The Supreme Court Rules that Employees Who are 40 or Over May Bring
Disparate Impact Claims Alleging Age Discrimination
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On March 30, 2005, the U.S. Supreme Court issued its 5-3 decision in
Smith v. City of Jackson, Mississippi, No. 03-1160, 125 S.Ct. 1536
(2005), resolving a split among the Circuits and ruling that a disparate
impact theory is viable under the Age Discrimination in Employment Act (“ADEA”).
The Court explicitly found that proving intentional discrimination is not
required for a finding of violation under the ADEA. Instead, it is sufficient
to show that the employer has a plan or policy that has a disparate impact
on employees who are 40 and over. The Court also said that an employer can
prevent liability by showing that it relied on “a reasonable factor other
Facts in City of Jackson
|"The Court explicitly found that
proving intentional discrimination is not required for a finding
of violation under the ADEA."
About 30 city police officers and public safety dispatchers in Jackson,
Mississippi, including the named plaintiff Azel Smith, claimed that the
City’s new performance pay plan discriminated against them based on their
age (40 or older). The City’s plan was created to make the pay for newly
hired officers more competitive with other police forces in the region.
The result of the plan was increasingly smaller raises to the more senior
officers and dispatchers. For the most part, these senior officers were
over age 40.
The plaintiffs alleged that the City purposefully discriminated against
them because of their age and, separately, that the City’s plan caused a
disparate impact on officers and dispatchers 40 years or older because they
received smaller pay increases than those under 40. Plaintiffs argued that
under the disparate impact allegation, discriminatory intent was irrelevant.
The district court granted summary judgment for the City and dismissed
both claims. The Court of Appeals for the Fifth Circuit affirmed summary
judgment on the disparate impact claim but determined that, on the disparate
treatment claim, further discovery was necessary on the issue of intent
before a determination could be made dismissing that claim.
Supreme Court’s Decision
The Court held that a disparate impact theory was cognizable under the
ADEA based on the similar provision found in Title VII of the Civil Rights
Act of 1964 (“Title VII”) and guidance from the Equal Employment Opportunity
Commission (“EEOC”) and the Department of Justice (“DOJ”).
At first, the Court compared the language in the ADEA with the language
in Title VII. The Court examined the language in both statutes that prohibits
employers from discriminating against employees based on protected factors.
Given this substantial similarity, the Court highlighted the presumption
that “when Congress uses the same language in two statutes having similar
purposes . . . it is appropriate to presume that the Congress intended that
text to have the same meeting in both statutes.” 125 S.Ct. at 1541. Moreover,
the Court recognized a “remarkable similarity” between the congressional
goals of Title VII and those set out in the ADEA’s legislative history.
Interestingly, the ADEA has language - the “reasonable factor other than
age” or “RFOA” provision - that significantly narrows a finding of ADEA
violation by permitting “otherwise prohibited” action “where the differentiation
is based on reasonable factors other than age.” Contrary to the Fifth Circuit’s
decision, the Court held that the RFOA provision actually supports the conclusion
that a disparate impact theory is viable under the ADEA since that provision
“plays its principal role by precluding liability” if the impact was attributed
to a non age factor that is “reasonable.” Id. at 1544-1545.
Even so, the Court expressly said that a disparate impact theory under
the ADEA is narrower than it is under Title VII because of the RFOA provision
(discussed above) and the Civil Rights Act, as amended in 1991. Id.
Although the 1991 amendments expanded coverage of Title VII, those amendments
did not apply to the ADEA. Accordingly, the Court determined that plaintiffs
failed to state a viable disparate impact theory as a matter of law and
affirmed summary judgment in favor of the City. Id.
The Court went on to say that plaintiffs failed to identify a specific
employment practice that was allegedly responsible for any statistical disparity
and that it was clear from the record that the City’s plan was based on
“reasonable factors other than age.” Id. The Court said that it was
“unquestionably reasonable” to rely on seniority and rank given the City’s
goal of raising salaries to match the surrounding communities. Id.
at 1545. In reaching this conclusion, the Court commented that the business
necessity test of Title VII, which requires courts to consider other alternative
measures in its determination of whether the practice at issue is discriminatory,
does not apply to the ADEA. Id. at 1546.
Effect of the Ruling
|"Now more than ever, employers
should bring knowledgeable employment counsel into strategizing
sessions before company restructurings, reductions in force and
any other decision making processes that may have significant effect
on workers age 40 and over."
This decision may have a significant effect on employers: by recognizing
disparate impact claims under the ADEA, the Supreme Court lowered the threshold
requirement for asserting viable claims in court. The likely effect is that
litigation costs for employers will go up: more employers will be confronted
with more lawsuits alleging disparate impact claims in violation of the
ADEA. To avoid such increasing litigation costs, now more than ever, employers
should bring knowledgeable employment counsel into strategizing sessions
before company restructurings, reductions in force and any other decision
making processes that may have significant effect on workers age 40 and
Also, employers are well advised to carefully reevaluate all current
employment plans and programs, such as retirement policies, benefit plans,
or salary and bonus practices, to determine whether they have a negative
effect on employees 40 and over. As mentioned above, the Supreme Court held
that ADEA violation will not be found, despite adverse effect on older workers,
if an employer can demonstrate that the practice at issue was based on reasonable
factors other than age. Accordingly, employers should ensure that the reasons
behind and basis for such plans are legitimate, well grounded and based
on factors other than age.
Finally, employers are well advised to keep a close watch on new developments
in legislation affecting the ADEA. Congress soon may attempt to square the
stricter ADEA requirements for a finding of liability with the less stringent
requirements of Title VII.
This Alert was written by
Maria Hallas in the Washington,
DC office. Please contact Ms. Hallas at 202.533.2312 or your Greenberg Traurig
liaison if you have any questions regarding the subject matter of this Alert.
© 2005 Greenberg Traurig
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