In a decision that may make it easier for employees over the age of 40 to prevail on claims under the federal Age Discrimination in Employment Act (the ADEA), the Supreme Court recently held that an employer can be liable for age bias if an employment practice unintentionally has a disproportionately adverse impact on older workers, unless the practice is justified by reasonable factors other than age. Smith et al. v. City of Jackson, Mississippi, et al., No. 03-1160 (U.S. March 30, 2005).

Disparate impact claims focus on the effect of a facially neutral employment practice. Under the disparate impact theory, an employer may be found liable for discrimination if it has an employment practice that has a discriminatory effect on a protected class of employees, even if there was no intent to discriminate against the group. Disparate impact claims were first recognized by the Supreme Court in the context of a Title VII lawsuit alleging race discrimination.

Since the Supreme Courts ruling recognizing disparate impact claims under Title VII, the federal Circuit Courts of Appeal have split over whether the disparate impact theory should also be recognized under the ADEA. In Smith v. City of Jackson, the Court ruled that such claims may be brought under the ADEA, noting that the language of the ADEA and Title VII is nearly identical, and that both statutes prohibit discrimination that adversely affects an employee. The Court, therefore, concluded that there was no reason that disparate impact claims may not also be recognized under the ADEA.

The case before the Court involved allegations of age discrimination filed by police officers and dispatchers against the City of Jackson. The police officers alleged that the Citys compensation plan discriminated against older employees because it provided for proportionately greater raises to employees with less seniority, who tended to be younger than employees with greater seniority. The City responded that the compensation plan was designed to raise the salaries of junior employees to a level that was competitive in the region.

Despite ruling that the police officers were permitted to bring their lawsuit under a disparate impact theory, the Court determined the officers had failed to set forth a valid disparate impact claim. In particular, the Court ruled that it was not enough for the officers to broadly allege that the Citys compensation plan was relatively less generous to older employees. Rather, the officers should have identified a specific practice or requirement within the Citys compensation plan that had an adverse impact on older employees.

In addition, the Court found that the compensation plan was based on a reasonable factor other than age, i.e., to ensure that salaries were competitive in the region. Unlike Title VII, the ADEA has a specific provision that allows an employment practice to have an adverse impact on older workers if the differentiation is based on reasonable factors other than age.

Title VII has a more stringent provision: if an employment practice has an adverse impact on a protected group based on race, color, religion, sex or national origin, it must be job related for the position in question and consistent with business necessity.

The ruling is significant because it permits employees to bring federal age-based claims under two alternative theories of discrimination. An employee may now allege that an employment practice was discriminatory either because 1) it was intended to discriminate against older employees; or 2) it adversely affected older employees. With respect to adverse impact claims, however, the burden is on the employee to show, with specificity, the practice that is alleged to have disproportionately affected older employees.

Additionally, an employer may still prevail if it can demonstrate that the practice was based on a reasonable factor other than age.

It is important to note that some states have their own laws that prohibit age discrimination that do not have the ADEAs reasonable factors other than age provision. In those states, employers may still have to show that a challenged employment practice with an adverse impact on older workers is job related and consistent with business necessity.

Whether an employer is designing a pay plan, instituting an employee benefit, implementing a layoff, or engaging in any other employment practice that affects groups of employees, the employer should determine whether the practice disproportionately affects older workers or other protected groups, and if so, make sure the practice is defensible under applicable federal and state laws. The Employment Law Attorneys at Arent Fox routinely assist clients on these types of matters.

If you have any questions about the City of Jackson case, please contact one of the attorneys listed below, or any other attorney in the Employment Law Group.

Michael Stevens
202-857-6382
stevens.michael@arentfox.com

Anita D. Khushalani
202.715.8457
khushalani.anita@arentfox.com