Skalka v. Fernald Environmental Restoration Management Corp.,
178 F.3d 414 (6^th Cir. (Ohio) May 19, 1999)

This case was brought by four Plaintiffs who worked for FERMCO, a company engaged in the clean-up of uranium waste. FERMCO underwent a workforce reduction where employees were divided into peer groups, evaluated, and ranked. The employees at the bottom of certain lists were laid off. One Plaintiff, Skalka, was one of four Remedial Support Operations employees. The other three RSO’s were all younger than Skalka, who was 54 at the time of his termination. Skalka received a nearly perfect score on his evaluation. Nonetheless, he was terminated, and the other three were not. The reason FERMCO gave Skalka for his termination was that the particular department that he supported no longer needed an RSO, while the other departments each still needed one. Skalka maintained that the person with the lowest rating should have been laid off and that he should have been moved to that person’s position.

The other three Plaintiffs in this litigation were, like Skalka, veteran employees. They, however, were ranked at the bottom of their respective groups and were fired as a result.

FERMCO conducted a statistical study of the effects of the layoffs and concluded that there was a possible disparate impact on older workers. FERMCO, however, argued that the difference in the number of older and younger workers laid off was negligible. The Defendants based this conclusion on the assumption that all groups should have been equally affected by the lay off, while the Plaintiffs asserted that, because of their greater experience, they should have been disproportionately unaffected by the layoffs.

The district court jury found that FERMCO had willfully discriminated against Skalka and one of the other Plaintiffs, and gave those two a doubled back pay award and a front pay award. The jury rejected the other two Plaintiffs’ claims. FERMCO appealed, claiming that there was insufficient evidence to support the findings of liability and willfulness, and that the damages were calculated erroneously.

The Sixth Circuit noted that after a jury verdict the burden-shifting framework falls away. The question simply becomes whether there was sufficient evidence to support the finding of age discrimination. The court found that there had been sufficient evidence for the jury to conclude that FERMCO discriminated against Skalka, in that he was the oldest member of his peer group and was laid off despite being rated the most competent. In so holding, the court said that the jury did not have to accept as credible FERMCO’s explanation of why it terminated Skalka and, therefore, was entitled to find that discrimination had occurred.

The jury also returned a verdict in favor of the second Plaintiff, Conover, on his ADEA claim. In its review of this portion of the verdict, the Sixth Circuit noted that Conover was not the oldest member of his peer group. Despite this fact, Conover had insisted at trial that he was the oldest member of the group. The court reversed Conover’s award, holding that a reasonable jury could not have inferred discrimination from the true facts of the case and that the jury must have been confused about the true nature of Conover’s age. In so holding, the Court of Appeals noted that Conover had received the lowest score in his peer group and that two members of his peer group, who were older than him, had not been terminated.

FERMCO next argued that even if the ADEA was violated there was insufficient evidence to support a finding that it willfully violated the ADEA. The Court of Appeals disagreed, noting that Skalka’s termination took a dramatic departure from the established workforce reduction plan and was, therefore, highly visible to management. The Court held that the jury could have reasonably concluded that FERMCO was aware that its oldest RSO was selected for a layoff through irregular procedures and that its failure to investigate and remedy this situation indicated a reckless disregard for whether its managers were making discriminatory decisions. The Sixth Circuit thus upheld the jury’s finding that FERMCO’s discrimination against Skalka was willful.

The jury awarded Skalka over one million dollars on his ADEA claim. FERMCO attacked that award, and the Court of Appeals concluded that the award was the result of several errors in the jury instructions, which led to the improper calculation of several aspects of the damage award.

The first issue addressed in remedying those errors was the award of pension benefits as a part of back pay. The court noted that included in the Plaintiff’s back pay award was compensation for pension benefits he eventually would have received if he had stayed at FERMCO until retirement. FERMCO argued that payments expected in the future cannot be part of back pay. The Plaintiff did not attempt to defend the inclusion of such future payments in the back pay award, but rather argued that FERMCO failed to object to the jury instructions given at trial that defined back pay as including "pension benefits which a plaintiff would have received had the discrimination not occurred." The Court of Appeals concluded that pension benefits are not proper for a back pay award. The court also said that FERMCO’s failure to object to this instruction did not work forfeiture upon it and only the portion of the judgment which truly represented back pay would be doubled under the ADEA’s liquidated damages section.

The Defendants next argued that there was insufficient evidence to support the award of any pension benefits because those benefits were too speculative. The court rejected this argument, holding that Skalka’s award of future pension benefits was not too speculative since he would have reached the retirement age of 65 before the particular project to which he was assigned was to be completed and his employment thereby terminated. The court allowed the award of pension benefits but made clear that they were not to be doubled.

The Court of Appeals next held, that because the district court had erroneously treated the pension benefits as back pay, the jury had not been instructed to discount the pension benefits to present value. The court ordered the district court to apply an appropriate discount rate to the pension benefits in calculating the remittitur and to carefully instruct the jury on that issue if there was a retrial on damages.

FERMCO then claimed that the jury award was erroneous because the Plaintiff’s salary from other employment was not subtracted from his back pay award. The court held that Skalka’s damage award should be reduced by the amount he earned on his new job up to the day of the verdict. To the extent that the Plaintiff’s salary exceeded his former salary, however, the "excess" was not to be subtracted from the back pay award for the period of unemployment.

FERMCO argued next that Skalka’s back pay award should be further reduced because he had received early retirement benefits during the time between his termination and the trial. The court said that such benefits may be a collateral payment, which should not be subtracted from the damages awarded to a discrimination plaintiff. The court held that on remand it should be determined whether the payments that Skalka received were from a collateral source. The court specifically directed the district court’s attention to Hamlin v. Charter Township of Flint, 165 F.3d 426 (6^th Cir. 1999), where it had set out a test for determining whether pension benefits are collateral.

The Court of Appeals then addressed the award of front pay. The Defendant advanced precedent which said a substantial liquidated damage award may make an additional award of front pay inappropriate or excessive. The Court ruled that this argument was no longer applicable because of its decision to reduce the amount of back pay awarded to the Plaintiff.

Based on these holdings, the Sixth Circuit affirmed the judgment for Skalka on his ADEA claim but reversed the ADEA judgment for Conover. The Court of Appeals then remanded the case to the district court for determination of an appropriate remittitur and, if necessary, a new trial on damages.

- Back to Sixth Circuit Court Cases -