may appear actionable under the ADEA.

 

However, said policy will be defensible when based on a reasonable factor other than age. Such policy factors, when properly reasoned and explained, are not actionable. Two factors make claims under the ADEA something that all distributors should focus on.

 

First, with the aging of the baby boomer generation, there is a greater statistical likelihood that employees affected by an employment decision will be age-protected. Second, as the economy continues to fluctuate, more employers are faced with issues of layoff and recall, which oftentimes affect older, more senior workers in adverse ways.

 

To avoid ADEA trouble, employers/distributors should identify legal and practical issues that affect employees who are older and subject to adverse action by the adoption of policies affecting pay, benefits, job retention, retirement, and other terms and conditions of employment; document steps that relate to the decision-making process; analyze the reasons for decisions, making sure age is not a ‘motivating factor’ and/or whether a RFOA is involved in any policy implementation and/or adoption; and clearly communicate reasons for employment actions to all employees, especially those adversely affected by any employment actions.

Frederic Mendelsohn is a partner with the law firm of Burke, Warren, MacKay & Serritella, P.C., in Chicago, www.burkelaw.com. His practice involves complex commercial litigation and dispute resolution; labor and employment law; market channel matters involving dealers, distributors and sales representatives; and the general representation of middle market business. He may be reached at 312-840-7004 or fmendelsohn@burkelaw.com.

received proportionately greater raises than those with more than five years of tenure. Consideration of the Pay Plan in light of the ADEA resulted in three categories of affected officers: 1) those with less than five years of service, most of whom were under 40 years of age; 2) those with more than five years of service, most of whom were over 40 years of age; and 3) a few with more than five years of service, who were under 40 years of age.

 

According to the plaintiff officers in the second category, the Pay Plan had a disparate (unequal or different) impact on them, as they received less in terms of compensation increases. The only issue before the Supreme Court was whether these plaintiffs could even pursue their disparate impact claims, as both the trial court and federal appeals court had held that they could not, reasoning that such claims are not available under the ADEA.

 

The Supreme Court’s Ruling

While a procedurally complex case, the findings of the Supreme Court were straightforward: A majority of the Justices held that the ADEA does allow claims of disparate impact but in this case found that the complaining officers couldn’t actually prove that they were adversely affected by the Pay Plan.

 

One reason for this ruling was the city’s explanation that the discrepancy between the differential for younger and older workers was that the junior officers’ salaries had to be competitive with comparable positions in the marketplace. Thus, the city claimed that its Pay Plan was reasonable due to its reliance on factors other than age.

 

The Court agreed, holding that even employment actions that result in a disparate impact on older workers won’t result in liability under the ADEA, where the reason is a RFOA (reasonable factor other than age). Thus, while disparate impact claims are recognized under the ADEA, the RFOA provision of the statute limits the scope of such claims under the ADEA.

 

If not self evident, the real reasons for employment actions play a significant role in how courts assess discrimination. For example, where there is not direct evidence of discrimination (e.g., a statement by the decision maker that the employee is ‘too old to do the job’ or ‘who gave that old guy his job anyway’), the reasons articulated by an employer for any allegedly discriminatory employment decision are always scrutinized for truth.

 

The reasons don’t necessarily have to be good reasons, but simply not pretext or false, to cover up an illegal action. Thus, in a recent case from the Sixth Federal Circuit of Appeals, where a 63-year-old administrative assistant to the CEO with a good performance record was fired, the court found that the CEO’s reasons were sufficient for termination and avoided a claim of disparate treatment under the ADEA.

 

The two reasons for the 63-year-old’s termination were: fouling up a hotel reservation and including other people in a photo shoot intended to spotlight the CEO. The court cited the holding from another case, noting that the ‘ADEA does not make employers liable for petty, stupid or even wicked decisions; it makes them liable for discriminating, for firing people on account of their age.’

 

While a termination case, and thus not based on a claim for disparate impact, the focus on this case was on the reasons, much like how the Supreme Court’s ruling in Smith found the reasons for the Pay Plan to be within the ambit of a RFOA.

 

Bottom Line

There is a bottom line to Smith. Federal law has historically recognized that an employee’s age, unlike his or her race, ethnicity, sex or other protected characteristic, is often relevant to his or her ability to perform certain jobs. Where an employer adopts a policy that affects those over 40 disproportionately, it
The U.S. Supreme Court broadened the scope of the Age Discrimination in Employment Act. With the aging of the baby boomer generation, there is a greater statistical likelihood employees affected by layoffs or other employment decisions will be age-protected. Distributors need to be aware to protect against age claims.

The U.S. Supreme Court decided a case that broadened the scope of claims under the Age Discrimination in Employment Act, ruling in the case of Smith v. City of Jackson, MS. Result: Older workers who believe they have been discriminated against can sue without proof of intentional discrimination and claims of ‘disparate impact’ are permissible under ADEA.

The ruling resolved a split in the 11 federal circuit courts of appeals on the issue, and expanded the ways in which plaintiffs can viably claim age discrimination.

 

Legal Background

Liability for discrimination under federal, state and local laws generally involve two types of discrimination claims: ‘disparate treatment’ and ‘disparate impact.’ The former arises when an employer intentionally treats an employee differently because of their race or any other characteristic protected by law. A classic example is the discharge of a pregnant employee solely because she is pregnant [and thus female].

 

To prove liability, the employee must prove ‘intentional discrimination,’ either by direct evidence such as a statement by the employer (e.g., ‘she’s not likely to come back to work, so let’s get rid of her’), or indirect evidence (e.g., termination when the employee was doing a good job and replacement by a non-protected person [a non pregnant female]).

 

On the other hand, where an employer takes action, or adopts a policy, that is, on its face, neutral to all employees, but has the unintended effect of treating a certain class of employees adversely, then the employer may be discriminating under the theory of adverse impact. For example, a rule that employees must be able to lift 75 pounds, regardless of their job description, may discriminate against women, older workers or the disabled, even if the employer had no discriminatory intent in adopting the policy. It is this type of policy that was at issue in Smith.

 

The ADEA generally prohibits employers from discriminating against employees who are 40 years of age or older.

 

Unlike several other discrimination statutes (e.g., the Civil Rights Act of 1964 [Title VII] and the Americans with Disabilities Act of 1990), the ADEA includes a provision that allows employers to take employment action that would otherwise be considered discriminatory if it is ‘based on a reasonable factor other than age’ (RFOA).

 

This statutory language is at the heart of the dispute in Smith, and the split in the federal courts of appeals, that led the Supreme Court to revisit the issue of whether a claim of disparate impact is even allowed under the ADEA.

 

This was not an easy decision for the Court while a plurality opinion, three Justices dissented (on the grounds that such claims are not cognizable under the ADEA), and others joined in the decision in different ways, such as by arguing that the proper interpretation should be left to the EEOC. Ultimately, while the Court found that plaintiffs in Smith did not prove their claim of disparate impact, such a claim is legally viable under the ADEA, clearing the way for more claims in the future.

 

The Facts

Smith involved the City of Jackson’s police force, many of whom were over 40. In this bell-weather case, the plaintiffs sued the city and the police department, claiming they were injured by application of an allegedly neutral Performance Pay Plan (Pay Plan).

 

Under the Pay Plan, officers with five or fewer years of service