Court: workers can sue for unintentional age bias

The U.S. Supreme Court has ruled that the disparate impact theory of liability is available to employees suing under the 1967 Age Discrimination in Employment Act (ADEA), but the scope of employer liability on that basis is narrower than under Title VII.

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The disparate impact theory allows plaintiffs to challenge an employer's neutral practices that have a disproportionately negative impact on persons over the age of 40, so workers will be able to sue in some cases over employer actions that result in unintentional discrimination.

The case, Smith v. City of Jackson, No. 03-1160, could open the door to more age bias lawsuits, experts say. "This case dispels a long-standing notion among employers that the ADEA does not cover disparate impact claims," said Manesh K. Rath of Keller and Heckman LLP in Washington, D.C.

"[This] decision has the potential to open the ADEA to far more litigation. Without delay, employers should carefully review all of their payroll practices and employment policies together with employment counsel, and possibly revise them in light of this new decision."

To attract and retain qualified employees, the City of Jackson, Miss., adopted a pay plan in October 1998 giving raises to all city employees. The city revised the plan in May 1999 to grant police officers and dispatchers with less than five years of service proportionately greater raises than those with more seniority. Part of the purpose of the revision was to align police officer starting salaries with the regional average.

Most of the officers over the age of 40 had more than five years of service.

A group of older officers sued the city, alleging that the city intentionally discriminated against them and that they were adversely affected because of their age.

The trial court dismissed both claims. On appeal, the 5th U.S. Circuit Court of Appeals said the ruling on the intentional discrimination claim was premature because the plaintiffs were entitled to more discovery on the intent. The 5th Circuit disposed of the disparate impact claim, saying it was categorically unavailable under the ADEA.

On March 30, four Supreme Court justices disagreed with that conclusion, holding that the ADEA does allow for disparate impact claims. A fifth justice agreed with the plurality's reasoning but, rather than independently rule on the issue, would have deferred to the U.S. Equal Employment Opportunity Commission's (EEOC) judgment that the ADEA allows for disparate impact liability.

Because the officers had not alleged a valid disparate impact claim, however, the court affirmed the lower court's judgment.

Identical Language, Conclusion

The ADEA makes it unlawful for an employer "to limit, segregate, or classify his employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual's age."

Except for its use of the word "age" in place of the words "race, color, religion, sex or national origin," the ADEA discrimination ban is identical to the language of Title VII of the Civil Rights Act of 1964, noted Justice John Paul Stevens in his plurality opinion.

In establishing the disparate impact theory in the context of a 1971 race discrimination case, Griggs v. Duke Power Co., the high court interpreted the identical prohibition, which "focuses on the effects of the action on the employee rather than the motivation for the action of the employer," Stevens noted. This "strongly suggests that a disparate-impact theory should be cognizable under the ADEA."

The ADEA, however, includes additional language that permits actions that are otherwise prohibited "where the differentiation is based on reasonable factors other than age," or RFOA. The RFOA language does not make disparate impact unavailable under the ADEA but rather precludes liability "if the adverse impact was attributable to a nonage factor that was 'reasonable,'" Stevens wrote.

Stevens also noted that the U.S. Department of Labor, which drafted the legislation, and the EEOC, which enforces the ADEA, "have consistently interpreted the ADEA to authorize relief on a disparate impact theory.... We therefore conclude that it was an error for the Court of Appeals to hold that the disparate-impact theory of liability is categorically unavailable under the ADEA."

In a separate opinion, Justice Antonin Scalia stated that he agrees "with all of the court's reasoning, but would find it a basis, not for independent determination of the disparate-impact question, but for deferral to the reasonable views of the Equal Employment Opportunity Commission."

The majority of the court agreed, however, that "the scope of disparate-impact liability under ADEA is narrower than under Title VII." Both the RFOA provision and the fact that in 1991 Congress expanded Title VII's coverage with respect to disparate impact liability, but left the ADEA untouched, dictate that conclusion.

These decisions, the majority said, are consistent with the fact that age--unlike race or other Title VII-protected classifications--often does have relevance to a person's capacity to engage in certain types of employment. "Thus, it is not surprising that certain employment criteria that are routinely used may be reasonable despite their adverse impact on older workers as a group."

In the specific case at hand, not only did the employees fail to identify a specific employment practice that adversely impacted older workers, but also the record was clear that the city's pay plan was based on reasonable factors other than age.

"The city's decision to grant a larger raise to lower-echelon employees for the purpose of bringing salaries in line with that of surrounding police forces was a decision based on a 'reasonable factor other than age' that responded to the city's legitimate goal of retaining police officers," the court held.

Attorneys representing employers agreed that the ruling would open the door to more employee suits, but some indicated that they have been advising their clients to avoid practices that have an adverse impact on older employees.

"It now permits claims against any policy that may be written neutrally. If an employer wants to hire someone who would make less than $50,000 a year for a certain position, that 'description' could be subject to scrutiny because older workers typically make more than the stated amount and, therefore, could now cry foul and sue employers," said Philip Berkowitz, head of Nixon Peabody's international labor and employment team.

Whether such a claim would be viable is another question.

As far as employers' actual practices are concerned, Maria Greco Danaher, of Dickie, McCamey & Chilcote in Pittsburgh, saw no cause for alarm.

"Employers will be well advised to fully document the business reasons for actions that will have an impact on a broad group of employees," she said.

MARGARET M. CLARK, J.D., SPHR, IS SENIOR LEGAL EDITOR FOR HR NEWS.

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