Wayne R. Metz v. Transit Mix, Inc.
1987 U.S. App. LEXIS 11867, 44 Empl. Prac. Dec. (CCH) 37,458, 828 F.2d 1202 (1987)
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Rule of Law:
An employer's decision to terminate an older employee to save on salary costs, where the higher salary is a direct function of seniority, constitutes a violation of the Age Discrimination in Employment Act (ADEA) because salary, in this context, serves as a proxy for age.
Facts:
- Wayne Metz, age 54, had worked for Transit Mix, Inc. for twenty-seven years as a plant manager.
- Due to his long tenure, Metz received annual raises and earned a salary of $26,000, making him one of the company's highest-paid employees.
- Transit Mix experienced financial difficulties, which it attributed to a decline in the local construction business.
- In November 1983, company president Will Lawrence temporarily closed the plant managed by Metz and laid him off.
- In April 1984, Lawrence permanently discharged Metz and hired Donald Burzloff, age 43, to reopen and manage the plant.
- Burzloff was paid a salary of approximately $8.05 an hour, significantly less than Metz's salary of about $15.75 an hour.
Procedural Posture:
- Wayne Metz filed a lawsuit against Transit Mix, Inc. in the U.S. District Court for the Northern District of Indiana, alleging a violation of the ADEA.
- Following a bench trial, the district court (court of first instance) entered judgment for the defendant, Transit Mix, Inc.
- Wayne Metz, as the appellant, appealed the district court's judgment to the U.S. Court of Appeals for the Seventh Circuit.
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Issue:
Does an employer violate the Age Discrimination in Employment Act (ADEA) by terminating an older, higher-paid employee and replacing them with a younger, lower-paid employee solely to realize salary savings?
Opinions:
Majority - Cudahy, Circuit Judge.
Yes. An employer violates the Age Discrimination in Employment Act (ADEA) when it replaces an older, higher-paid employee with a younger, lower-paid one if the motivation is to save on salary costs that are directly correlated with age and seniority. The court reasoned that since Metz's high salary was a direct result of his 27 years of service, allowing the company to fire him for that reason would defeat the purpose of the ADEA. The court rejected the distinction between cost-saving measures affecting an individual versus a group, as the ADEA protects individuals. It also noted that Transit Mix failed to pursue less-detrimental alternatives, such as offering Metz continued employment at a reduced salary, before resorting to termination.
Dissenting - Easterbrook, Circuit Judge,
No. An employer does not violate the ADEA by making an employment decision based on salary, as wage is a 'reasonable factor other than age.' The dissent argued that the district court found two independent reasons for the termination: salary savings and the greater flexibility offered by the new employee, with the flexibility reason alone being sufficient to uphold the judgment. Furthermore, firing an employee whose salary is too high for the revenue their work generates is a legitimate economic decision, not age discrimination. The majority's holding conflates disparate treatment and disparate impact analyses and creates a rule that could harm older workers by encouraging employers to close unprofitable plants rather than replace overpaid managers.
Analysis:
This decision establishes that, in the Seventh Circuit, an employee's high salary cannot serve as a legitimate, non-discriminatory reason for termination under the ADEA when that salary is inextricably linked to seniority. The ruling effectively treats salary as a proxy for age in disparate treatment cases, limiting an employer's ability to make cost-cutting decisions that disproportionately affect older workers. It reinforces the idea that employers must consider less drastic alternatives, such as pay reductions, before terminating a senior employee for economic reasons. This case highlights a significant divide among courts on whether cost can be considered a 'reasonable factor other than age' when it correlates strongly with an employee's protected status.
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