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Supreme Court Explains Disparate Impact Analysis for Age Bias Claims Involving Reductions in Force

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06.25.2008 | Advisory

Most employers know that they must anticipate and prepare for legal challenges to their method of selecting employees affected by a reduction in force (RIF).  If, for example, the ages of the selectees suggest the possibility of age bias, then the employer has to consider its proof that the selections were based on a defense explained in the Americans with Disabilities Act:  "reasonable factors other than age (RFOA).”  The United States Supreme Court recently issued an illuminating opinion involving this type of case, thereby resolving a conflict that had existed in the lower courts.  The new opinion explains how plaintiffs may use statistics and a theory of "disparate impact" to attack a RIF, how employers may defend by trying to prove RFOA, and how the judicial system ultimately will evaluate the lawfulness of the layoffs by placing the burden of persuasion on the employer for showing that the RFOA defense actually applies. 

The case at issue was Meacham v. Knolls Atomic Power Laboratory. [1] In Meacham, the Knolls Atomic Power Laboratory had laid off 31 salaried employees, all but one of whom were at least 40 years old.  The laboratory chose the 31 by grading and comparing a larger group of employees on the basis of their "performance" (i.e., their two most recent appraisals), "flexibility" (their perceived ability to work on other assignments), and "criticality" (a measure of how important their individual skills were).  Twenty-eight of the 31 then sued.  They claimed that age discrimination was proven by the "disparate impact" of the selection process on older workers.  According to their arguments, the three facially neutral RIF selection criteria were in fact unfairly biased against them because of their age.  This was apparent, they said, because only 1203 (58%) of the laboratory's 2063 salaried workers were 40 years of age or older, and only 179 (73%) of the 245 salaried workers who were at risk in the RIF were that old. 

At trial, the Meacham plaintiffs sought to prove their case with a statistics expert who testified that the laboratory's layoff selections were skewed by age far too much to be explained by chance.  The expert testified that the chances of this particular RIF outcome were only 1 in 348,000 (based on a population of 2063 salaried workers), 1 in 1260 (based on a population of the 245 workers at risk of layoff), or 1 in 6639 (when analyzed by sections of the company).  The expert also testified that the two RIF selection criteria over which managers had the most discretionary judgment were "flexibility" and "criticality," and that those two relatively subjective criteria also had the firmest statistical ties to the flawed selection process outcomes.  The plaintiffs' implication was obvious:  notwithstanding the facial neutrality of the selection process, managers had allowed unlawful age bias to taint employee grading in the two areas where grading was most subjective. 

The primary question before the Supreme Court was procedural:  which side of the lawsuit should have the burden of persuasion?  The laboratory argued, as one court of appeals had held, that this burden should be on the plaintiffs because a plaintiff generally has the burden of proving a successful claim.  But the Supreme Court did not agree, and it thus ruled against the laboratory.  The court explained that a plaintiff will fall short in his claim when all he does is allege a disparate impact or point to some generalized policy that leads to such an impact.  To prove a prima facie case of disparate impact, a plaintiff also must "isolate and identify the specific employment practices that are allegedly responsible for the statistical disparities.”  But once a plaintiff meets that threshold burden, then the burden of persuasion will fall on the employer to prove its RFOA defense. [2]

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[1] The Supreme Court released its opinion on June 19, 2008.

[2] The Court acknowledged the adverse impact its ruling might have on employers as follows: "[T]here is no denying that putting employers to the work of persuading factfinders that their choices are reasonable makes it harder and costlier to defend than if employers merely bore the burden of production; nor do we doubt that this will sometimes affect the way employers do business with their employees.  But at the end of the day, [these] concerns have to be directed at Congress, which set the balance where it is ...."
 
This advisory was prepared by David C. Henderson, a member of Nutter's Employment, Labor and Benefits practice group.  For additional information, please contact David (dhenderson@nutter.com) or your Nutter attorney at 617-439-2000.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising. 

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