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G Employment Law Alert May 2005 Disparate Impact Claims Permitted Under the Age Discrimination in Employment Act By Martha L. Lester, Esq., Miguel A. Pozo, Esq., and Stefanie P . Tavaglione, Esq. W e have prepared this Alert to advise you policies have a discriminatory effect or impact on of a March 30, 2005, decision by the the older employee, even though such adverse United States Supreme Court that effect or impact was unintentional. affects all employers. As a result of this decision by Historically, the United States circuit courts our highest court, employees have another means have attempted to answer the question by by which to bring age discrimination claims against comparing Congress’ intent in enacting both Title their employers. Now, plaintiffs may bring VII of the Civil Rights Act of 1964 (“Title VII”) “disparate impact” claims under the Age and the ADEA. Title VII bans discrimination Discrimination in Employment Act (“ADEA”). based on race, color, religion, sex, and national This means that employees now may challenge origin, and its text and purpose is similar to the facially neutral policies and practices that anti-age discrimination provisions of the ADEA. negatively result in disparate impact. This has long Title VII disparate impact claims have long been been the view of the Equal Opportunity recognized. However, to date, the circuit courts Commission and the United States Department of have been divided as to the viability of disparate Labor, both of which have supported relief under impact claims under the ADEA. the ADEA for disparate treatment and disparate The Third U.S. Circuit Court of Appeals (New impact. Jersey’s circuit), formerly held in a 1995 decision that it was “doubtful that traditional disparate Background: impact theory is a viable theory of liability under In 1967, Congress enacted the ADEA to end the ADEA.” In its recent decision, the United age discrimination against older employees and to States Supreme Court finally has put an end to the encourage their employment. Since its inception, debate among the circuit courts and thereby has the ADEA has afforded employees a “disparate changed the employment landscape. treatment” cause of action, i.e ., where an employer The Supreme Court’s Decision: intentionally discriminates or takes an adverse action In Smith v. City of Jackson , No. 03-1160, the against an employee based on age. However, until Supreme Court considered whether the disparate now, it has been unclear whether “disparate impact” impact theory of recovery first announced in Griggs claims are cognizable under the ADEA, i.e. , v. Duke Power Co. is cognizable under the ADEA. whether an employee has a cause of action against The Supreme Court answered this question in the an employer under the ADEA if the employer’s This document is published by Lowenstein Sandler PC to keep clients and friends informed about current issues. It is intended to provide general information only. L Roseland, New Jersey Telephone 973.597.2500 65 Livingston Avenue www.lowenstein.com 07068-1791 Fax 973.597.2400

G affirmative and concluded that the ADEA protects claim, finding that the senior officers did not employees from employer actions that may appear demonstrate that they suffered from a disparate facially neutral, but have a disproportionately impact because of the city’s pay plan. The Supreme adverse impact on older workers. Court accepted the city’s reliance on seniority and In Smith , a group of police and public safety rank, as well as the city’s justification - that it was officers employed by the City of Jackson, trying to retain officers by making junior officers’ Mississippi, sued the city alleging that its salaries more competitive with comparable performance pay plan discriminated against older positions in the local market - as an acceptable employees. Under the plan, junior officers received “ reasonable factor other than age .” proportionately higher percentage pay increases The Impact of Smith v. Jackson : compared to more senior officers. The older What does this mean to you as an employer? officers argued that: (1) the city deliberately This ruling means that older employees now have discriminated against them based upon age an additional cause of action against their (disparate treatment discrimination); and (2) they employers under the ADEA. They are no were “adversely affected” by the plan because of longer required to prove discriminatory intent. their age (disparate impact discrimination). Employers, therefore, must be prudent in creating In response, the city argued that it did not and drafting new policies and practices, and in design the pay policy to discriminate based on age. evaluating existing policies to be certain that older Rather, the stated goal of the performance pay plan employees are not adversely impacted, even though was to retain junior officers by making entry-level the policies and practices might not have been salaries competitive with those of other local police created or carried out with discriminatory intent. departments. However, the Smith v. Jackson ruling also makes After losing on claims of disparate treatment clear that older employees must meet a high and disparate impact at the district court level, the threshold to prove a claim of disparate impact age Fifth U.S. Circuit Court of Appeals allowed the discrimination under the ADEA. The Supreme ADEA disparate treatment claim to move forward, Court noted that the scope of the disparate impact but held that the disparate impact claims were unavailable. The senior officers appealed to the theory of liability is more narrow under the ADEA than that under Title VII. This is true because, United States Supreme Court. unlike the protected classifications under Title VII The United States Supreme Court held that (race, color, religion, sex, and national origin), the disparate impact claims are, in fact, available to employees under the ADEA. Thus, the senior age of a worker “not uncommonly has relevance to officers did not have to prove deliberate an individual’s capacity to engage in certain types discrimination against them; rather, they had to of employment. ...” Therefore, according to the prove only that the city’s performance pay plan Supreme Court, an employer may justify policies disproportionately harmed them. However, based that have a disproportionately adverse impact on on the facts before it, the Supreme Court affirmed older employees, as long as the employer’s policies the Fifth Circuit’s dismissal of the disparate impact and/or practices were created based upon

G New Edition Coming Soon reasonable factors other than age. It is therefore critical that, as an employer, you are able to The new edition of “ The Practical Guide to support your decisions as grounded on reasonably Federal and New Jersey Employment Law: The sound, non-discriminatory factors. Employers’ Resource,” Executive Editor, Martha L. Lester, includes: The law in the area of workplace discrimination � Federal Law Updates continues to evolve. If you have any further questions � Easy-to-Follow Index about the issue discussed in this Alert, or whether any � New In-Depth Chapters of your policies should be examined as a result of these The Guide , published in decisions, or any other employment practices or connection with the New Jersey compliance issues, please do not hesitate to call Martha Business & Industry Association, L. Lester, Chair of the Employment Law Practice is the resource for New Jersey Group, or Miguel A. Pozo and Stefanie P . T avaglione, employers seeking to comply with applicable federal and members of the Employment Law Practice Group, at state laws, regulations and procedures in the (973) 597-2500. employment-related area. It provides management with critical information concerning existing laws, emerging trends, most frequently asked questions, and practical tips on managing the workforce and workplace. T o obtain your copy of the new edition of, “ A Practical Guide to Federal New Jersey Employment Law: The Employer’s Resource ,” please contact Karen Cerreto at 973.422.6466 or email kcerreto@lowenstein.com.