High Court Shifts Burden To Employers In Certain Age Discrimination Cases
The Supreme Court recently held that an employer defending an age discrimination claim on the basis of "reasonable factors other than age" (RFOA) has the burden to produce evidence of the defense and persuade the court or jury of its applicability. In Meacham v. Knolls Atomic Power Laboratory, the employer alleged it had to lay off employees due to an involuntary reduction in force. To determine which employees would be discharged, the employer asked its managers to score subordinates based on performance, flexibility, and critical skills. As a result, 30 out of 31 people ages 40 and above were laid off. The laid-off employees brought a disparate impact and disparate treatment action alleging that employer's method of determining layoffs had a discriminatory impact on employees protected under the Age Discrimination in Employment Act (ADEA). The jury ruled in favor of the plaintiffs on the disparate impact claim and the employer appealed.
Initially, the Court of Appeals for the Second Circuit agreed with the jury's verdict, but after an order by the Supreme Court of the United States to review the decision again in light of 2005 opinion issued while the employer's petition was pending, the Second Circuit reversed the jury's verdict because the employee failed to prove that the employer's system for determining layoffs was unreasonable. The Supreme Court reversed the decision by the Second Circuit asserting that in the text of the ADEA, Congress intended both the RFOA and the bona fide occupational qualifications (BFOQ) issues to be affirmative defenses that fall on the employer to prove.
Disparate Impact Cases Under Discrimination Laws Are Typically Governed By A Three-Step Analysis:
- an employee must identify a specific employment practice
and establish that its effect is discriminatory
- the employer must then offer a legitimate "business
necessity" for the practice
- the burden then shifts back to the employee to show that
the demonstrated business necessity either does not support
the employment practice or that an equally effective
alternate practice would have been less discriminatory
The Court rejected the use of the second and third steps in ADEA actions because it would be wasteful and confusing to apply both a business necessity test and the RFOA defense. Accordingly, the employee must establish that an employer's business practice had a disparate impact among older workers, and the employer must then prove that any disparate impact was based on reasonable factors other than age.
This opinion inevitably makes it harder and costlier for employers to defend ADEA disparate impact actions. The increased prospect of liability may force employers to consider and reconsider various plans designed to streamline their workforce in light of changing market conditions. Employers would be well served to ensure that lay-off decisions and other RIFs do not affect workers over 40 in a disproportionate manner.
Plaintiffs Still Must Show That A Policy With Discriminatory Effect Was Actually Motivated By Age
In another disparate impact case, the Supreme Court held that the Commonwealth of Kentucky's disability plan did not discriminate based on age even though workers who became disabled after becoming eligible for retirement based on age did not receive the same benefits as some workers who became disabled prior to being eligible for retirement. If an employer adopts a pension plan that includes age as a factor, the Court said, and then treats employees differently based on pension status, the employee must prove that the differential treatment was "actually motivated" by age, not pension status. In Kentucky Retirement Systems v. EEOC, a hazardous position worker in the Sheriff's Department complained of age discrimination after he became disabled and retired at 61, after the age of eligibility under the State's retirement plan. The EEOC brought an action against the State alleging that if the worker had become disabled before reaching the age of eligibility for retirement benefits, he would have additional years to receive benefits.
The Court Held That The Plan Was Not Discriminatory For A Number Of Reasons Including:
- the ADEA treats pensions with more flexibility and
leniency
- there was a clear non-age related rationale for the
disparity
- the system does not rely on any stereotypical assumptions
that the ADEA seeks to eradicate, and
- absent such plan, it would be difficult for the State to
provide benefits for disabled workers not of the required
retirement age
Additionally, this decision clarifies what evidence is needed in a case of disparate treatment discrimination under the ADEA involving pension plans. Unlike classifications on the basis of sex or race, which are routinely viewed as facially discriminatory without any further reflection about the underlying motive, plaintiffs in age discrimination cases based on such policies must show that the arbitrariness appears on the face of the policy. If it does not, the employee must prove that any differential treatment was "actually motivated" by age.
Court Invalidates California Statute Limiting Employers' Speech Rights
In one of its end-of-term employment decisions, the Supreme Court struck down two provisions in a California labor statute because they were pre-empted by federal law. The two provisions prohibited several classes of employers receiving state funds from using it to promote or deter union activity. In Chamber of Commerce v. Brown, several organizations doing business with the state brought this action to prohibit the statute from being enforced. The District Court held that the NLRA preempted the statute and the Ninth Circuit eventually reversed asserting that Congress did not intend to preclude States from imposing such restrictions on the use of their own funds.
The Supreme Court rejected the Ninth Circuit's opinion because it de-emphasizes the importance Congress has placed upon an employer's right to speak against union organization attempts. Such a right was intended to be free from State regulation. Congress's intent in giving employers such a right not only fostered the First Amendment, it also fostered wide-open debate in labor disputes. The State argued that it was not regulating conduct by employers because it did not condition receipt of funds based on such activity. The Court held that the State indirectly regulated employers' conduct by imposing rigorous record keeping requirements and sanctions if it was deemed funds were used to promote or deter union activity. These provisions of the California statute were found to be calculated specifically to make it expensive for employers receiving state funds to speak out against union organization efforts.
The impact of the decision will be felt most immediately in California, where employers will no longer be faced with the decision to either forgo revenue from state funds or to remain silent and complicit in the face of union activity.
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