posted on Monday, June 23, 2008 2:15 PM
by
Lou Michels
Age Discrimination Gets Easier to Prove
The Supreme Court recently made its contribution to what will likely be an increasing trend -- class action age discrimination lawsuits. With an aging workforce and economic downturn, companies are going to find themselves laying off employees or adjusting their workforce to conform to the new economic realities of tighter credit and higher energy prices.
In the latest pronouncement by the Supremes, the Court looked at a reduction in force occurring in a nuclear power company. Specifically, Knolls Atomic Power Laboratory ("KAPL") was ordered to reduce the size of its workforce that the government uses to service nuclear reactors on warships. The company tailored its reduction by having managers score subordinates on their job performance (as measured in their annual evaluations), "flexibility", and "critical skills", and points for each of these three criteria, along with points for years of service were used to rank order the employees. KAPL faced a particular problem in that it had a fairly senior workforce -- 1203 of the 2063 salaried employees were at least 40 years old, and 179 of the 245 at risk of involuntary lay-off were 40 or over. Of the 31 employees selected for lay off, all but one were 40 or over. Twenty-eight of them sued, alleging that the company's use of such subjective factors as flexibility and critical skills was either a pretext for covering up age discrimination, or resulted in a disproportionately high termination rate for older employees.
I might note here that one factor that the Supreme Court was not considering was the issue of age-banding. I don't know whether there was a cluster of older employees in the the forty-and-over group. This could be significant, because a cluster of employees selected for termination between the ages of 45 and 50 would seem to indicate that the age issue was simply coincidental. But the court was not looking at the reliability of the statistical evidence here.
The plaintiff's expert determined that flexibility and critical skills were the two most important factors that caused individuals to be selected for lay off. In other words, those with the lowest scores in those two areas were the most likely to be laid off. The company asserted that the two factors were so-called "reasonable factors other than age" ("RFOA") that provided an exception to a disparate impact age discrimination claim. At the initial trial of the case, the jury rejected this (no surprise here, jurors are almost universally sympathetic to age discrimination claimants, especially in a lay off situation like this) and the case moved through several different layers of appeal before finally reaching the Supreme Court last year.
Most of the employers in this audience are thinking, "Those factors seem to be pretty reasonable to me." In fact, the company defined these factors for the managers, and it is clear from these definitions and the process that what the company was trying to do was select people who would be best qualified for the work that remained after the government altered the nature of its contract with the company.
The Supreme Court determined first of all that the burden of producing evidence and persuading a jury that RFOA were the basis for the layoff decision falls squarely on the employer. This is not really a surprising result given the EEOC's similar position and the court's decisions in recent years. The court's discussion of the RFOA argument is extremely useful because it distinguishes the RFOA factors from the so-called "bona fide occupational qualification" ("BFOQ") factor so familiar to Title VII practitioners. In an RFOA case, the employer just has to establish that its choice of criteria (which must be age neutral on their face) is "reasonable". There is no obligation to show that an alternative practice or evaluation standard might have a smaller impact on older employees; the employer simply must have a logical justification for its position that is consistent with its business evidence. I was somewhat skeptical of the effect of such a requirement since jurors will rarely find a practice that puts Grandpa out on the street to be reasonable, but I was heartened to read that the lower court of appeals here showed no hesitation in finding that KAPL prevailed in its RFOA defense. So at least there is hope that courts can keep this concept from spiraling out of control and being virtually impossible to prove at trial.
A second important point from the court's decision is that a plaintiff in a case like this cannot simply say that the RIF decision is discriminatory -- he must point to a specific employment practice that is responsible for any observed statistical disparity. In this case, the plaintiffs did so by having their statistical expert identify the two key factors used in the evaluation process that allegedly caused the selection of older employees for layoff. But as the Court pointed out, this is not an easy thing to do and the requirement will dispose of many of these cases before they get to trial.
So, for employers dealing with older workforces and layoffs, it is absolutely essential that the criteria used to set up such a system are vetted so that a human resources professional can articulate clearly why the criteria were put in place, and the evaluators using them can articulate exactly how they were used and how the decisions were made with regard to the affected individuals. Actually, that's good advice for any reduction in force.