United States: Supreme Court Gives Okay to Disparate Impact Claims under the ADEA

Originally published April 4, 2005

On March 30, 2005, the United States Supreme Court resolved a split among the federal appellate courts over whether the federal Age Discrimination in Employment Act (ADEA) allowed workers age 40 and over to bring discrimination claims by showing that a facially neutral policy or practice had a disproportionate adverse impact on older workers (a "disparate impact" claim), without any evidence of discriminatory intent. In an earlier decision, the Supreme Court held that disparate impact claims were available under Title VII, but before this year it had not addressed whether such claims were available under the ADEA. In Smith v. City of Jackson (March 30, 2005), the Supreme Court resolved the question, explicitly holding that workers age 40 and over may bring disparate impact claims under the ADEA based on an employer’s policy, practice, or procedure. However, the Court held that such a claim may be defeated if the employer's policy, practice, or procedure is based on factors, such as seniority or position, that may be rationally related to a legitimate objective.

The City of Jackson, Mississippi, revised a pay plan that granted raises to all city employees in order to bring the starting salaries of police officers up to the regional average. Those with less than five years of service received proportionately greater salary increases than did more senior officers. Most of the officers with less than five years of service were under the age of 40.

A group of older officers sued the city under the ADEA, claiming disparate impact and disparate treatment. The district court granted summary judgment to the city on both claims. The Fifth Circuit Court of Appeals ruled that dismissal of the disparate treatment claim was premature because discovery on the issue of intent was warranted. Dismissal of the disparate impact claim was affirmed based on the court’s finding that disparate impact claims are "categorically unavailable" under the ADEA.

In holding that the ADEA permits disparate impact claims, four of the justices presumed that Congress, in enacting the ADEA right after Title VII, which permits disparate impact claims, intended the text to have the same meaning in both statutes: to prohibit the adverse consequences of employment practices on protected groups, regardless of intent. The justices cited Griggs v. Duke Power Co., 401 U.S. 424 (1971), and discussed its application to the ADEA. In Griggs, the Court held that employment qualification standards which were not significantly related to successful job performance and operated to disqualify African Americans at substantially higher rates than Caucasian applicants violated Title VII. They also noted that both the Department of Labor and EEOC consistently interpret the ADEA as authorizing relief based on a disparate impact theory.

Title VII and the ADEA part ways, however, with respect to an employer’s justification for its actions. Under the ADEA, if the adverse impact of the employer’s decision is attributable to a "reasonable" non-age factor, liability is precluded. In other words, unlike Title VII, the ADEA permits employment decisions that would otherwise be prohibited "where the differentiation is based on reasonable factors other than age" (the "RFOA" provision). And, unlike Title VII, the ADEA does not require employers to demonstrate that there are no alternatives in achieving their goals without adversely affecting a protected group.

The Court noted that the older officers did little more than identify a pay plan that was less generous to older workers than to younger workers. The plaintiffs failed, however, to point to any specific test, requirement, or practice within the pay plan that had an adverse impact on older workers. This failure to isolate and identify the specific practices responsible for the statistical disparities, and the fact that the city’s plan was based on reasonable factors, proved fatal to the older officers’ claim. Although the plan had a disparate impact on persons over 40, this was an unintended consequence of the city’s legitimate objective to bring starting salaries in line with the regional average.

• Employers should review any policies, practices, and procedures involving compensation and benefits to determine whether they have an adverse impact on older workers.
• Employer liability under the ADEA may be prevented if the adverse impact of the employer’s policy, practice, or procedure is attributable to a non-age factor that is "reasonable."
• When contemplating a reduction in force or layoff affecting employees age 40 and over, employers should document the legitimate reasons for the action.
• Employers should make sure these legitimate reasons are communicated in a consistent manner to their employees.
• In order to prevail in a disparate impact case under the ADEA, older workers cannot rely upon a generalized policy but must identify a specific test, requirement, or employment practice that has an adverse impact on them.
• Employment decisions based on seniority and rank, for example, are reasonable and should protect an employer from liability for a disparate impact claim under the ADEA when the employer’s practice is based on a legitimate objective.

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