Supreme Court ruling expands age bias claims

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The Supreme Court opened a new door for older workers to sue for age discrimination.

The court ruled that workers over 40 years old could sue when an employer's action has a "disparate impact" on their age group, and need not meet the tougher standard of proving that the employer actually intended to discriminate.

Laurie McCann, a senior attorney with the AARP's Litigation Foundation, which advocates for older Americans, said the opinion was "a huge victory for older workers, somewhat unexpected coming out of this court. We were fighting a losing trend, with the appellate courts seeming to fall off one by one saying the disparate impact theory did not apply."

But the 5-3 opinion, written by Justice John Paul Stevens, gave employers an easier line of defense for age claims than they have in suits alleging race or sex discrimination. "Business necessity" is needed to justify disparate impact along lines of sex or race, but in age-discrimination cases, employers can take actions that disadvantage older workers if, as the Age Discrimination in Employment Act reads, "the differentiation is based on reasonable factors other than age."

While the court opened the door a bit further for future age claims, it frustrated the plaintiffs in the case before it. The suit was brought by senior police officers from Jackson, Miss., who claimed that the city's salary plan unfairly favored younger officers, who got higher percentage raises than those with more seniority. The city argued it needed to boost pay at the low end to recruit new officers. The court found that the city's pay plan was "unquestionably reasonable."

In his opinion, the 84-year-old Justice Stevens observed that age sometimes is related to job performance, and that Congress considered age discrimination less of a problem than race or sex discrimination. Still, since the language of the Civil Rights Act was similar enough to that of the Age Discrimination in Employment Act, it implied that similar remedies were available, he wrote. He noted that the federal agencies responsible for enforcement -- first the Labor Department and now the Equal Employment Opportunity Commission -- have always considered disparate-impact legitimate grounds for action.

Justices David Souter, Ruth Bader Ginsburg and Stephen Breyer joined the opinion. Justice Antonin Scalia joined most of the Stevens opinion, but wrote separately that the court should defer to the EEOC's interpretation, one he found "eminently reasonable."

In a separate opinion, Justice Sandra Day O'Connor, 75, disagreed, and was joined by Justices Anthony Kennedy and Clarence Thomas. Chief Justice William Rehnquist, 80, who is being treated for thyroid cancer, didn't participate in the case.

The age case came down a day after Justice O'Connor, writing for the majority, widened its interpretation of Title IX, the 1972 law that requires equity between the sexes in educational institutions that receive federal funding. But where she found that giving whistle-blowers the right to sue under Title IX reflected congressional intent, she saw no reason to expand the enforcement of the age act with disparate impact claims.

She found that Congress wanted employers liable only for "arbitrary" discrimination, even if their actions stem from a "mixed motive." The act "makes clear that such conduct is nevertheless lawful as long as it is 'based on' a reasonable factor other than age."

"This is a win for both sides," said John Fox, who heads the employment-law practice at the law firm Fenwick & West in Mountain View, Calif. Plaintiffs "get the disparate-impact theory, which may be the only way they can recover in many cases. But the defense bar gets a chance to prove a standard that might, in fact, be reachable," he said, since it's easier for an employer to prove to a court that a particular action was a "reasonable" business decision rather than a "business necessity."

The disparate-impact theory already is recognized under California state law, and Mr. Fox, who represents Silicon Valley employers, said it has led to fine tuning of layoff lists to ensure that older workers aren't unfairly hit when companies cut back. "People who were over the age of 40 on the RIF [reduction-in-force] list are now off the RIF list," he said.

"If we had to take a loss, this is the way we'd want to lose," said Stephen Bokat, general counsel of the U.S. Chamber of Commerce. "It's not a difficult test to comply with if employers are careful." For instance, "when you're making changes to pension plans, you'd better be careful that it doesn't treat older workers differently," Mr. Bokat said.

In 1971, the Supreme Court recognized the disparate impact theory for race and sex cases under Title VII of the Civil Rights Act of 1964. But it had never addressed whether the theory also applied under the 1967 age act, which covers workers over 40.

"Disparate impact is a sweeping theory," said Prof. James Brudney, an employment-law specialist at Ohio State University. "The court doesn't want to prejudge issues, so it will be up to litigants and the lower courts to flesh out the contours of this."

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