The U.S. Supreme Court Rules that Disparate Impact Claims are Cognizable Under the ADEA

Article

The Employment and Labor Law Alert

May 11, 2005

Background

“Disparate impact” is a methodology for establishing that an employer has engaged in discrimination against a specific group of employees or job applicants of the same race, ethnicity, religion or sex that does not require evidence that the employer intended to discriminate. The disparate impact methodology has long been recognized as a means of proving these forms of discrimination under Title VII of the Civil Rights Act of 1964, 42 U.S.C. Section 2000e et seq. (“Title VII”). Age discrimination, however, is not proscribed by Title VII but by the Age Discrimination in Employment Act, 29 U.S.C.Section 621 et seq., (“the ADEA”), which protects individuals 40 years of age or older. Now, for the first time, in Smith v. City of Jackson, Mississippi, 125 S. Ct. 1536 (2005), the United States Supreme Court has held that claims under the ADEA may be brought under a disparate impact analysis. The Court, however, provided a defense to employers in age discrimination cases that is not available to employers in Title VII cases, and thus plaintiffs pursuing disparate impact claims under the ADEA will have a significantly more difficult task of prevailing than have Title VII plaintiffs. Indeed, in Smith, the Supreme Court affirmed summary judgment for the employer on the disparate impact claim.

Under traditional Title VII disparate impact analysis, developed by the Supreme Court in a series of cases beginning with Griggs v. Duke Power Co., 401 U.S. 424 (1971), and ending with Wards Cove Packing Co. v. Atonio, 490 U.S. 642 (1989), a plaintiff must first establish that a specific policy or practice of the employer has had an adverse impact on a segment of the workforce or job applicant pool, e.g., African Americans or women. If the plaintiff makes this showing, the employer is then required to adduce evidence of the “business necessity” of the policy or practice. If “business necessity” is lacking, the plaintiff prevails. For example, in Griggs, the employer was held liable for race discrimination under a disparate impact theory when it could not justify the “business necessity” of its policy of requiring its unskilled laborers to have a high school diploma or pass a written test. The plaintiff may also prevail by demonstrating that although the employer’s policy or practice at issue is justified by “business necessity,” the employer refused to implement alternative policies or practices through which it could have accomplished its business objectives but which would not have had an adverse impact on the segment of the workforce at issue. Disparate impact claims differ markedly from “disparate treatment” claims, which require proof that the employer intentionally took into account a prohibited factor, e.g., race or sex, when making an employment decision.

The Disparate Impact Claim in Smith

The plaintiffs in Smith were police officers employed by the City of Jackson who contended that salary increases provided in 1999 violated the ADEA because they were less generous to officers over the age of 40 than to younger officers. In 1998, the City adopted a pay plan providing raises to all City employees. The plan’s purpose was to “attract and retain qualified people, provide incentive for performance, maintain competitiveness with other public sector agencies and ensure equitable compensation to all employees regardless of age, sex, race and/or disability.” A 1999 revision to the plan, which was partially motivated to bring the starting salaries of police officers up to the regional average, granted raises to all police officers and police dispatchers. Those officers with less than 5 years of tenure received proportionately greater raises when compared to their former pay than those with more seniority. Although some officers over the age of 40 had less than 5 years of service, not surprisingly most of the older officers had more.

In the district court, Plaintiffs asserted both disparate treat and disparate impact claims, and that court granted the City’s motion for summary judgment. The Court of Appeal for the Fifth Circuit reversed on the disparate treatment claims, ruling that plaintiffs were entitled to additional discovery on the issue of intent. But the appellate court affirmed summary judgment on the disparate impact claim, ruling that such a claim was simply not cognizable under the ADEA.

The Supreme Court’s Decision

In addressing the issue of whether disparate impact claims are cognizable under the ADEA, the central focus of the Supreme Court’s analysis was the similarity in language between Title VII and the ADEA. In relevant part, the ADEA provides that it shall be unlawful for an employer “to limit, segregate, or classify his employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s age.” The Court noted that this language was identical to the language of Title VII “[e]xcept for substitution of the word “age” for the words “race, color, religion, sex, or national origin,” that appear in Title VII. This language in Title VII had been held by the Court in Griggs to address “the consequences of employment practices, not simply the motivation,” and thus supported the viability of disparate impact claims in Title VII cases. In Smith, the Court reasoned that because Congress used virtually identical language in both Title VII and the ADEA “it is appropriate to presume that Congress intended the text to have the same meaning in both statutes.” Thus the Court concluded that disparate impact claims may be brought under the ADEA as well as under Title VII.

The Court, however, recognized that there was one important difference in the text of the two statues, in that the ADEA “contains language that significantly narrows its coverage by permitting any ‘otherwise prohibited’ action ‘where the differentiation is based on reasonable factors other than age,” the so-called “RFOA provision.” A comparable provision is not found in Title VII. The Court then explained the significance of the RFOA provision on disparate impact claims under the ADEA. The Court ruled that the employer can establish a complete defense to disparate impact claims brought under the ADEA by demonstrating that the policy or practice which resulted in an adverse impact on older employees was simply a “reasonable” policy or practice. The employer need not demonstrate that its policy or practice is justified by “business necessity” as it must in Title VII cases.

Turning to the specific case before it, the Court held that the plaintiffs in Smith had not made out a viable claim of disparate impact. First, they had not identified any specific test, requirement or practice within the pay plan at issue that resulted in the adverse impact on older employees. In this regard, the Court ruled, it was not enough for plaintiffs to “point to a generalized policy that leads to such an impact.” Second, the City had demonstrated that its pay plan was a reasonable means of achieving its goals: “The City’s decision to grant a larger raise to lower echelon [and mostly younger] employees for the purpose of bringing salaries in line with that of surrounding police forces was a decision based on a “reasonable factor other than age” that responded to the City’s legitimate goal of retaining police officers.” Thus the Court affirmed summary judgment for the City on the disparate impact claim.

Conclusion

It remains to be seen whether the Court’s recognition of disparate impact claims in ADEA cases will actually result in employer liability to any significant degree. Employers generally do not employ policies or practices that are purely arbitrary. It can be anticipated that in the great majority of cases employers will be able to establish that their policies and practices, even those having an adverse impact on older employees, have a reasonable basis for purposes of the RFOA defense. Nevertheless, employers should be alert to the impact that its policies and practices may have on the 40 and over segment of their workforces.