United States: Supreme Court Rules ADEA Applies To All Public Employers Regardless Of Size And Leaves The Door Open To Personal Liability

Executive Summary: The first decision by United States Supreme Court this term, Mount Lemmon Fire District v. Guido, has broadened liability for small public employers nationwide by holding unanimously the Age Discrimination in Employment Act (ADEA) applies to all state and local public sector employers irrespective of size. While this decision may appear relevant only to the public sector, private employers should also pay close attention as this case may pave the way for personal liability for a violation of the ADEA.

By way of background, the ADEA appears in the same Title as, and is partly modeled after, the Fair Labor Standards Act (FLSA) (which, among other things, governs employee wages). The ADEA generally prohibits an "employer" from discriminating against employees over the age of 40 because of age. As originally adopted in 1967, the ADEA, like Title VII of the Civil Rights Act of 1964, applied only to private employers.

However, in 1972, Congress amended Title VII to include public employers. Under Title VII, an "employer" is "a person engaged in an industry affecting commerce who has fifteen or more employees...." Title VII defines "person," among other things, as "governments, government agencies, [and] political subdivisions." Therefore, it is clear from the statutory language that even a government agency must have 15 employees to be subject to Title VII.

Two years later, in 1974, Congress also amended the ADEA to include public employers, but used different language and statutory construction. Unlike in Title VII, the definition of "person" under the ADEA does not specifically include the government, its agencies and/or its political subdivisions. Rather, public entities are covered under the definition of "employer," which reads: "The term 'employer' means a person engaged in an industry affecting commerce who has twenty or more employees... . The term also means (1) any agent of such a person, and (2) a State or political subdivision of a State and any agency or instrumentality of a State or a political subdivision of a State, and any interstate agency... ." (emphasis added). 29 U.S.C.S. § 630(b). Of interest, at the same time Congress amended the definition of "employer" under the ADEA, it also amended the definition of "employer" under the FLSA to include all government employers, irrespective of their size.

Since the 1974 amendment, it has been disputed whether "also means" in the definition of "employer" is a clarifier to the first sentence or whether it is additive, creating new categories of employers subject to the ADEA. The difference with respect to public employers is clear: if it is a clarifier, then a state or local government employer needs 20 employees to be subject to the ADEA (which is consistent with Title VII); if it is additive, then all state and local governmental employers are subject to the ADEA, regardless of size (which is inconsistent with Title VII). As of the date Mount Lemmon Fire District v. Guido was decided, the federal courts varied on their approaches, with the Sixth, Seventh, Eighth and Tenth Circuits holding that "also means" is a clarifier.

This changed with Mount Lemmon Fire District v. Guido. In that case, two firefighters claimed they were terminated because of their age in violation of the ADEA. Mount Lemmon Fire District, a political subdivision of Arizona, has less than 20 employees. Thus the employer moved for summary judgment, arguing that because it did not have 20 employees, it was not an "employer" under the ADEA. The lower court ruled in favor of the employer, and the firefighters appealed. The Ninth Circuit reversed, holding that size was irrelevant when determining whether a public employer was subject to the ADEA. This created a split among the Circuits, and the Supreme Court granted certiorari.

In affirming the Ninth Circuit, the Supreme Court, in an opinion authored by Justice Ruth Bader Ginsberg, relied primarily on the "ordinary meaning" of "also" as being additive rather than clarifying. The Court noted that "also means" is used throughout the U.S. Code and "typically" has an additive meaning. Likewise, in other places in the U.S. Code where Congress intended a qualifier to apply to more than one clause within a single statutory provision, the qualifier is repeated. In the ADEA, the qualifier "twenty or more employees" is not repeated in the second sentence, lending support to the Ninth Circuit's interpretation that size does not matter in determining whether a state or local government meets that statutory definition of "employer."

The Court specifically rejected Mount Lemmon Fire District's argument that the ADEA should be read consistently with Title VII, which clearly requires a minimum number of employees for even governmental agencies to be considered employers, even though it means that the ADEA has broader reach than Title VII. The Court noted that unlike Title VII, the ADEA appears in the same title as the FLSA, which does not take into account the number of employees a government has in determining whether it is an "employer." The Court also cited to its prior decision in Gross v. FBL Financial Services in reasoning that Congress chose to use different language in drafting the ADEA than Title VII, which cannot be ignored when interpreting the ADEA.

The Court also rejected Mount Lemmon Fire District's public policy argument that applying the ADEA to small governmental employers would make it difficult to provide safety related public services by deferring much needed funds away from the community towards fighting litigation.

The initial ramifications of this decision are clear – unlike in the private sector where an employer must have 20 or more employees to be subject to the ADEA, all public sector employers, regardless of size, must now comply with and be wary of the ADEA. This is particularly burdensome on small rural municipalities and special districts – like Mount Lemmon Fire District – where 20 or more employees are simply unnecessary to properly provide services, and minimal budgets make it difficult to defend against such lawsuits. This is especially true in areas where there are no local or state human rights laws prohibiting age discrimination, which usually apply to smaller employers. It also creates inconsistency in the application of the ADEA versus other federal employment laws.

The secondary implication of this case applies more broadly to all employers. The Court left unanswered the natural question following from this decision: whether the inclusion of "any agent of such a person" in the definition of "employer" after "also means" indicates Congress intended to impose individual liability for an ADEA violation. In a footnote, the Court dismissed the issue for later consideration. However, given the Court's holding that "also means" is additive, and that the FLSA provides for individual liability in both the private and public sectors, individual liability under the ADEA in at least some circumstances seems a natural extension of Mount Lemmon Fire District. Indeed, although there exists a split among the circuits, most to have addressed the issue, including the Second, Third, Fifth, Seventh and Eighth, have relied on the FLSA rationale for imposing individual liability under the Family and Medical Leave Act (FMLA), which also appears in the same title as the FLSA.

Finally, in 1991 Congress amended the ADEA by passing the Older Workers Benefit Protection Act (OWBPA). The OWBPA provides additional benefits to employees over the age of 40, including protections pertaining to severance pay and waivers of claims. The OWBPA explicitly adopted the ADEA's definition of employer. In light of the Supreme Court's decision, public sector employers with fewer than 20 employees will now also likely be subject to the OWBPA's requirements.

Employers' Bottom Line:

Both private and public sector employers should be cognizant of this case's ramifications. Those in the public sector, regardless of size, must be sure to safeguard against ADEA claims by employees. Policies and procedures should be updated to ensure that age discrimination and harassment are prohibited and that there is an effective complaint procedure in place. Additionally, even the smallest of local agencies and special districts should consider carrying Employment Practices Liability Insurance to safeguard against the financial burden of such claims. We will monitor lower court decisions interpreting Mount Lemmon Fire District since a holding interpreting the decision to impose individual liability under the ADEA will impact both private and public sector employers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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