Supreme Court expands Age Discrimination Act, but limits impact of ruling

By G. Phillip Shuler

Employers can be sued for practices that were not adopted with discriminatory intent, but which adversely impact persons age 40 and over, the United States Supreme Court ruled.

In Smith v. City of Jackson, a five-member majority of the court found that the "disparate impact" theory of recovery, which has long been applied to cases arising under Title VII of the Civil Rights Act, also applies to cases arising under the Age Discrimination in Employment Act (ADEA).

At issue was whether salary increases received by police officers under a revision to the city's pay plan violated the ADEA because they were less generous to officers over the age of 40 than to younger officers.

A group of officers sued the city under the ADEA, claiming that the city deliberately discriminated against them because of their age (their disparate treatment claim) and that they were "adversely affected" by the plan because of their age (their disparate impact claim).

The district court granted summary judgment in favor of the city, finding in part that a disparate impact theory is not available under the ADEA and the Fifth Circuit Court of Appeals affirmed on that point.

The Supreme Court reversed, finding that with the substitution of "age" for "race, color, religion, sex, or national origin," the ADEA contains language identical to the language of Title VII prohibiting discrimination. In Griggs v. Duke Power Co. (1971), the court interpreted Title VII to make employment practices that act as "built-in headwinds" to minorities actionable even if they were not adopted with discriminatory intent.

In this case, the majority found that it is reasonable to assume that where Congress uses nearly identical language in two separate statutes adopted within a few years of each other, it expects the statutes to be interpreted similarly.

The majority also found that the ADEA's provision that permits use of "reasonable factors other than age" also supports the argument that disparate impact is available under the ADEA. They reasoned that that language would be unnecessary if the statute only prohibited intentional discrimination.

Finally, the majority noted that the Equal Employment Opportunity Commission's (EEOC) regulations have consistently interpreted the ADEA to authorize relief on a disparate impact theory.

Scope of theory narrower than under Title VII. The Supreme Court also held that the scope of disparate impact liability under the ADEA is narrower than that of Title VII because of the "reasonable factors other than age" (RFOA) provision and Congress' failure to include age in the Civil Rights Act of 1991.

This expanded the ability of plaintiffs to recover for adverse impact discrimination under Title VII (Modifying the Supreme Court's 1989 Ward's Cove decision which, critics charged, eliminated the requirement that practices with adverse impact be justified by "business necessity," i.e. a showing that the practices are essential to the operation of the business).

As a result, the court emphasized that "unlike the business necessity test, which asks whether there are other ways for the employer to achieve its goals that do not result in a disparate impact on a protected class, the reasonableness inquiry includes no such requirement."

Thus, an employer can rely on "reasonable" factors to justify an employment practice that adversely affects older employees in order to avoid liability.

Applying the test, the court found that the city's decision to grant a larger raise to lower echelon employees for the purpose of bringing its salaries into line with those of surrounding communities was a decision based on a "reasonable factor other than age" that advanced the city's legitimate goal of retaining police officers. Justices O'Connor, Kennedy, and Thomas concurred in the judgment but argued that the ADEA's test, legislative history and purpose demonstrated that Congress did not intend the statute to authorize disparate impact claims.

They also argued that significant differences between the ADEA and Title VII prohibits applying the same interpretation. Finally, they argued that the EEOC has never authoritatively construed the ADEA's prohibitory language so as to impose disparate impact liability.

Justice Scalia concurred in part and concurred in judgment, arguing that the matter at issue was a "classic case for deference to agency interpretation." Therefore, although he agreed with the court's reasoning, he would find it a basis for deferral to the reasonable views of the EEOC.

Impact on employers may be minimal. While the adoption of the disparate impact theory is not good news for employers, the court's liberal interpretation of the "reasonable factor other than age" standard effectively ameliorates the impact of its holding.

Employers rarely adopt practices that adversely impact older workers unless there is a legitimate business-related reason for doing so, even if there are other ways in which the legitimate objective could be accomplished.

The extent to which judges will permit juries to pass on the question of "reasonableness" remains to be seen, but the willingness of the entire court to sustain the grant of summary judgment in the case suggests that unless the plaintiff can come forth with evidence that the employer's purpose is not business-related or that the means employed have no logical relationship to that purpose, the question should be decided in favor of the employer by the court.

The impact of this decision on contractors and employers generally is uncertain. However, it is clear that creating a new cause of action means more lawsuits and, even if employers win, it is still expensive to litigate them.

The court's broad interpretation of the RFOA provision of the ADEA is a blessing for employers and removes some incentive to file disparate impact claims.

Editor's Note: G. Phillip Shuler is a partner in the New Orleans office of Chaffe, McCall, Phillips, Toler & Sarpy.