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As companies continue with layoffs and other belt-tightening measures in this recovering economy, the question of the availability of a “disparate impact” theory of liability under federal age discrimination legislation has come to the fore once again. In early November, the U.S. Supreme Court heard oral argument on a case that should define whether a disparate impact theory is available under the Age Discrimination in Employment Act (ADEA). In this case, Smith v. City of Jackson, No. 03-1160, the Court faces a question with wide-ranging implications for the way workplace decisions affecting many segments of the economy are made. The disparate impact theory of liability is generally viewed as among the most sweeping doctrines in employment law, since it predicates liability solely on the effect of an employer’s neutral employment practice on a protected group, without regard to the employer’s actual motive. In general, any objective and facially neutral policy can be found unlawful if the group it affects coincides to a meaningfully greater degree with the membership of a protected group than with others and the employer cannot justify the practice as a matter of business necessity. ‘GRIGGS’ AND THE CREATION OF DISPARATE IMPACT THEORY Disparate impact as a theory grew out of the U.S. Supreme Court’s well-known decision in Griggs v. Duke Power Co., 401 U.S. 424 (1971), a case involving claims of racial discrimination under Title VII of the Civil Rights Act of 1964. In Griggs, a North Carolina power plant that had traditionally excluded African-Americans from all but the most menial positions enacted new employment policies on June 2, 1965, the same day that Title VII went into effect. The new policies restricted eligibility for the same higher-paying jobs as before to high school graduates who passed certain “general intelligence” and “aptitude” tests. As a consequence, these policies created new ostensibly race-neutral employment barriers for otherwise qualified African-Americans, given the historically lower percentage of African-American high school graduates in the area and the higher African-American failure rate on these particular tests. Sympathetic to the fact that discriminatory intent appeared to lurk behind the facade of the power plant’s supposedly neutral policy, and acutely sensitive to the national problem of racism, the Supreme Court created a new theory of liability that encompassed significant discriminatory effects, even without an inference of intent. The Griggs decision focused on ending the perpetuation of discrimination that stretched well into the past, rooted not only in the employment setting but also in the socio-economic elements of race discrimination. The Court’s recognition that the plaintiffs had received an “inferior education in segregated schools” was its building stone in preventing such external social disadvantages from operating as “built-in headwinds” to advancement in the employment context. Whether the Court intended it, the disparate impact theory certainly made sense in the context of race because disallowing the challenged employment criteria had no negative cost or quality effect on the employer, in that the tested-for skills were not qualification-related while the protected category-race-is presumptively qualification neutral. Opponents of extending disparate impact to the ADEA argue that there exists a stark difference between the socially endemic racial animus befitting such a drastic remedy as disparate impact and the absence, in our time, of any comparably invidious hatred along the lines of age. At the same time, employees argue that allowing employers to make ostensibly age-neutral decisions that nevertheless have patently age-correspondent effects contradicts the spirit and purpose of the age act. DISPARATE TREATMENT THEORY IS ADEQUATE, SAY EMPLOYERS From the employers’ perspective, the societal dysfunction that the ADEA aims to proscribe is the temptation to make employment decisions based on generalized misperceptions about the abilities of older workers. This mission is more than adequately served, they argue, by a theory of liability based on disparate treatment, i.e., an employer looking at an employee and making a decision using age as a proxy for employment qualifications. Employers routinely face important decisions involving factors such as experience, salary, health care, technological training, insurance risks, pension contributions, physical mobility (whether for family or other reasons) and seniority or longevity. These decisions, at some order of perception, may be likely to trigger age-correlative impacts. The application of disparate impact theory to the ADEA restricts an employers’ use of these otherwise innocent efficiency, qualification and cost-related criteria in employment decisions. Consequently, disparate impact theory imposes a hidden, unintended burden on employers to bear such costs, a result not typically present in Title VII’s disparate impact context (where challenged criteria will more frequently be qualification- and cost-neutral) and, it stands to reason, not contemplated by the holding in Griggs. On the other hand, employees argue, there is no harm in allowing the law to acknowledge what employers already know themselves, i.e., that some age-neutral decisions may inevitably have a disparate effect along the lines of age, nor in simply asking employers to supply an acceptable business rationale for such suspect age-correlative results. Moreover, the argument goes, the number of reported federal disparate impact age cases has been in the dozens, not the thousands, and so it is not necessarily a certainty that Supreme Court endorsement of disparate impact would unleash a flood of litigation that would affect our business-based economy. BOTH SIDES ARGUE BASED ON TEXTUAL INTERPRETATION The debate over whether disparate impact theory is appropriate to the age context also centers on textual interpretation. Employees point out that the Equal Employment Opportunity Commission interprets the ADEA as allowing for disparate impact theory. In addition, the main text of the ADEA mirrors that of Title VII and seems to support a disparate impact theory insofar as it does not allow an employer “to limit, segregate, or classify his employees in any way which would deprive or tend to deprive any individual of employment opportunities … because of such individual’s age.” 29 U.S.C. 623(a)(2); cf. 42 U.S.C. 2000e-2(a)(2). Nevertheless, employers argue, there is a critical textual distinction between Title VII and the ADEA that points toward the opposite conclusion. The ADEA explicitly allows employment decisions “where the differentiation is based on reasonable factors other than age,” a provision with no Title VII counterpart. See 29 U.S.C. 623(f)(1). As the 1st U.S. Circuit Court of Appeals has commented, “if the exception [for reasonable factors other than age] is not understood to preclude disparate impact liability, it becomes nothing more than a bromide to the effect that ‘only age discrimination is age discrimination.’” Mullin v. Raytheon Co., 164 F.3d 696, 702 (1st Cir. 1999). CASE INVOLVES SALARY PLAN WITH AGE-ADVERSE IMPACT In the Smith v. City of Jackson case now sub judice in the Supreme Court, a group of Jackson, Miss., police officers challenged the city’s salary plan as rendering an age-adverse impact by granting significantly higher pay raises to officers below the age of 40 than above. The essence of the plan was that officers with five or fewer years of tenure would get proportionately higher raises than those with five or more years of service. In holding that disparate impact theory was not available under the ADEA, the 5th Circuit focused on the textual distinction between Title VII and the ADEA (principally, the “reasonable factors other than age” defense), as well as some long-debated indications of specific legislative intent consciously distinguishing between age and race discrimination. 351 F.3d 183, 190-94 (5th Cir. 2003); see Jay W. Waks and David E. Prager, “Age Discrimination: Does the Adverse Impact Theory Apply?” in Proceedings of N.Y.U. 40th Annual Nat’l Conf. on Labor, ch. 14 (1987). In the end, the task the Supreme Court faces in deciding this case is to determine whether the extraordinary relief found in Title VII disparate impact doctrine, originally designed as a response to intractable and irrational racial animus, is appropriately suited to the realm of age-based discrimination. Although there is an argument to be made for statutory parity as between Title VII and the ADEA, it also may be the case that traditional intent-based doctrine remains adequate to address any wrongheaded generalizations as to the ability of older workers. It is up to the Supreme Court to surmise the extent to which any increase in litigation flowing from the recognition of a disparate impact theory in the age context is necessary to expand the relief for those plaintiffs who truly have been the victims of age-based discrimination. Jay W. Waks, a litigation partner at Kaye Scholer in New York, is chairman of the firm’s employment and labor law practice, representing corporations. William Poorten is a litigation associate at the firm. If you are interested in submitting an article to Law.com, please click here for our submission guidelines.

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