S. Ct. Authorizes Disparate Impact Age Discrimination Claims

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. An increase in the amount of litigation in respect to these types of claims under the ADEA will likely result from the Smith opinion.

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 …” 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

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. The Court concluded that the very presence of the RFOA Defense in the ADEA implied that Congress intended the ADEA to apply only to intentional and arbitrary age discrimination. (In the Smith case, larger raises given to newer employees were intended as a defense against competitive recruitment by nearby communities.)

The Circuit court also found, based on comparative legislative histories, that the ADEA had the refined purpose of prohibiting arbitrary age discrimination in employment, whereas Title VII was enacted for broader remedial purposes.

Supreme Court Opinion

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.

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. The 1991 amendments 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.

The Wards Cove Packing decision requires that disparate impacts be traceable to specific employment practices that are allegedly responsible for the observed statistical disparities. Ironically, the Supreme Court ultimately denied ADEA-based relief in the just-decided Smith case, since it found that the Wards Cove criterion had not been met.

Conclusion

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. An increase in the amount of litigation in respect to these types of claims under the ADEA will likely result from the Smith opinion.

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 …” 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

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. The Court concluded that the very presence of the RFOA Defense in the ADEA implied that Congress intended the ADEA to apply only to intentional and arbitrary age discrimination. (In the Smith case, larger raises given to newer employees were intended as a defense against competitive recruitment by nearby communities.)

The Circuit court also found, based on comparative legislative histories, that the ADEA had the refined purpose of prohibiting arbitrary age discrimination in employment, whereas Title VII was enacted for broader remedial purposes.

Supreme Court Opinion

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.

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. The 1991 amendments 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.

The Wards Cove Packing decision requires that disparate impacts be traceable to specific employment practices that are allegedly responsible for the observed statistical disparities. Ironically, the Supreme Court ultimately denied ADEA-based relief in the just-decided Smith case, since it found that the Wards Cove criterion had not been met.

Conclusion

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.