The Supreme Court's New Age Discrimination Ruling: Good News and Bad News for Both Employers and Older Workers
By JOANNA GROSSMAN
Tuesday, Apr. 19, 2005
Recently, the Supreme Court issued its decision in Smith v. Jackson, a case that concerns the scope of the Age Discrimination in Employment Act (ADEA). The ADEA is a federal law that protects workers forty and older (whom I will call "older workers") from discrimination on the basis of age. In Smith, the Court gave older workers some good news (and employers some bad news): Older workers can now sue their employers for disparate impact discrimination.
It is uncontroversial that federal anti-discrimination statutes prohibit intentional discrimination - for instance, an employer's decision (admitted or unadmitted) to fire all older workers because the firm prefers "new blood." But disparate impact discrimination is different.
The theory of disparate impact discrimination holds that even if an employment practice or policy is facially neutral, it is still unlawfully discriminatory if it has a disproportionate negative impact on a protected group of workers and is not job related and consistent with business necessity.
So if the same employer takes no intentional account of age, but decides to lower the salaries of, say, all workers with over ten years' service at the company, it is disparate impact discrimination that could be the basis for the lawsuit. Granted, the policy might hurt, say, a thirty-two year old who joined the company right after college, but it is much more likely to hurt employees who are at least forty.
After Smith, forty-and-over employees can challenge this kind of policy or practice. But the Court also gave these workers some bad news (and employers some good news): When older workers do sue for disparate impact discrimination, it will be difficult for them to win.
The Facts of the Case, and the Legal Issue It Raised
I have described the facts of the Smith case in detail in a prior column. Briefly, the case was triggered by the city of Jackson, Mississippi's adoption of a new raise structure that gave proportionately higher raises to police officers with fewer than five years on the job.
The scheme was designed to bring up the starting salaries for officers to a more competitive level, in order to facilitate recruiting and retention efforts. And the scheme was based on seniority, not on age. So an intentional discrimination ADEA case could not be brought.
But the effect of the scheme, of course, was to hurt older officers, whose raises were smaller even though they had more experience on the job. So a disparate impact ADEA case could at least theoretically be brought.
The only question was: Does the ADEA permit such a case - or was the statute only meant to combat intentional discrimination? And the Supreme Court had never answered this question.
A Strong Title VII Precedent Suggested the ADEA Prohibits Disparate Impact Discrimination
The Supreme Court had, however, answered the very same question in the context of Title VII, the main federal anti-discrimination law.
Title VII was enacted in 1964. The ADEA was enacted in 1967. Both used identical language. And it is a basic principle of statutory interpretation that the same meaning should be accorded identical text when found in statutes with similar purposes.
In particular, each statute said it was 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" a particular characteristic or characteristics.
In the case of the ADEA, the characteristic was age. In the case of Title VII, the characteristics included sex and race.
In 1971, in Griggs v. Duke Power Co., the Supreme Court held that Title VII prohibited not just intentional discrimination, but disparate impact discrimination as well.
At issue were the requirements that a candidate for certain low-skill jobs must have a high school diploma and achieve a certain score on an aptitude test. The requirements had disqualified a disproportionate number of black applicants for new positions and internal transfers, yet the evidence showed they were not related to job performance.
Important to the Court was the statutory language making illegal employment actions that "deprive any individuals of employment opportunities or otherwise adversely affect his status as an employee" because of a protected characteristic. (Emphasis added.) This text, the Court held, reflects a focus on the effects of, rather than the motivation for, an employer's action - exactly what is at issue in a disparate impact claim.
The Supreme Court held that employers could not rely on hiring criteria that imposed a demonstrable negative impact on a protected class of workers, and yet were not justified by business necessity. The Court concluded that targeting discriminatory consequences - not just discriminatory motives - was part of Congress' purpose in enacting Title VII.
That holding suggests very strongly that the very same language, in the ADEA, was meant to do the very same thing: target discriminatory consequences, as well as discriminatory motives.
After Griggs: The Court Narrows Disparate Impact Theory
Between 1971, when Griggs was decided, and 1991, when Congress amended Title VII, the Supreme Court narrowed Griggs' scope. This was particularly so in a 1989 case, Wards Cove Packing v. Atonio. There, the Court restricted disparate impact claims in a number of ways.
For example, the Court held that the employer does not have the burden of proving that a particular practice was justified by business necessity. The court said, instead, only that a court must conduct "a reasoned review of the employer's justification for its use of the challenged practice."
To take another example, Court also imposed a "particularity" requirement, which meant that a plaintiff must identify a single employment test or criteria that produces a disparate impact in order to make out a violation of the statute.
Two years later, in 1991, Congress amended Title VII to clarify its scope. Congress amended Title VII to expressly outlaw disparate impact discrimination. And it effectively overruled part of Ward's Cove. (Congress can change Supreme Court results on statutory - though not constitutional - interpretation.)
Congress retained the particularity requirement. But it reversed other, more restrictive requirements. For instance, it reinstated the employer's burden of proof, for example, on the defense of business necessity. It made clear it was not good enough for the employer simply to articulate the defense; it must actually prove it.
Why the Court Recognized Disparate Impact Theory Under the ADEA
The ADEA was never amended in these ways. But recall that its language was the same as Title VII's original language - which the Griggs decision had recognized encompassed disparate impact claims.
Moreover, when Congress enacted the ADEA, a central part of the record before it was a commissioned report of the Secretary of Labor about the nature and extent of age discrimination in American workplaces. And that report strongly suggests that Congress was very much concerned with disparate impact when it passed the ADEA.
Interestingly, that Secretary of Labor report showed minimal discrimination against older workers born of animosity or dislike. (Oddly, a 1993 Supreme Court opinion, Hazen Paper Co. v. Biggins, nevertheless said that intentional discrimination "captures the essence" of what Congress intended to forbid under the ADEA. But in that opinion, the Court explicitly said it was not deciding "whether a disparate impact theory of liability is available under the ADEA.")
But the Secretary of Labor's report did show discrimination resulting from arbitrary age limits employers imposed, and it did show disproportionate effects from indirect restrictions on the employment of older workers. And discrimination resulting from carelessness is exactly what disparate impact theory permits plaintiffs to challenge.
Finally, the EEOC, the agency responsible for implementing the ADEA, has consistently recognized a disparate impact theory of recovery. And Court doctrine commands deference to such interpretations.
For these reasons, it is unsurprising that the Court ruled that disparate impact ADEA claims may be brought. The only surprising aspect of the vote on this issue is that it was as close as it was: 5-4. (Moreover, Justice Scalia concurred only because of the EEOC deference argument.)
The Catch: The "Reasonable Factors Other than Age" Provision
Here's the catch, however: The Court also ruled that the protection against disparate impact under the ADEA is not as strong as under Title VII.
The reason is that the ADEA includes a separate provision not found anywhere in Title VII. Both statutes permit employers to raise a defense that a particular characteristic is a "bona fide occupational qualification." This has been nicknamed the BFOQ defense.
But of the two, only the ADEA permits employers to take any "otherwise prohibited" action "where the differentiation is based on reasonable factors other than age." This has been nicknamed the RFOA provision.
Did the RFOA provision mean that the ADEA did not cover disparate impact discrimination at all? The Court said no. Indeed, it reasoned that the whole purpose of the RFOA provision had to be to apply to disparate impact claims. (After all, age would always be among the reasons for an intentionally discriminatory decision. Not so with decisions with disparate impact; there, the decisionmaker might genuinely be thinking about, say, recruiting, and not age.)
The Court thus read the RFOA provision to limit, rather than preclude disparate impact claims. To see the effect of the limitation, let's compare the current situation under Title VII and under the ADEA.
Why ADEA Claims Will Now Be Harder to Win Than Title VII Claims
Remember, both statutes have a BFOQ defense, but only the ADEA has an RFOA provision. That leads to the following contrast:
Under Title VII, when an employer is charged with disparate impact race discrimination, it must justify the practice as a "business necessity" in order to avoid liability.
Necessity is a hard standard to meet; it invites the consideration of other, less restrictive alternatives. Most businesses won't fall apart if they abandon a particular policy or practice, so few are truly necessary to their operations.
By contrast, under the ADEA, when an employer is charged with disparate impact age discrimination, the employer - according to Smith v. Jackson -- must only show that its practice was "reasonable." Proving a practice is reasonable is much easier than showing it is necessary. A plaintiff might be able to point to a less restrictive alternative, yet the defendant might still be able to say its policy is reasonable.
In fact, that's exactly what happened to the Smith v. Jackson plaintiffs. The Supreme Court saw "the City's decision to grant a larger raise to lower echelon employees for the purpose of bringing salaries in line with that of surrounding police forces" as serving its "legitimate goal of retaining police officers." This emphasis on retention and salary competitiveness, the Court held, was a reasonable factor other than age. So, in the end, the plaintiffs lost; the older police officers did not get the raises they had sought.
Another Reason ADEA Claims May Be Harder To Win: Restrictive Precedent
Meanwhile, the Court also limited ADEA claims in another way - for a different reason. This limitation derives from the different paths of Title VII and the ADEA since enactment.
As noted above, in 1991, Congress amended Title VII - but not the ADEA - to expressly embrace disparate impact theory, and to reject prior Court decisions putting the burden of articulation - but not proof - of business necessity on the employer.
Because Title VII was amended, pre-1991 interpretations of Title VII - including the harsh limitations of Wards Cove - no longer apply to Title VII.
But the Court held in Smith v. Jackson that these limitations - and the older precedents that created them, such as Wards Cove - do apply to the ADEA.
This is an odd result in two ways. First, a body of case law stopped dead in its tracks almost fifteen years ago is now immediately relevant - though lawyers and law professors had long ago consigned it to history.
In all that time, the Supreme Court hasn't had to think about Wards Cove, because it had been mooted by Congress' 1991 actions. If the Court had reconsidered Wards Cove, would it also have reaffirmed it? The answer is not clear. But now, ADEA plaintiffs must accept this harsh, previously moot precedent as good law.
Second, Congress expressly overruled several aspects of the judicial interpretations of Title VII because it thought they imposed inappropriate obstacles to employment discrimination plaintiffs' success. Yet those same obstacles are now reinstated for another body of plaintiffs that is experiencing discrimination at work.
Certainly, it would have been better had Congress amended the ADEA at the same time it amended Title VII. But at the time, there weren't harsh ADEA Supreme Court decisions to catch the Court's attention. Perhaps Smith v. Jackson will inspire Congress to rethink the ADEA just as it rethought Title VII.
A Recent Supreme Court Trend: Good News/Bad News Anti-Discrimination Rulings
Interestingly, Smith v. Jackson is only one among a number of recent discrimination cases in which the Supreme Court has offered a mix of good and bad news to plaintiffs and employer defendants alike.
For example, in Davis v. Monroe County Board of Education, the Court held that schools can be held liable for student-student sexual harassment. But the standard they set for liability - that the school must have actual notice of the harassment and respond with deliberate indifference - means that few plaintiffs will actually prevail in a lawsuit.
Likewise, in Oncale v. Sundowner Offshore Services, the Court held that same-sex harassment can be actionable under Title VII. But it also held that it must be proven that the action was undertaken because of gender, rather than because of sexual orientation.
And just this term, in Jackson v. Birmingham Board of Education, the Court allowed retaliation claims under Title IX. But, as I have explained in a previous column, it made it very difficult for plaintiffs to succeed in making such claims.
In each of these areas, and in Smith, the Court was reviewing a federal appellate decision categorically denying the existence of a particular cause of action. In each of its decisions, the Court wisely refused to adopt a categorical exclusion: That was the good news. But in each, the Court had bad news to add - bad news that made it difficult, as a practical matter, for plaintiffs to succeed.
While fewer plaintiffs will win, this approach at least will keep employers on the hook for particularly egregious behavior. And it gives all employers an incentive to think hard about their employment practices, and whether these practices have the effect of hurting a particular group of employees that is defined by age, sex, or race.
This incentive for employer self-scrutiny will indirectly benefit employees. Yet at the same time, individually aggrieved employees who end up suing may not, in the end, gain recompense for the harm inflicted on them.