Age Discrimination Ruling: Analysis

However, following the Court's 1993 decision in Hazen Paper Co. v. Biggins, in which the Court held that the ADEA did not prohibit employers from basing employment decisions on employees' years of service, the First, Seventh, Tenth and Eleventh Circuit courts of appeal held that employees could not recover under the ADEA under a disparate impact theory. Those decisions were based primarily on the fact that, unlike Title VII, the ADEA contains language that significantly narrows its coverage by permitting “otherwise prohibited” action “where the differentiation is based on reasonable factors other than age” (the RFOA Defense).

Lower Court Proceedings in Smith

The petitioners in the Smith case were police and public safety officers employed by the City of Jackson, MS, aged 40 and over. In 1998, the City adopted a plan to raise the salaries of all City employees. In 1999, the City revised the plan, which granted raises to all police officers and police dispatchers. Under the plan revision, those with less than 5 years of tenure received proportionately greater raises when compared to their former pay than those with more seniority. Although some of the officers over the age of 40 had less than 5 years of service, most of the older officers had more. The petitioners filed suit in a U.S. District Court in Mississippi alleging, inter alia, that they were adversely affected by the revised plan because of their age, in violation of the ADEA. The district court dismissed the disparate impact claim.

The Fifth Circuit Court of Appeals affirmed the district court's dismissal. Like other federal circuit courts that had previously ruled on the issue, the Fifth Circuit focused on the RFOA Defense which, the court noted, serves as a safe harbor for employers who can demonstrate that they based their employment action on reasonable non-age factors, even if their actions led to age-disparate results. Thus, the court concluded, the presence in the ADEA of RFOA Defense implies that Congress intended, in the ADEA, to remedy only intentional age discrimination.

The court also found that strong policy considerations, revealed in the comparative legislative histories of the ADEA and Title VII, supported its conclusion. The court explained that the Griggs opinion was based on its finding that Congress enacted Title VII for broad remedial purposes, ie, to achieve equality of employment opportunities and remove barriers that have operated in the past to favor an identifiable group of white employees over non-white employees. Thus, the court noted, the Supreme Court's holding in Griggs that disparate impact claims are cognizable was based on Congress broad remedial purpose in enacting Title VII. By contrast, the court noted, Congress, in enacting the ADEA, had no such broad remedial purpose. According to the court, Congress recognized that there was no evidence of prejudice based on dislike or intolerance of older workers and that the primary problem older workers faced in the workplace was arbitrary age discrimination — namely explicit age limitations — based on misconceptions about the abilities of older workers, and the concept of age prejudice differs from the concept of race prejudice because the process of aging is inescapable, regardless of distinct social and economic environments. Consequently, the court found, Congress enacted the ADEA for the refined purpose of prohibiting arbitrary age discrimination in employment, as opposed to other institutional arrangements that have a disproportionate effect on older workers they might not be motivated by a discriminatory animus.

Supreme Court Opinion in Smith

The Supreme Court reversed, holding that disparate impact claims can be asserted under the ADEA, even in the absence of discriminatory intent. The Court noted that, although its prior decision in Griggs relied heavily on the above-described legislative history of Title VII, subsequent Court opinions concerning Title VII made it clear that the statutory text of Title VII mandated the same result. And, since the relevant language in Title VII is virtually identical to the relevant text in the ADEA, particularly since the two statutes have similar purposes and one was enacted shortly after the other, it is appropriate to assume that Congress intended the text to have the same meaning in both statutes.

The Court also disagreed with the Fifth Circuit's conclusions regarding legislative history and the RFOA Defense in the ADEA. With respect to the legislative history, the Court found that Congress, in enacting the ADEA, was concerned about the potential disparate impact of facially neutral practices on older workers. With respect to the RFOA Defense, the Court held that it does not represent a “safe harbor” from liability because, if an employer's actions were based on a factor other than age, those actions would not be prohibited in the first instance, and thus the RFOA Defense need not be utilized to avoid liability that would otherwise attach.

Nonetheless, the Court held that the scope of disparate impact liability is narrower under the ADEA than under Title VII as a result of the amendment to Title VII in the Civil Rights Act of 1991, which modified the Court's 1989 decision in Wards Cove Packing Co. v. Atonio, in which the Court narrowly construed an employer's potential exposure to liability under a disparate impact theory under Title VII. While the 1991 amendments expanded the coverage of Title VII, they did not amend the ADEA or speak to the subject of age discrimination. Consequently, the Court held, the Wards Cove Packing decision continues to apply to disparate impact claims under the ADEA.

Ironically, the Court affirmed the Fifth Circuit's decision affirming the dismissal of the petitioners' disparate impact claim under the ADEA because they failed to identify any specific test, requirement or practice within the revised pay plan that had an adverse effect on older workers; thus they failed to meet their burden, as enunciated in the Court's Wards Cove Packing decision, of isolating and identifying specific employment practices allegedly responsible for any observed statistical disparities in the way that the challenged employment action impacted older police officers. Moreover, the Court held, the evidence demonstrated that the revised pay plan was based on reasonable factors other than age, and thus was not prohibited under the RFOA Defense, ie, the City's motivation in granting larger raises to lower echelon employers (who were also younger employees) was to raise their salaries to match those of surrounding communities for the legitimate purpose of retaining police officers. While there may have been other reasonable methods for the City to achieve its goal, the one that it selected was not unreasonable.

Conclusion

The Supreme Court's decision in the Smith case represents a significant victory for employees because it enables them to assert age discrimination claims under the ADEA based on a disparate impact theory without having to satisfy the difficult burden of proving discriminatory intent. This will likely result in more age discrimination claims based on facially neutral employment policies and practices. In light of the Smith decision, employers must be careful when establishing new, or modifying existing, policies or practices, particularly those relating to pay and benefits, to pay attention to the potential disparate adverse impact they may have on their older workers. Any such policy or practice should be adequately vetted, prior to becoming effective, to ensure that a reasonable basis other than age exists for the policy or practice. It is recommended that counsel be centrally involved in the vetting process in order to preserve the attorney-client privilege in connection with this process.

The U.S. Supreme Court recently issued an important decision concerning the Age Discrimination In Employment Act of 1967 (ADEA). In Smith v. Jackson, Miss., the Court held that employees aged 40 and over can assert claims for age discrimination under the ADEA based on the disparate impact of a facially neutral employment policy, even in the absence of discriminatory intent on the employers' part. In so doing, the Court reconciled a split in the federal circuit courts of appeal and aligned its view concerning the scope of the ADEA with its view of the scope of Title VII of the Civil Rights Act of 1964, which, according to prior Court decisions, permits employees to allege discrimination because of race, color, religion, sex and national origin based on the disparate impact of a facially neutral employment policy. Because employees located in the geographic areas covered by the federal circuits whose courts of appeal formerly prohibited the assertion of such claims under the ADEA can now assert disparate impact claims under the ADEA, the Smith opinion will likely result in increased litigation under the ADEA in respect of these types of claims.

Statutory Background

The ADEA, enacted in 1967, makes it unlawful for employers to “limit, segregate, or classify [their] 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 substitution of the word “ age” for the words “race, color, religion, sex, or national origin,” the ADEA's prohibition is virtually identical to that found in Title VII. In 1971, the U.S. Supreme Court, in Griggs v. Duke Power Co., held that Title VII recognized discrimination claims based on facially neutral policies that were not motivated by discrimination but had a disparate impact when applied. Until 1993, based on the Griggs decision, the federal courts of appeal uniformly interpreted the ADEA as authorizing recovery on a disparate impact theory.

However, following the Court's 1993 decision in Hazen Paper Co. v. Biggins, in which the Court held that the ADEA did not prohibit employers from basing employment decisions on employees' years of service, the First, Seventh, Tenth and Eleventh Circuit courts of appeal held that employees could not recover under the ADEA under a disparate impact theory. Those decisions were based primarily on the fact that, unlike Title VII, the ADEA contains language that significantly narrows its coverage by permitting “otherwise prohibited” action “where the differentiation is based on reasonable factors other than age” (the RFOA Defense).

Lower Court Proceedings in Smith

The petitioners in the Smith case were police and public safety officers employed by the City of Jackson, MS, aged 40 and over. In 1998, the City adopted a plan to raise the salaries of all City employees. In 1999, the City revised the plan, which granted raises to all police officers and police dispatchers. Under the plan revision, those with less than 5 years of tenure received proportionately greater raises when compared to their former pay than those with more seniority. Although some of the officers over the age of 40 had less than 5 years of service, most of the older officers had more. The petitioners filed suit in a U.S. District Court in Mississippi alleging, inter alia, that they were adversely affected by the revised plan because of their age, in violation of the ADEA. The district court dismissed the disparate impact claim.

The Fifth Circuit Court of Appeals affirmed the district court's dismissal. Like other federal circuit courts that had previously ruled on the issue, the Fifth Circuit focused on the RFOA Defense which, the court noted, serves as a safe harbor for employers who can demonstrate that they based their employment action on reasonable non-age factors, even if their actions led to age-disparate results. Thus, the court concluded, the presence in the ADEA of RFOA Defense implies that Congress intended, in the ADEA, to remedy only intentional age discrimination.

The court also found that strong policy considerations, revealed in the comparative legislative histories of the ADEA and Title VII, supported its conclusion. The court explained that the Griggs opinion was based on its finding that Congress enacted Title VII for broad remedial purposes, ie, to achieve equality of employment opportunities and remove barriers that have operated in the past to favor an identifiable group of white employees over non-white employees. Thus, the court noted, the Supreme Court's holding in Griggs that disparate impact claims are cognizable was based on Congress broad remedial purpose in enacting Title VII. By contrast, the court noted, Congress, in enacting the ADEA, had no such broad remedial purpose. According to the court, Congress recognized that there was no evidence of prejudice based on dislike or intolerance of older workers and that the primary problem older workers faced in the workplace was arbitrary age discrimination — namely explicit age limitations — based on misconceptions about the abilities of older workers, and the concept of age prejudice differs from the concept of race prejudice because the process of aging is inescapable, regardless of distinct social and economic environments. Consequently, the court found, Congress enacted the ADEA for the refined purpose of prohibiting arbitrary age discrimination in employment, as opposed to other institutional arrangements that have a disproportionate effect on older workers they might not be motivated by a discriminatory animus.

Supreme Court Opinion in Smith

The Supreme Court reversed, holding that disparate impact claims can be asserted under the ADEA, even in the absence of discriminatory intent. The Court noted that, although its prior decision in Griggs relied heavily on the above-described legislative history of Title VII, subsequent Court opinions concerning Title VII made it clear that the statutory text of Title VII mandated the same result. And, since the relevant language in Title VII is virtually identical to the relevant text in the ADEA, particularly since the two statutes have similar purposes and one was enacted shortly after the other, it is appropriate to assume that Congress intended the text to have the same meaning in both statutes.

The Court also disagreed with the Fifth Circuit's conclusions regarding legislative history and the RFOA Defense in the ADEA. With respect to the legislative history, the Court found that Congress, in enacting the ADEA, was concerned about the potential disparate impact of facially neutral practices on older workers. With respect to the RFOA Defense, the Court held that it does not represent a “safe harbor” from liability because, if an employer's actions were based on a factor other than age, those actions would not be prohibited in the first instance, and thus the RFOA Defense need not be utilized to avoid liability that would otherwise attach.

Nonetheless, the Court held that the scope of disparate impact liability is narrower under the ADEA than under Title VII as a result of the amendment to Title VII in the Civil Rights Act of 1991, which modified the Court's 1989 decision in Wards Cove Packing Co. v. Atonio, in which the Court narrowly construed an employer's potential exposure to liability under a disparate impact theory under Title VII. While the 1991 amendments expanded the coverage of Title VII, they did not amend the ADEA or speak to the subject of age discrimination. Consequently, the Court held, the Wards Cove Packing decision continues to apply to disparate impact claims under the ADEA.

Ironically, the Court affirmed the Fifth Circuit's decision affirming the dismissal of the petitioners' disparate impact claim under the ADEA because they failed to identify any specific test, requirement or practice within the revised pay plan that had an adverse effect on older workers; thus they failed to meet their burden, as enunciated in the Court's Wards Cove Packing decision, of isolating and identifying specific employment practices allegedly responsible for any observed statistical disparities in the way that the challenged employment action impacted older police officers. Moreover, the Court held, the evidence demonstrated that the revised pay plan was based on reasonable factors other than age, and thus was not prohibited under the RFOA Defense, ie, the City's motivation in granting larger raises to lower echelon employers (who were also younger employees) was to raise their salaries to match those of surrounding communities for the legitimate purpose of retaining police officers. While there may have been other reasonable methods for the City to achieve its goal, the one that it selected was not unreasonable.

Conclusion

The Supreme Court's decision in the Smith case represents a significant victory for employees because it enables them to assert age discrimination claims under the ADEA based on a disparate impact theory without having to satisfy the difficult burden of proving discriminatory intent. This will likely result in more age discrimination claims based on facially neutral employment policies and practices. In light of the Smith decision, employers must be careful when establishing new, or modifying existing, policies or practices, particularly those relating to pay and benefits, to pay attention to the potential disparate adverse impact they may have on their older workers. Any such policy or practice should be adequately vetted, prior to becoming effective, to ensure that a reasonable basis other than age exists for the policy or practice. It is recommended that counsel be centrally involved in the vetting process in order to preserve the attorney-client privilege in connection with this process.