often 62). Are these programs a stick, threatening the employee from continuing to work past a certain age? Is it even lawful to have a maximum age cutoff?
The answer, while unpopular, is clear. While ERIPs with age limits may make sense to both schools and teachers, many of these programs violate federal age discrimination law. Buckle up...
Federal courts have held that early retirement programs with a hard age cap discriminate on the basis of age in violation of the federal Age Discrimination in Employment Act. In Jankovitz v. Des Moines Indep. Cmty. Sch. Dist., the United States Court of Appeals for the Eighth Circuit analyzed a school district’s early retirement program that limited participation to anyone under the age of 65. 421 F.3d 649 (8th Cir. 2005). An employee satisfied the years of service requirement portion of the program, but had “aged out” because he was over 65. Id. The court held the program was illegal due to the fixed age cap, because it had the effect of discriminating against older individuals in favor of younger ones. That was true even though the individuals who benefitted (those under 65) were also part of the “protected class,” which under the ADEA is anyone 40 and above. The employee was entitled to a money judgment against the school district.
This is not to say ALL early retirement programs are unlawful, just those using upper age limits to disqualify an employee. Programs which use years of service as opposed to age generally are lawful, but they must be drafted carefully. Additionally, minimum ages are lawful as well, and school districts can cap the number of accepted applicants per year to ensure predictability in the budget. You should consult your school attorney to make certain your program is lawful. Even if your program uses appropriate criteria, there are several procedural requirements under the law that schools often forget, such as requiring eligible employees to have at least 45 days to consider the early retirement incentive offer once it is made.
We understand this information may be surprising, considering the popularity of these programs. However, the Jankovitz case was decided by the 8th Circuit, which includes Nebraska and South Dakota. Although it was an Iowa school that got sued in that case, the case governs programs established in South Dakota or Nebraska. There are ways to draft your ERIPs to ensure compliance with federal law while still accomplishing the same goals as existing programs.
If your board has included the ERIP in policy, you may be able to make adjustments without the approval of the teachers union. If you have negotiated ERIPs within your negotiated agreement, you may have to negotiate changes to the program with the local union, even if the changes are based on efforts to comply with the limitations that exist by law, including the Jankovitz case. If you have included the ERIP in your negotiated agreement, you should prepare to make adjustments to it through the negotiations process. There are ways to draft your negotiated agreements to ensure compliance with federal and state law while still accomplishing your goals within your existing programs.
One additional note about ERIPs that Nebraska schools should be mindful of: your ability to levy for ERIPs outside the board’s regular levy authority may have been reduced or even eliminated based on changes made in 2017. If you haven't done an assessment of your ERIP since then, you may want to consider doing that.
You should consult with your school district attorney or feel free to reach out to Karen, Steve, Bobby, Coady, Jordan or Tyler with any questions.