Supreme Court Places Burden On Employers In Age Bias Disparate Impact Cases

On June 19, 2008, the U.S. Supreme Court issued an important

decision, making it easier for older workers to prove that they

were subjected to age discrimination. Given the economic

downturn, and the resulting uptick in layoffs, this age-bias

ruling is likely to trigger an increase in age discrimination

lawsuits, particularly where disproportionate numbers of

employees age 40 or older lose their jobs in a reduction in

force.

In Meacham et al. v. Knolls Atomic Power Laboratory et

al., No. 06-1505, the United States Supreme Court held, in

a 7-1 ruling, under the Age Discrimination in Employment Act

(ADEA), that an employer defending a disparate impact claim on

the basis of a reasonable factor other than age (RFOA) bears

both the burden of production and the burden of persuasion in

showing that the factors the employer relied upon in selecting

those employees to be laid off were reasonable. In so ruling,

the Supreme Court resolved a conflict dividing the federal

appellate courts where the U.S. Court of Appeals for the Ninth

Circuit had placed these burdens on the employer, whereas the

Second Circuit had placed the burden of persuasion on the

employees to show that the factors relied upon by the company

were unreasonable.

Background and Lower Courts' Decisions

The federal government contracts with private companies,

such as Knolls Atomic Power Laboratory ("Knolls"), to

do certain work maintaining the country's fleet of nuclear

powered warships. In or about 1996, the government ordered

Knolls to reduce its workforce. Knolls conducted an involuntary

reduction in force (RIF) resulting in the layoff of thirty-one

employees, thirty of whom were over 40 years of age or older.

Twenty-eight of the terminated employees filed suit asserting a

disparate impact claim under the ADEA.

The selection of employees was based on a matrix, where

managers ranked employees from zero to ten on performance,

flexibility, and criticality of their skills. The managers

could also give an employee up to ten points for company

service. After completing this process, a review board, and

then the general manager and general counsel, reviewed the

managers' decisions. On behalf of the employees, a

statistician testified that it was extremely unlikely that

Knolls' termination decisions with respect to age happened

by chance, and that the scores for "flexibility" and

"criticality," over which managers had the most

discretionary judgment, had the firmest statistical ties to the

outcome.

Before a jury at the district court, and a 2004 panel of the

Second Circuit, plaintiffs prevailed by showing that the

criteria for layoff used by Knolls failed the "business

necessity" test because the results demonstrated a

disparate impact on account of age where 30 of the 31 employees

selected for layoff, out of...