February 2009

U.S. Supreme Court Holds That “Reasonable Factor Other Than Age” Must Be Proven by Employers

Holland & Knight Newsletter
William B. deMeza Jr.

The United States Supreme Court has just decided that an employer claiming it did not violate the federal Age Discrimination in Employment Act, 29 USC 621 et seq. (ADEA), because a decision having an adverse impact on older workers was based on a “reasonable factor other than age” must actually prove that contention at trial. In Meacham v. Knolls Atomic Power Laboratory, Inc.,1 the Court held that a claimed “reasonable factor other than age” (RFOA) is an affirmative defense to an alleged ADEA violation which must be proven by the employer because “the burden of proving an exception [to the statute] is on the party claiming it.” The ruling will complicate and make more expensive an employer’s defense of a disparate impact age discrimination claim and, in fact, Meacham may induce additional disparate impact claims by unhappy older workers.

Meacham’s Disparate Impact Claim

Knolls Laboratory is a federal contractor that was ordered by the federal government to reduce its workforce. Although 73 percent of the employees subject to discharge were at least 40-years-old, 30 out of 31, or 97 percent, of those selected for layoff were over 40. Knolls picked the employees for discharge by scoring the at-risk population not only as to job performance (using prior performance evaluations) and years of service, but also as to subjective “flexibility” and “critical skills” assessments by the employees’ immediate supervisors. Meacham was discharged and together with 27 co-workers sued Knolls alleging various ADEA violations, including “disparate impact” discrimination.
Meacham prevailed before a jury verdict on the “disparate impact” claim (but, interestingly, lost on his claim that Knolls intentionally discriminated because of his age). Meacham’s “impact” evidence included the opinions of an expert statistician that, given the ages of the Knolls employee population, the odds were one in 1,260 that 30 of the 31 persons selected would be over 40-years-old and, further, that the supervisors’ subjective “flexibility” and “job criticality” scores were those most closely tied to the actual individual termination decisions. Meacham’s verdict eventually was overturned by the appellate court and he sought review in the U.S. Supreme Court.

ADEA “Disparate Impact” Claims and Defenses

The ADEA prohibits employers from discriminating against workers who have reached their 40th birthdays. But the statute also expressly recognizes that an otherwise prohibited act is not illegal “age discrimination” if “the differentiation is based on reasonable factors other than age.”2
The Supreme Court first recognized disparate impact ADEA claims in a 2005 case challenging an employer’s pay plan which, though it did not mention employees’ ages, gave larger pay raises to less-senior and generally younger employees.3 Smith v. City of Jackson, 544 US 228 (2005). The Court there found that “disparate impact” age discrimination occurs when an employer’s decisions or policies disadvantage older employees even though the decision/policy does not mention ages, is age-neutral on its face and, in fact, was made without any actual intent to discriminate against older workers.4 (Disparate impact cases often are class actions in which one or more workers assert claims on behalf of a group of similarly situated people.)
The Supreme Court’s City of Jackson opinion held that even if a plaintiff showed that a specific employer practice had a disparate impact on older workers, the employer could avoid liability by showing that the practice was justified by a reasonable factor other than age. But the Court then did not expressly address which of the parties – plaintiff or defendant – had the burden of proof on the RFOA issue. The RFOA burden of proof issue is more than an abstract theoretical question: it can determine the outcome of lengthy and expensive disparate impact litigation. If the employee must disprove a RFOA but fails, the employee loses, but if the employer must prove a RFOA and fails, it loses. Meacham finally resolved this important issue.

The U.S. Supreme Court’s Decision

The Supreme Court held in Meacham that a “reasonable factor other than age” is an affirmative defense and, thus, employer Knolls had the burden of proving the existence of a RFOA justifying its reduction-in-force selection procedures. Justice Souter’s opinion (joined by five other justices), relied on the ADEA’s language and the history of its enactment as well as the Court’s prior opinions interpreting that law and analogous portions of Title VII of the Civil Rights Act of 1964. The Court continued to recognize that, though age discrimination is prohibited, certain employer actions could have a disparate impact on older workers yet not violate the ADEA because they are based on other “reasonable” factors as a matter of law.
The Meacham majority opinion rejected Knolls’ argument that it should not be required to prove (rather than simply produce evidence of) the RFOA because requiring such proof would create greater burdens and expenses for employers. Although recognizing that its decision might create additional difficulties for employers, the Court noted that the language of the ADEA required its ruling (“[w]e have to read it the way Congress wrote it”) and, in any event, any such burdens were somewhat offset by the plaintiffs’ initial requirement of proving disparate impact liability. Justice Souter reiterated the Court’s 2005 pronouncement that a disparate impact plaintiff must “isolat[e] and identif[y] the specific employment practices” by which older workers were disadvantaged, an obligation that he described as “not a trivial burden.”

Implications of Meacham

The Supreme Court’s Meacham opinion likely will make it more difficult for employers to successfully defend the growing number of disparate impact age discrimination cases (a number likely to continue to rise with the increasing number of reductions-in-force economically-mandated by the nation’s faltering economy). Meacham will make it more difficult for employers to get such cases dismissed with a motion for summary judgment and likely will make them more difficult to win at a jury trial. Further, because employees’ lawyers will quickly recognize that Meacham has changed the ground rules for defending disparate impact cases, it may well lead additional plaintiffs with questionable claims to “take a shot” with litigation. But employers have been helped by the Meacham majority’s emphasis on plaintiffs’ obligations to allege and prove specifically how older workers have been disparately impacted; thus, in defending disparate impact litigation, employers must focus on and aggressively attack the specificity (or not) of plaintiffs’ allegations.
Meacham also instructs employers that any decisions adversely affecting older workers must be carefully considered, reviewed and documented. Although subjective factors (“flexibility”; “creativity”; “team play”; “enthusiasm”; “initiative”) still can be considered in making decisions, the use of such hard-to-quantify criteria must be studied to ensure that they are truly “reasonable” under the specific circumstances and the resulting decisions must be examined – at least by senior management and, with large reductions-in-force, by legal counsel and possibly by expert statisticians – to ensure that the use of such subjective criteria do not unconsciously disadvantage older workers.

1 128 S.Ct. 2395. 

2 29 U.S.C. 623(f)(1). 

3 Smith v. City of Jackson, 544 US 228 (2005). 

4 Disparate impact cases often are class actions in which one or more workers assert claims on behalf of a group of similarly situated people.

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