Sep 10, 2004 Employment Discrimination

Supreme Court Expected to Resolve Circuit Split on Whether Disparate Impact Age Discrimination Claims Are Permissible

A recent decision of the U.S. Court of Appeals for the Second Circuit in New York highlights a disagreement among the federal appeals courts over whether plaintiffs may sue on a disparate impact theory under the Age Discrimination in Employment Act (the “ADEA”). Meacham v. Knolls Atomic Power Laboratory, Inc., 2004 U.S. App. LEXIS 17873 (Aug. 23, 2004).

In discrimination law, “disparate treatment” refers to an employer’s practices or policies that are intentionally discriminatory. For example, an allegation that an individual was discharged because of his/her race, sex, age, or other protected characteristic is a claim of disparate treatment. “Disparate impact” refers to policies or practices that are neutral on their face, but have a disproportionate effect on members of a protected group. Disparate impact theory arose in 1971, in a race discrimination case brought under Title VII of the Civil Rights Act of 1964, Griggs v. Duke Power Co., 401 U.S. 424 (1971). In that case, the U.S. Supreme Court ruled that, even in the absence of discriminatory intent, an employer was prohibited by Title VII from requiring a high school education or passing of a standardized general intelligence test as a condition of employment, where neither standard was shown to be significantly related to successful job performance, and both requirements operated to disqualify black applicants at a substantially higher rate than white applicants.

As in Griggs, disparate impact claims are typically proven through statistical analysis rather than by direct evidence of discriminatory intent. A significant statistical disparity arising out of the application of the employer’s facially neutral policy in and of itself establishes a plaintiff’s prima facie case of disparate impact discrimination, shifting the burden to the employer to prove either that the disparity is the result of factors other than race, sex, etc., or that the practice or policy at issue is justified by business necessity.

The disparate impact theory of discrimination was codified in Title VII when Congress amended the statute in the Civil Rights Act of 1991. On the other hand, no similar amendment was made to the ADEA, creating some uncertainty as to whether Congress intended plaintiffs in age discrimination cases to be able to sue on a disparate impact theory. Federal appeals courts reviewing this question have come out on both sides of the issue. The Second Circuit was one of the Circuits that ruled that disparate impact claims are permissible under the ADEA, and in the Meacham decision it recently reaffirmed this position despite an invitation to hold otherwise.

In Meacham, a group of plaintiffs who lost their jobs as part of a layoff, or “involuntary reduction in force” (IRIF), brought a class-action age discrimination lawsuit against their former employer, Knolls Atomic Power Laboratory (KAPL or “the Lab”). KAPL is a government contractor that performs work for the U.S. Navy’s Nuclear Propulsion Program and is subject to an annual staffing limit. The Navy significantly reduced KAPL’s staffing limit in 1996, forcing the Lab to eliminate 143 existing jobs from a workforce of about 2,000 employees.

One hundred seven jobs were eliminated through voluntary separations. The Lab then eliminated an additional 31 employees through the IRIF program, which consisted of several steps that ranked 245 employees’ performance in various areas and considered additional factors such as whether the employees’ skills were critical to KAPL’s mission and the employees’ “flexibility” (i.e., whether they could be reassigned elsewhere in the Lab). Thirty of the thirty-one employees selected for involuntary layoff through this process were over forty years old.

The Meacham plaintiffs complained, among other things, that KAPL’s IRIF program violated the ADEA because it resulted in a disproportionate selection of older workers for layoff. This disparate impact theory has been accepted in the Second Circuit, but rejected in other Circuits. Compare, e.g., Smith v. Xerox Corp., 196 F.3d 358, 364 (2d Cir. 1999) and EEOC v. Local 350, Plumbers and Pipefitters, 998 F.2d 641, 648 n.2 (9th Cir. 1993) (as amended on reconsideration) with Smith v. City of Jackson, Miss., 351 F.3d 183, 187 (5th Cir. 2003) and Adams v. Florida Power Corp., 255 F.3d 1322, 1326 (11th Cir. 2001). Courts that permit disparate impact age claims look to the similarity of purpose between Title VII and the ADEA — prohibiting discrimination — to justify extending the holding of Griggs to the ADEA. Courts that refuse to allow such claims note these similarities, but point out the differences in statutory language and legislative history between the two laws to buttress the position that Congress did not intend for the ADEA, unlike Title VII, to encompass disparate impact claims.

In Meacham, KAPL invited a three-judge panel of the Second Circuit to disavow its prior precedent and hold that disparate impact claims are not permissible under the ADEA, but the court refused to do so. The court concluded that it was bound by its prior precedent holding that the ADEA allows disparate impact claims and that it could only depart from that precedent “if a Supreme Court decision or a decision from this circuit sitting en banc [a panel of all 13 members of the court] implicitly or explicitly overrules it.”

In the absence of legislation amending the ADEA, the rift among the Circuits can only be resolved by the Supreme Court, which has granted review in a case presenting the issue, Smith v. City of Jackson, Mississippi, 351 F.3d 183 (5th Cir. 2003). As of this writing, no date has been set for oral argument in the Smith case, but a decision is expected by June 2005.