• Can Unintended Effects Lead to Age Discrimination Claims? The U.S. Supreme Court Dramatically Expands Age Discrimination
  • April 12, 2005 | Author: Robert R. Reinhart
  • Law Firm: Dorsey & Whitney LLP - Minneapolis Office
  • On March 30, the Supreme Court for the first time legitimized claims for unintentional discrimination on the basis of age under Federal law. In Smith v. City of Jackson Mississippi, the city implemented a pay plan intended to raise workers' pay up to the regional average for their position, by raising pay rates of all workers, but particularly newer employees with less than five years with the city. Many city workers over 40 years old had been with the city for more than five years, and claimed that their raises were not enough -- and were discriminatory under the Age Discrimination in Employment Act. The Supreme Court held that even where an employer's motives were innocent, the employee may have a claim if the employment practice adversely affected older workers disproportionately. In previous cases, the Supreme Court had hinted that this "disparate impact" theory would not fly under the federal Age Discrimination in Employment Act. As a result, plaintiffs have not often attempted to establish it. Now they may, and if they do, an increase in class and collective actions could well be the result.

    The Good News for Employers

    While validating potential claims for unintentional discrimination, the Court did narrow the potential application of this theory in two important ways. First, the Court held that disparate impact claims can only be applied to a specifically identified practice. In other words, the former employee must point to a specific act or practice that has had a discriminatory effect, and cannot simply compare older and younger employees' circumstances in a vacuum. Second, the Court allowed employers to defend themselves successfully, even in the face of proven disproportionate adverse impact on older workers, by demonstrating that their challenged practices are "reasonable." In race, sex and other discrimination cases, once plaintiffs show significant statistical imbalance caused by a specific bias-neutral practice, the targeted employer can escape liability only by showing that it could not achieve its legitimate business objectives by alternative means -- by demonstrating business necessity of the attacked practice. The bar is lower in age cases, because of the ADEA's unique statutory language that excludes decisions that are made on the basis of "reasonable factors other than age." Since "reasonableness" ordinarily is thought to be an issue of fact, this limitation ultimately could prove to be the most significant aspect of the Court's opinion. (Employers in states such as California, Minnesota, Washington and New York with local human rights statutes prohibiting age discrimination without "reasonable factor other than age" provisions will need follow the more restrictive state laws.)

    Practical Implications

    Will disparate impact claims will be widely attempted in the near future? That's still hard to say. Such claims offer plaintiffs' counsel the jackpot-style damages of class actions. They will also be expensive, both to prosecute and to defend. If they do come, they seem most likely to target the following kinds of practices:

    1. Driving selection or compensation decisions on the basis of tenure, where time on the job cannot necessarily be reasonably justified as a basis for selection.

    2. Imposing formal education requirements (specified degrees or simply recent specialized coursework), where older workers disproportionately lack such credentials but arguably have equivalent experience (specifically addressed in the City of Jackson decision). This issue is of particular importance to high-technology and life sciences employers.

    3. Using compensation level, which is often highly correlated to age, as a consideration during workforce downsizing.

    4. Incorporating any other age-neutral selection criteria without sufficient attention to its impact on older workers and the business case for its use.

    Statistics -- It's the Method that Matters

    The "disparate impact" theory which the Supreme Court has now validated for age discrimination claims revolves around a finding of statistical imbalance in the way employment decisions affect older and younger workers. Statistical analysis is difficult under the best of circumstances. It presents special challenges when age is involved, for the fundamental reason that people are not simply "old" or "young." Age is a relative category, raising issues about which group should be compared to which, and in what ways. Especially where intent is not the issue, great care will be required to approach the subject intelligently.

    Finally, regardless of what comes of the disparate impact theory, employers still definitely will find it prudent to apply adverse impact statistical analysis to reduction in force and other contemplated actions, as a preventative measure to protect against old fashioned disparate treatment cases, not just the potential new disparate impact claims. Remember that significantly disproportionate consequences of adverse decisions, by age as well as race and sex and other legally protected classifications, can also serve as evidence of discriminatory intent, not just actionable adverse impact of decisions admittedly free of bad intent.