By Sara J. Ackermann
April 1, 2005
Consider the following scenario: due to a recent decline in sales, your company is forced to layoff several of its employees. Two of the older employees affected by the layoff, John Jones and Jane Smith, threaten to sue your company for discrimination in violation of the Age Discrimination in Employment Act (“ADEA”). Both employees are over age 40 and therefore protected by the ADEA, the federal law which makes it unlawful for employers to discriminate on the basis of age. John alleges that prior to the layoff he overheard his supervisor make the following comments: “John is too old to do his job. The layoff will be a great way to get rid of him.” On the other hand, Jane’s claim is devoid of any evidence that your company deliberately discriminated against her. Rather, she alleges only that a majority of the workers included in the layoff were over age 40. Can both John and Jane bring an ADEA claim against your company? According to a recent Supreme Court decision, the answer is yes.
On March 30, 2005, the Supreme Court held that the ADEA permits recovery in “disparate impact” claims – claims where employees (like Jane) lack any evidence that their employer deliberately discriminated against them, but can show that they were “adversely affected” because of their age. Smith v. City of Jackson, Mississippi, No. 03-1160, (U.S.S.C. March 30, 2005). Prior to this ruling, several Courts of Appeal, including the Seventh Circuit which covers Wisconsin, had previously held that only “disparate treatment” claims (like that alleged by John) were actionable under the ADEA.
The case involved the City of Jackson, Mississippi, and its effort to raise starting salaries for its employees. After surveying wages in similar communities, the City implemented pay raises for its police officers based on rank and seniority. Officers with less than five years of service received the greatest increases. The City’s rationale for this was that the salaries for these junior officers were not in line with the current market. Because these officers with less tenure were generally younger in age, a group of older officers filed suit, claiming that the pay plan adversely affected them because of age.
Though recognizing that the officers were not barred from bringing a disparate impact claim, the Supreme Court ultimately ruled against them, citing two reasons for its decision. First, the officers failed to specifically identify a practice, test or requirement within the City’s pay plan that had an adverse impact on older workers. Second, the Court reiterated that the ADEA permits employers to make employment-related decisions based on “reasonable factors other than age…” 29 U.S.C. 623(f)(1). The Court was convinced that the City implemented its pay plan based on the factors of seniority and rank. Finding these factors to be “reasonable,” and in line with the City’s legitimate business goal of retaining police officers, the Court found the City had not violated the ADEA.
What does this decision mean for Wisconsin employers? Employers must think carefully before implementing policies or practices that could disproportionately impact older workers. However, if an employer can show that it executed such policies on the basis of reasonable, legitimate, business-related factors, it will increase its chances of prevailing in a disparate impact claim. Although the Jackson decision does allow an employee like Jane to bring a disparate impact claim, it does not mean she will win.
If you have questions regarding the above, please contact Sara Ackermann, the author of this article, or any of the attorneys in the Employment, Benefits & Labor Relations Practice Group of Ruder Ware.
This document provides information of a general nature regarding legislative or other legal developments, and is based on the state of the law at the time of the original publication of this article. None of the information contained herein is intended as legal advice or opinion relative to specific matters, facts, situations, or issues, and additional facts and information or future developments may affect the subjects addressed. You should not act upon the information in this document without discussing your specific situation with legal counsel.
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