KENTUCKY RETIREMENT SYSTEMS, BOARD OF TRUSTEES REVIEW V. H . DENNIS HALFHILL
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2003-SC-0771-DG
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KENTUCKY RETIREMENT SYSTEMS,
BOARD OF TRUSTEES
V.
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APPELLANTS
REVIEW FROM COURT OF APPEALS
2002-CA-0564
FRANKLIN CIRCUIT COURT NO . 00-CI-0746
H . DENNIS HALFHILL
APPELLEE
OPINION OF THE COURT BY JUSTICE GRAVES
REVERSING
Appellee, H . Dennis Halfhill, a deputy sheriff with the Kenton County Sheriffs
Office, sought and was denied disability retirement benefits' after he was injured in an
automobile accident in the course of his employment . A former Kentucky Administrative
Regulation barred disabled state employees from being eligible for disability retirement
benefits if they were independently eligible for unreduced normal retirement benefits .2 It
mandated that the employee accept the "non-disability" normal retirement benefits in
lieu of claiming disability retirement .
' See KRS 16 .582 .
2 See KRS 16 .576 . These are the benefits a non-disabled state employee would
receive upon retirement based on the employee's years of service and final
compensation .
Halfhill filed suit against the system's administrator, Kentucky Retirement
Systems, Board of Trustees ("Kentucky Retirement"), contending that 105 KAR 1 :205,
the former regulation which dictated this result, discriminated based on age and violated
KRS 344 .040, Kentucky's version of the Age Discrimination in Employment Act (ADEA) .
The trial court found the regulation to be valid, but the Court of Appeals reversed and
declared the regulation a violation of KRS 344 .040. Kentucky Retirement sought review
in this Court and we granted discretionary review. For the reasons set forth herein, we
reverse the Court of Appeals and reinstate the trial court's judgment in favor of Kentucky
Retirement .
The Court of Appeals held that 105 KAR 1 :205 violated KRS 344.040 . As the
appellate court noted, the regulation was subsequently repealed and its language was
codified into statutory law in 2000. 3 However, at the time of Halfhill's claim, the
regulation was not yet codified and the Court of Appeals determined that it conflicted
with KRS 344 .040, the statute prohibiting age discrimination . Consequently, it held that
the regulation could not stand .
The regulation stated in pertinent part:
A member of the Kentucky Employees Retirement System, County
Employees Retirement System or State Police Retirement System, who is
eligible for a retirement allowance not subject to the reductions specified in
KRS 16 .577 or KRS 61 .595(2)(x), as of the last day of paid employment,
shall not be eligible to apply for disability retirement under KRS 16 .582 or
KRS 61 .600 .
KRS 16.576 provides in relevant part:
Any member with at least five (5) years of service credit may retire
at his normal retirement date, or subsequent thereto, upon written
notification to the system, setting forth at what time the retirement is to
3 See KRS 16 . 582 et seq. The statutory scheme regulating the Kentucky Employment
Retirement System has been amended significantly subsequent to Halfhill's suit . We
will refer to each statute as it existed at that time .
2
become effective, if the effective date shall be after his last day of service
and subsequent to the filing of the notice at the retirement office .
And finally, KRS 16.505(15) defined "normal retirement date" as:
[T]he first day of the month following a member's fifty-fifth birthday,
except that for members over age fifty-five (55) on July 1, 1958, it shall
mean January 1, 1959. A member of the State Police Retirement System,
a member of the County Employees Retirement System or a member of
the Kentucky Employees Retirement System covered by this section with
twenty (20) or more years of service credit, at least fifteen (15) of which
are current may declare his "normal retirement date" to be some date prior
to his fifty-fifth birthday .
Halfhill was fifty-seven years old and had ninety-four months of service credit
when he applied for disability retirement benefits. Thus, under the above statutes, he
was eligible for unreduced normal retirement benefits. Pointing out that he would have
been eligible for disability retirement benefits had he been fifty-four years old with the
same amount of service credit, he alleges that he was disparately treated solely
because of his age.
KRS 344 .040 prohibits employers from discriminating against an employee "with
respect to compensation, terms, conditions, or privileges of employment, because of the
individual's . . . age forty (40) and over." It also prohibits employers from limiting,
segregating or classifying employees in any way which would tend to create a
deprivation of employment opportunities or adversely affect the individual's status as an
employee, inter alia, because of age. The general purpose of KRS 344 .040 is to
execute the policies embodied in its federal counterpart, the Federal Age Discrimination
in Employment Act of 1967 ("Federal ADEA") .4 Consequently, we look to federal
precedent for guidance.
4 See KRS 344 .020 .
Most notable to this case is the fact that Halfhill asserts a claim of age
discrimination based solely on a disparate treatment theory .5 "In a disparate treatment
case, liability depends on whether the protected trait (under the ADEA, age) actually
motivated the employer's decision ."s "When the employer's decision is wholly motivated
by factors other than age, the problem of inaccurate and stigmatizing stereotypes
disappears . This is true even if the motivating factor is correlated with age . ,7
In the instant case, Kentucky Retirement administers the state retirement plan
which distributes disability retirement benefits as well as normal retirement benefits .
These two types of benefits are drawn from the same retirement fund and are mutually
exclusive .9 Thus, the former regulation simply established that when an employee was
eligible for one type of benefit, he would not be eligible for the other. The necessity,
function, and conformity section of the regulation provided the following explanation :
"Because the enhanced benefits provided under disability retirement are intended to
bridge the gap between the date the member becomes disabled and the date the
member would have been eligible for a [normal retirement] benefit without reduction,
this administrative regulation establishes that members who are eligible for retirement
without a reduction, regardless of age, shall not be entitled to disability retirement ."' ° In
other words, Kentucky Retirement contends that disability retirement benefits are barred
5 See Hazen Paper Company v. Biggins, 507 U.S . 604, 609, 113 S.Ct . 170 1, 123
L .Ed .2d 338 (1993) ("We long have distinguished between `disparate treatment' and
`disparate impact' theories of employment discrimination .")
6 _Id . at 610 (citing United States Postal Service Bd. of Governors v. Aikens, 460 U .S.
711, 103 S.Ct. 1478, 75 L.Ed .2d 403 (1983) ; Texas Dept. of Community Affairs v.
Burdine, 450 U .S . 248, 252-256, 101 S .Ct. 1089, 1093-1095, 67 L.Ed .2d 207 (1981) ;
Furnco Constr. Corp. v. Waters, 438 U .S . 567, 576- 578, 98 S.Ct. 2943, 2949-2950, 57
L .Ed .2d 957 (1978)) .
_Id . at 611 .
.,
8 See KRS 16 .510 et. al KRS 61 .515 et. al, KRS 78 .520 et. al.
9 See _Id .
10 105 KAR 1 :205 (repealed 2000) .
for those who have access to unreduced normal retirement benefits because the
purpose of disability retirement is to provide a permanent source of income to those
who would not otherwise have retirement income due to the fact that they became
disabled before they had an opportunity to accumulate retirement benefits .
The trial court found that the explanation provided above was legitimate and that
Halfhill failed to show any discriminatory motive whatsoever on the part of Kentucky
Retirement when it enacted the above regulation . The Court of Appeals reversed the
trial court, finding that Kentucky Retirement had effectively admitted discriminatory
motive in the introductory annotations to the regulation ." The Court of Appeals
explained that prior to the enactment of the regulation at issue, KRS 16 .582 provided
that applicants were not eligible to receive disability retirement benefits unless they
were "less than normal retirement age. "12 The Equal Employment Opportunity
Commission ("EEOC") challenged the statutory scheme as being based solely on age
(and thus, in violation of the Federal ADEA) . 13 In response, that portion of KRS 16 .582
was amended 14 and the regulation currently in dispute was issued as a "corrective"
measure . 15
As explained by the Court of Appeals, the "corrective" measures in the regulation
did two things : (1) it allowed applicants who had been denied benefits in the past to
reapply for benefits without application of the previous "age restriction," and (2) it
replaced the age restriction language ("less than normal retirement age") with language
11
Halfhill v. Kentucky Retirement Systems, 2003 WL 21419587, 2 (Ky . App . 2003) .
12 _Id . The "normal retirement age" was defined as fifty-five years .
13 _Id
.
'4
The amended statute now provides that applicants employed prior to August 1, 2004,
may not receive disability retirement benefits if they are "eligible for an unreduced
retirement allowance ." KRS 16.582(2)(b) .
15 Halfhill , supra, at 2 .
5
barring disability retirement eligibility to all applicants who are independently eligible for
"an unreduced normal retirement allowance. 06 Applicants who were eligible for an
unreduced normal retirement allowance included all those who were greater than
normal retirement age (over age fifty-five) and all those who had twenty (20) years of
service or more ." Thus, the pool of applicants who were barred from seeking disability
retirement benefits was enlarged, not reduced by the "corrective" regulation .
With this background in mind, the Court of Appeals framed the pivotal question in
this case as follows : "whether expanding the pool of excluded claimants from only those
over normal retirement age to include those who have served 20 years transforms the
exclusion from one 'based solely on . . . age' into something more acceptable ."' 8 We
find the Court of Appeal's framing of this issue along with the underlying assumptions
associated with it to be misplaced . It is unreasonable to presume or to construe a
discriminatory motive from the mere fact that a regulation was issued as a "corrective"
measure or in response to a challenge levied by the EEOC. Not only would such a
strict construction discourage the taking of such "corrective" or "precautionary"
measures in the future, but it would unfairly presume that all such "precautionary" or
"corrective" measures are taken only when the issuing agency had a discriminatory
motive in the first place. We believe closer scrutiny is required since there are a variety
of legitimate reasons why an agency might issue such a "corrective" regulation .' 9
16
Id .
_.
Id
18
Id .
' 9 Such corrective regulations may be issued to avoid potential or perceived conflict, to
clarify potentially confusing language, or to reduce the likelihood of disparate impact
upon a protected class .
17
Furthermore, a careful reading of the introductory annotations to the regulation at
issue actually belies the presumption of a discriminatory motive by Kentucky
Retirement :
NECESSITY, FUNCTION, AND CONFORMITY: KRS 16 .582 and KRS
61 .600 provide for long-term disability benefits for members of the
Kentucky Employees Retirement System, County Employees Retirement
System and the State Police Retirement System . 29 USC 623(i)(1)(A) and
29 CFR 1625 .10(f)(ii) prohibit a pension system from limiting long-term
disability benefits solely on the basis of age . KRS 61 .645(9)(f) provides
that the provisions governing the Kentucky Employees Retirement
System, County Employees Retirement System and the State Police
Retirement System shall conform to federal law. Because the enhanced
benefits provided under disability retirement are intended to bridge
the gap between the date the member becomes disabled and the
date the member would have been eligible for a benefit without
reduction, this administrative regulation establishes that members
who are eligible for retirement without a reduction, regardless of age,
shall not be entitled to disability retirement.
(emphasis added) . We find such a statement to be an express rejection of
discriminatory intent, with the "corrective" measures being imposed as a means of
clarifying and endorsing a non-discriminatory scheme . Without further evidence
establishing that the above stated intent is somehow irrational or is otherwise clearly a
pretext for age discrimination based primarily on "inaccurate and stigmatizing
stereotypes," we find that evidence simply showing the regulation was issued as a
"corrective" measure in response to a challenge by the EEOC is insufficient, in and of
itself, to establish that Kentucky Retirement had a discriminatory motive when it enacted
the former regulation .
Without sufficient evidence to establish proof of discriminatory motive by
Kentucky Retirement, Halfhill's claim of disparate treatment under KRS 344.040 must
fail. Accordingly, we reverse the Court of Appeals and reinstate the trial court's
judgment in favor of Kentucky Retirement . Our decision renders moot all other issues
raised by the parties.
Lambert, C .J ., Cooper, Graves, Johnstone, and Scott, J .J ., concur. Roach, J.,
not sitting . Wintersheimer, J ., dissents by separate opinion .
COUNSEL FOR APPELLANT
Lisabeth Ann Tulley
James D. Allen
Stoll, Keenon & Park, LLP
300 West Vine St.
Suite 2100
Lexington KY 40507
J . Eric Wampler
Kentucky Retirement Systems
Perimeter Park West
1260 Louisville Road
Frankfort, KY 40601
COUNSEL FOR APPELLEE
Stephen D . Wolnitzek
Donna Michelle Bloemer
Wolnitzek, Rowekamp & Bonar PSC
502 Greenup St.
P O Box 352
Covington, KY 41012-0352
RENDERED : SEPTEMBER 22, 2005
TO BE PUBLISHED
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2003-SC-0771-DG
KENTUCKY RETIREMENT SYSTEMS,
BOARD OF TRUSTEES
APPELLANTS
ON REVIEW FROM COURT OF APPEALS
2002-CA-0564
FRANKLIN CIRCUIT COURT NO. 00-CI-0746
V.
H . DENNIS HALFHILL
APPELLEE
DISSENTING OPINION BY JUSTICE WINTERSHEIMER
I must respectfully dissent from the majority opinion because Halfhill was denied
a substantial and permanent benefit solely because of his age . Under such
circumstances, the anti-discrimination provisions of KRS 344 .040 were violated by 105
KAR 1 :205 . Thus, he was entitled to the disability retirement benefits .
The protestations by the Kentucky Retirement Systems that age was not a factor
in this action are unacceptable . Halfhill was employed for 94 months, much less than
the twenty years of service credit that seems to be the foundation of the eligibility
argument. Halfhill was 57 years of age at the time of his application and had he been
54 years of age, he could have properly elected to receive disability retirement benefits
rather than being required to accept normal retirement benefits . It is inescapable that
the sole factor in determining his eligibility for unreduced retirement benefits was his
age. The Franklin Circuit Court in its consideration of this situation admits that the rule
in question may have a discriminatory effect on Halfhill's situation, but that the rule does
not have a discriminatory intent. This is, of course, little comfort to Halfhill .
Under all the circumstances in this matter, the decision of the Court of Appeals
should be affirmed because Halfhill is entitled to disability retirement benefits.
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