The Disparate Impact of Hiring Practices

R.J. Reynolds Tobacco Co., with the assistance of a recruiting service, utilized a set of “resume review guidelines” in screening applicants for its Territory Manager positions. Among other things, the guidelines directed hiring managers to target candidates who were “2-3 years out of college” and to “stay away from” candidates with “8-10 years” of prior sales experience. In almost three years, only 19 of the 1,024 individuals hired for the position were over the age of 40.

While these screening tools were in place, Richard Villarreal submitted an online application for a position as Territory Manager in November 2007. R.J. Reynolds did not respond to Mr. Villarreal's application. In May 2010, more than two years after having applied, Villarreal filed a charge with the EEOC alleging that he had been discriminated against because of his age.

When he subsequently filed suit in federal court, Villarreal advanced the theory that R.J. Reynolds' hiring practices had a disparate impact on job applicants over the age of 40. Under this theory, Villarreal would not have to present any evidence that R.J. Reynolds intentionally discriminated against him. Rather, he would simply have to prove that the company's facially neutral hiring practices “fall more harshly” on individuals over 40.

A court had never before applied the “disparate impact” theory of discrimination to job applicants under the ADEA. In fact, three separate circuit courts ' the U.S. Courts of Appeal for the Seventh, Eighth and Tenth Circuits ' had expressly stated that job applicants may not pursue disparate impact claims under the ADEA. Accordingly, the federal district court dismissed the majority of Villarreal's claims. However, on appeal, the Eleventh Circuit took a novel approach to the issue.

The ADEA and Disparate Impact Claims

Before examining the Eleventh Circuit's decision, it is important to consider the statutory basis for disparate impact claims under the ADEA and how prior courts have treated the matter.

Section 4(a)(1) of the ADEA makes it unlawful for employers “to fail or refuse to hire or to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions or privileges of employment, because of such individual's age.” As the plain text makes clear, this provision applies to both employees and applicants for employment. But it does not permit disparate impact claims. Rather, a plaintiff must present proof of intentional discrimination to prevail.

In contrast, Section 4(a)(2) of the ADEA contains a broader prohibition against “limit[ing], segregat[ing], or classify[ing] ' 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.” There is no dispute that Section 4(a)(2) provides for disparate impact claims under the ADEA. However, its repeated reference to “employees” has been traditionally understood to preclude such claims from non-employees or, more specifically, applicants for employment.

Indeed, Congress had expressly revised similar language in Title VII of the Civil Rights Act to include the phrase “applicants for employment,” thereby allowing job applicants to bring disparate impact claims under that statute. However, when afforded the opportunity to do the same with respect to the ADEA, Congress declined.

As such, the Seventh, Eighth and Tenth Circuits have each held that Section 4(a)(2) is limited to employees. Even the Supreme Court has opined that job applicants are prohibited from bringing disparate impact claims of age discrimination. In Smith v. City of Jackson, 544 U.S. 228 (2005), Justice O'Conner stated in a concurring opinion, “Section 4(a)(2), of course, does not apply to 'applicants for employment' at all ' it is only Section 4(a)(1) that protects this group.” Likewise, Justice Scalia noted that an “attempt to sweep employment applications into the disparate-impact prohibition is mistaken.”

The Eleventh Circuit's Decision

The Eleventh Circuit, however, was unpersuaded. In considering Congress' refusal to amend the ADEA to specifically provide for a disparate impact theory of recovery for job applicants, the court shrugged, “Congress has all kinds of reasons for passing laws, and presumably all kinds of reasons for not passing laws as well.” The Eleventh Circuit similarly reduced the Supreme Court's comments to “a single sentence in a minority opinion.”

While the Eleventh Circuit acknowledged that the traditional reading of the Act was “reasonable,” it concluded that an alternative reading was likewise “reasonable.” In doing so, the court afforded itself the opportunity to consider the EEOC's opinions on the matter.

However, even this proved problematic. The EEOC has not issued any regulations that speak specifically to whether Section 4(a)(2) of the ADEA allows job applicants to pursue a disparate impact claim. The Eleventh Circuit was therefore forced to look to EEOC regulations interpreting separate provisions of the Act to ascertain the EEOC's position. Specifically, the Eleventh Circuit looked to the EEOC's regulation governing the “reasonable factor other than age” defense, which states, “Any employment practice that adversely affects individuals within the protected age group on the basis of older age is discriminatory unless the practice is justified by a 'reasonable factor other than age.'” In addition, the Eleventh Circuit considered EEOC's briefs in prior cases, which set forth the EEOC's belief that job applicants may pursue a disparate impact claim under the ADEA.

Given the EEOC's consistent position on the matter, the Eleventh Circuit held that job applicants may pursue a disparate impact claim under Section 4(a)(2) of the ADEA.

Tolling the Statute of Limitations

The Eleventh Circuit's decision did not end there. To pursue a claim of age discrimination, an individual must file a charge of discrimination with the EEOC within 180 days of the adverse employment decision. Mr. Villarreal did not, however, file his EEOC charge until more than two years after submitting his on-ine application to R.J. Reynolds.

Villarreal argued that his late filing should be excused and the statute of limitations tolled. According to Villarreal, he did not know, nor could he have known, of R.J. Reynolds' resume review guidelines and hiring practices at the time he submitted his application, or at any other time within the 180-day limitation period. Rather, Villarreal contends that he did not learn of R.J. Reynolds' alleged discriminatory practices until April 2010, at which time he promptly filed his EEOC charge.

The Eleventh Circuit accepted Villarreal's argument, noting that “secret preferences in hiring are unlikely to be readily apparent to the individual discriminated against.” Moreover, the court refused to require that Villarreal undertake an exhaustive investigation into R.J. Reynolds' hiring practices within the 180-day limitations period simply in the name of “due diligence.” Rather, the court held that Villarreal was only required to file his charge within 180 days of when he would have learned, “with a reasonably prudent regarding for his rights,” of facts necessary to support his claims.

Conclusion

Given the conflicting opinions from other circuits, not to mention the Supreme Court's prior dicta on the issue, the Eleventh Circuit's decision appears ripe for review. However, in the meantime, Villarreal leaves employer hiring policies subject to even greater scrutiny than before. Employers in the Eleventh Circuit can no longer rely on the lack of any intentional discrimination by hiring managers to rebut failure to hire claims, but must now be concerned with the potential impact of their facially neutral policies on older applicants.

The court's ruling on tolling the statute of limitations likewise leaves employers subject to potentially stale claims, particularly from online applicants. Where an employer does not reject a candidate who submits an on-ine application, it may give that individual an opportunity to allege that he or she was unaware of a potential cause of action until well after the expiration of the applicable limitations period. Perhaps most importantly, Villarreal reflects an increased willingness by courts to defer to agency interpretation of the law, rather than provide their own. Despite statements from the Supreme Court and three separate circuit courts that the ADEA's disparate impact provision “of course, does not apply to 'applicants for employment' at all,” the Eleventh Circuit felt the need to defer to the EEOC's conflicting interpretation of the statute. As the DOL, EEOC, and NLRB continue to advance their own novel interpretation of employment laws, employers should be prepared for acquiescence from the courts.

Matthew R. Simpson is a partner in the Atlanta office of Fisher & Phillips, a national labor and employment law firm. He can be reached at [email protected].