On March 30, 2005, in Smith v. City of Jackson, the Supreme Court held that the Age Discrimination in Employment Act ("ADEA") authorizes recovery in disparate impact cases. The Circuit Courts of Appeal had split on the issue and the Supreme Court had not previously stated that such suits were allowed. Although the decision appears to be pro-employee because it specifically authorizes a cause of action that had been in doubt for many years, a close reading of the decision indicates the while it allows age-based disparate impact claims in theory, it also contains a high standard which may prove difficult to meet in practice. In Smith, although the Court noted that such actions are allowed, the Court held that the employees did not set forth a valid disparate impact claim.
According to the Court, there are two key differences between the ADEA and Title VII that make clear that the test for age based disparate impact claims is narrower under the ADEA than race and sex based disparate impact claims under Title VII. First, unlike Title VII, §4(f) of the ADEA narrows its coverage by permitting an otherwise prohibited action where the differentiation is based on "reasonable factors other than age" [the RFOA provision]. This language is not contained in Title VII. Congress' decision to limit the ADEA's coverage by including the RFOA provision is consistent with the fact that age, unlike Title VII's protected classifications, sometimes is relevant to an individual's capacity to engage in certain types of employment. It also recognizes that unlike an employee's race or sex, age often times is associated with factors employers may use to distinguish between workers, including seniority, experience, education, and salary levels. Because most typical compensation packages correlate with age in one way or another, and it is likely older workers will have higher valued pay packages than younger workers, a business which needed to cut expenses could not do so without violating the law if the RFOA provision were not in effect.
The second difference involves the Civil Rights Act of 1991 which expanded the coverage of Title VII, but did not amend the ADEA. The Civil Rights Act of 1991 expanded Title VII by modifying the Court's holding in Ward's Cove Packing v. Atonio. In Ward's Cove, the Supreme Court held that in race based disparate impact cases, an employer only had to produce evidence of a business justification. Congress disagreed with the Court's interpretation and in the Civil Rights Act of 1991, included a provision which amended Title VII, specifically stating that in Title VII disparate impact cases, the employer was required to demonstrate that the challenged practice was required by a "business necessity." This is a higher burden for employers and makes it easier for employees to establish a prima facie case of disparate impact discrimination. Because the relevant 1991 amendments expanded only Title VII's coverage and did not amend the ADEA, the Supreme Court's pre-1991 interpretation of Title VII remains applicable to the ADEA. Thus, an employer must only have a business justification for its actions rather than show a business necessity.
In Smith, the Jackson, Mississippi police department implemented a facially neutral performance pay plan. Plaintiffs were police officers, over the age of 40, who challenged the plan under the ADEA, claiming violations under both the "disparate treatment" and "disparate impact" theories of discrimination. Plaintiffs claimed the plan gave substantially larger salary increases to officers with five or fewer years of tenure than to those with more than five years, creating a disparate impact in violation of the ADEA because its effects were less favorable to officers older than 40 years of age. Not surprisingly, a majority of those 40 and older had more than five years of tenure, while those with five or fewer years were generally younger than 40. The district court granted summary judgment in favor of the City. On appeal, the Fifth Circuit affirmed the judgment, in part, and dismissed the disparate impact claims, but remanded the case to the district court to consider the disparate treatment claims.
The Supreme Court affirmed and held that the employees had done little more than point out that the pay plan was somewhat less generous to older workers than to younger ones. They did not, as required by Wards Cove, identify any specific test, requirement, or practice within the pay plan that had an adverse impact on older workers. Further, the Court concluded that the City's plan was based on reasonable factors other than age. The City's explanation for the difference in awarding more favorable raises to younger workers was that there was a need to make the city more competitive in the labor market by raising salaries to match those in the surrounding area. The Supreme Court held that while the City may have achieved its objectives by some other way, the City's reliance on these factors was not unreasonable.
Although the decision has largely been viewed as a victory for employees, it is open to question whether many employees will succeed on age discrimination claims based on disparate impact. Plaintiffs may have a heavy burden to demonstrate a specific test, requirement, or practice within the employers' action that had an adverse impact on older workers. It will not be enough just to show that the action affected older workers more frequently than younger ones. Though employees may still allege disparate impact claims in age based lawsuits against employers, if employers base their actions on legitimate business factors, they will have a strong defense to such claims.
You may view the court's opinion by clicking here, or you can obtain a copy by phoning my secretary, Anne McDevitt, at 215-665-3314. If you have any questions about the opinion itself, or with any employment matter, please feel free to give me a call.
Very truly yours,
Daniel C. Moraglia
For further information, please contact Daniel C. Moraglia, Esquire.
Telephone: 215-665-3366
E-mail: moraglia@bbs-law.com
