Oral argument: April 23, 2008
Appealed from: U.S. Court of Appeals, Second Circuit (August 14, 2006).
AGE DISCRIMINATION IN EMPLOYMENT ACT, EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, AGE DISCRIMINATION, OLDER WORKERS, REDUCTION IN FORCE, LAY-OFFS, BURDEN OF PROOF, BURDEN OF PERSUASION
In this case, a hair's breadth of analytical difference is worth almost $6 million dollars, as the plaintiffs, former employees at Knolls Atomic Power Laboratory ("KAPL") ask the U.S. Supreme Court to overturn the Second Circuit's finding for the defendants. The plaintiffs had prevailed at trial and on appeal on a disparate impact theory of illegal age discrimination under the Age Discrimination in Employment Act (the "ADEA"), 29 U.S.C. 621 et seq., when the Supreme Court remanded for reconsideration in light of Smith v. City of Jackson. While upholding the disparate impact theory, City of Jackson also requires the touchstone of the analysis to be whether employers considered "reasonable factors other than age," which the Second Circuit determined was a burden of persuasion to be borne by the plaintiffs. The employee-plaintiffs disagree, maintaining that the "reasonable factors other than age" harbor in the ADEA statute is a traditional affirmative defense on which the employer-defendants bear the burden of proof. In determining where the burden rests, the Supreme Court's decision will impact the nature of future employee litigation under the ADEA, shape the strategies for a successful reduction in force, and determine what deference is due the Equal Employment Opportunity Commission's regulations interpreting the ADEA.
Whether an employee alleging disparate impact under the ADEA bears the burden of persuasion on the "reasonable factors other than age" defense, as held by the Second Circuit in this case in conflict with the decisions of other circuits and a regulation of the Equal Employment Opportunity Commission.
After an employee shows that an employment practice had a disparate impact on older workers, and after an employer presents evidence that the challenged practice was neutral, does the employer have to convince the jury that its policy was "reasonable," or does an employee have to convince the jury the policy was "unreasonable?"
Knolls Atomic Power Laboratory (the "Lab") draws its workforce of 2,600 from the small upstate New York towns of Niskayuna and New Milton. The Lab is a government initiative funded by a joint program of the Navy and the Department of Energy, and is operated by KAPL Inc. ("KAPL"), a Lockheed Martin company. For fiscal year 1996, a reduction in the Lab's operating budget required an "involuntary reduction in force" ("IRIF") resulting in the firing of thirty-one employees, thirty of whom were over forty years old. See Meacham v. Knolls Atomic Power Lab., 461 F.3d 134, 139 (2d Cir. 2006) ("Meacham II").
KAPL instructed its managers in the "matrix" method of evaluating employee performance to select employees for layoff. Meacham II, 461 F.3d at 138. This method required managers to assign points to employees in their groups based on performance, flexibility, criticality of skills, and time with the company. Management let go employees scoring lowest on the matrix until staffing was reduced to meet budgetary constraints. See Meacham v. Knolls Atomic Power Lab., 381 F.3d 58, 64 (2d Cir. 2004) ("Meacham I") (vacated and remanded by KAPL, Inc. v. Meacham, 544 U.S. 957 (2005)).
KAPL further instructed its managers to perform a disparate impact analysis for protected classes of employees under the Age Discrimination in Employment Act of 1967, 29 U.S.C. ? 621 et seq. ("ADEA"), but the managers lacked adequate training to assess ADEA compliance. See Meacham I, 381 F.3d at 64. A review board assessed those identified by management for layoff but did not review for possible age discrimination. Id. KAPL performed a final disparate impact analysis, but the methodology used did not highlight the statistical anomaly of the layoff's disproportionate impact on an ADEA-protected class. Id.
The former employees, including Clifford Meacham, sued under the ADEA and the New York Human Rights Law, charging both disparate treatment and disparate impact in the IRIF process. See Meacham I, 381 F.3d at 69-71. The U.S. District Court for the Northern District of New York held for Meacham and his fellow former employees, and the U.S. Court of Appeals for the Second Circuit affirmed because it felt constrained by precedent. See id.
The U.S. Supreme Court first heard this case in 2005, when it remanded for reconsideration in light of Smith v. City of Jackson, a case that confirmed the availability of disparate impact claims under the ADEA. See 544 U.S. 228, 232 (2005). However, contrary to the analysis conducted in Meacham I, City of Jackson held that the question of whether an employer practice violates the ADEA requires a "reasonableness" inquiry. See id. at 232, 240. In order to comply with City of Jackson, a panel of the Second Circuit reversed itself and remanded with instructions to enter judgment as a matter of law for the defendants. See Meacham II, 461 F.3d at 138, 147.
Significantly, City of Jackson did not explain which party bears the burden of proof on proving the reasonableness of the employer practice. The Second Circuit found that the "best reading" of City of Jackson results in the plaintiff bearing the burden of proof of persuading the court that the employer's justification is unreasonable. See Meacham II, 461 F.3d at 141.
On January 18, 2008, the Supreme Court granted certiorari to resolve the issue of which party bears the burden of proof under the City of Jackson "reasonableness" inquiry. Brief for Petitioner at 1.
Like many seemingly minute analytical distinctions, the U.S. Supreme Court's decision on the burden of proof issue under the Age Discrimination in Employment Act of 1967 ("ADEA") will in fact have important repercussions for businesses and employees throughout the United States. With company general counsels reporting yet again that their biggest litigation fear in 2007 was labor and employment litigation, and predicting the same trend for the future, an outcome in this case will significantly influence both the character and amplitude of that litigation. See Fulbright & Janowski's 2007 Litigation Trends Survey. A decision either way will impact employees' ability to bring suit and their likelihood of success, inform employers' strategies for implementing successful reductions in force ("RIF"), and update courts' understanding of the deference due to Equal Employment Opportunity Commission ("EEOC") regulations.
Who brings ADEA suits? Every year, between 15,000 and 20,000 people do, with numbers rising due to the recent economic downturn and consequent reductions in force ("RIF"). See ADEA Charges, FY 1997-FY 2007. Of those complaints received, between 2,500 and 3,500 completed a trial on the merits. See id. Furthermore, this issue will only grow in importance as the country's population continues to age, presenting employers with difficult decisions.
The Effect on Employees
One law firm notes that the tricky burden of proof issue may be decisive either at summary judgment or at trial, because the plaintiffs could conceivably be required, under a holding for KAPL, to provide evidence at the pleadings stage of the unreasonableness of an employer practice. See Sutherland, Asbill & Brennan LLP's Legal Alert: U.S. Supreme Court Will Hear Three New Employment and ERISA Cases, January 24, 2008. Summary judgment, the AARP worries, would be unavoidable for plaintiffs bearing a burden that requires a "second sight" to know what reasons the employer might advance without the benefit of discovery. See Brief for the AARP as Amicus Curiae in Support of Petitioners at 20 ("Brief for AARP").? According to the AARP, a finding for KAPL increases the possibility of loss at the pleadings stage, relegating employee claims under the ADEA to an "exercise in futility." Id. A win for KAPL would render the RFOA part of plaintiffs' pleading, requiring plaintiffs to guess at the rationales an employer will present and rebut them. See id. at 21. This would be impossible without access to employer records in pre-discovery stages of the trial. Id.
Likewise, a heavier burden may undermine ADEA enforcement. The tendency towards "inaccurate age-based assumptions" that Congress sought to counter through the ADEA would re-emerge, with a very limited ability to review such decisions. Brief for AARP at 23. Purported use of age-correlated factors would mask age-stereotyping, and would be unassailable in court if employers are not required to prove the factors' neutrality. Id. at 25.
The Effect on Employers
If KAPL prevails, it will signal that employers have greater freedom than previously thought in the decision and planning of RIF's. See Nixon Peabody Employment Law Alert, August 2006. In validating the Second Circuit's recognition that age is fundamentally different from race, sex or other classifications, because some functions are legitimately impaired by advanced age, the Court would effectively sanction so-called "subjective" evaluation methods, like those employed by KAPL in its RIF. See id. Company-wide layoffs based on apparently subjective criteria would benefit from a new legitimacy, and as such, immunity from challenge in the courts. See id. A jury faced even with "startlingly skewed" statistics of laid-off employees will no longer be able to find unintentional discrimination if those employees cannot prove that their selection for the RIF was "unreasonable." See id. This is a strikingly high bar.
The American Psychological Association ("APA") points out that under the new analysis, the crucial factor for employers becomes convincing jurors that the challenged policy is reasonable. Per the APA, if KAPL prevails, the role of experts' testimony in convincing jurors of the truth of the employer's proposition will take on new importance, because as soon as the jury believes the employment practice is "reasonable," the employer is off the hook. See American Psychological Association, Monitor on Psychology, Volume 38, No. 5 May 2007, "Age discrimination and disparate impact in employment:Are there reasonable factors other than age?" Conversely, if Meacham prevails, the burden on employers will be to convince jurors that the policy is reasonable, which is a higher bar requiring a different strategy. The burden of production has been referred to as "disparate impact lite," whereas the traditional affirmative defense is typically thought to distribute the burdens equally. Therefore, a decision for KAPL will be viewed as favorable to the business community, and likely be acted upon as such, while a decision for Meacham will be viewed as more employee-friendly.
An outcome either way will implicitly clarify how much deference is due to the EEOC's regulations regarding the ADEA. Additionally, a decision for Meacham would validate the EEOC's long-standing interpretation of the ADEA, and end its projected review to bring its regulations into line with City of Jackson.
Statutory and Caselaw History
The Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. 621 et seq., prohibits employer discrimination based on age against those over forty years of age. In Smith v. City of Jackson, 544 U.S. 228 (2005), the U.S. Supreme Court held that a cause of action is available to employees under the ADEA for employment practices resulting in an unjustified disparate impact on older workers. Disparate impact liability results from an illegal impact on a protected class, such as workers over forty, whereas disparate treatment liability requires proving an intent to discriminate.
In those circuits recognizing liability for disparate impact prior to City of Jackson, ADEA cases used an analytical reasoning parallel to that of claims under Title VII of the Civil Rights Act of 1964 ("Title VII"). In practice, this meant that disparate impact claims were regulated for nearly twenty years by the "business necessity" test of Wards Cove Packing Co. v. Atonio, 490 U.S. 642 (1989). The business necessity test requires the plaintiff to identify the specific business practice responsible for the disparate impact, the defendant to proffer a business justification, and the plaintiff to disprove the necessity of the practice by finding an equally-efficient alternative. See Wards Cove, 490 U.S. at 658-59.
In City of Jackson, the Court confirmed the continued applicability of Wards Cove to ADEA disparate impact claims. See 544 U.S. at 240. However, the Court acknowledged that the ADEA's coverage is limited in a way that Title VII's is not, as no comparable provision exists under Title VII. See id. Section 4(f)(1) of the ADEA, 29 U.S.C. 623(f)(1), allows employers to make certain decisions that would otherwise violate the ADEA if employers can prove that the different treatment is actually based on "reasonable factors other than age" ("RFOA.")
This case turns on a very sensitive analytical teeter-totter: who bears the burden of proof (or persuasion) on the reasonableness issue. A burden of proof is the responsibility of convincing the fact-finder that a proposition asserted in the pleadings is true. In English, this translates to whether Meacham must show that KAPL's employment practice resulting in the disparate impact was unreasonable, or whether it is up to KAPL to show that it was reasonable.
Does the Reasonable Factors Other than Age Provision Constitute an Affirmative Defense?
Meacham argues that even after City of Jackson,the RFOA provision unquestionably creates an affirmative defense. Brief for Petitioner at 20. First, Meacham explains that exceptions to a general liability provision are traditionally understood as affirmative defenses. Id. at 21. Hence, the structure of the provision, with subsections (a), (b), and (c) defining unlawful acts and subsection (f) outlining exceptions, supports its reading as an affirmative defense. See Meacham v. Knolls Atomic Power Lab., 461 F.3d 134, 150 (2d Cir. 2006) ("Meacham II") (Pooler, J., dissenting). Per Meacham, the RFOA provision is by definition a defense, since it only has relevance in response to an employer action that is "otherwise prohibited" under the ADEA. See Brief for Petitioner at 23 (citing City of Jackson, 544 U.S. at 246 (Scalia, J., concurring in part and concurring in the judgment)).
Furthermore, Meacham signals that Court precedent in closely related cases leans in favor of construing section 4(f)(1) as an affirmative defense. Brief for Petitioner at 25. Meacham and his amici point out that the Court has interpreted very similar language in the Equal Pay Act of 1963 (the "EPA"), 29 U.S.C. ? 206(d), to constitute "an affirmative defense on which the employer has the burden of proof." Corning Glass Works v. Brennan, 417 U.S. 188, 196-197 (1974); see Brief for the United States as Amicus Curiae Supporting Petitioners ("Brief for U.S.") at 13-14. The EPA used nearly identical language ("any other factor other than sex"), supporting the case to interpret the RFOA language as an affirmative defense. 29 U.S.C. ? 206(d)(1); see Brief for Petitioner at 26. Finally, Meacham argues that Congress logically intends the burden to be on the party more capable of filling it, and a defendant is more likely to have the required information or be able to gather it. See id. at 33-34. Meacham emphasizes that the "reasonableness" inquiry is by its nature a light burden, since it will be satisfied by any reasonable business practice. Id.
Conversely, KAPL is likely to agree with the Second Circuit, which read City of Jackson as requiring Meacham to carry the burden. See Meacham II, 461 F.3d 134, 141. The Second Circuit reasoned that, under Wards Cove, as the employer is not to bear the ultimate burden of persuasion, the Smith Court must have intended the burden on the RFOA to fall on the plaintiff despite textual signals to the contrary. See id. at 142. City of Jackson nowhere suggested that the RFOA was a traditional affirmative defense, whereas the occasion to signal it as such was ripe. Id.
The Second Circuit also underlined that there would result a "redundancy" in expecting an employer to prove that a routine employment practice was reasonable. Meacham II, 461 F.3d at 142. Moreover, since City of Jackson confirmed that Wards Cove is still applicable to ADEA claims, and Wards Cove held that the "ultimate responsibility" for proof is on the plaintiff, in order to not circumvent that case's applicability, the plaintiff must carry the burden of persuasion on the RFOA as well. See id.
While amici of Meacham underscore that Court precedent leaves open the question of who bears the burden, KAPL is likely to argue that City of Jackson resolved the matter: the disparate impact plaintiff bears the burden. See Meacham II, 461 F.3d at 142. While the AARP maintains that City of Jackson's identification of the RFOA provision as the way in which the ADEA is narrower than Title VII does not imply a burden shift to the plaintiff. See Brief for AARP at 9. KAPL may argue that any case that seemingly leaves it open either (i) predates City of Jackson or (ii) concerns disparate treatment, not impact. See id. at 143 n. 7. KAPL will doubtless underline the Second Circuit's deference to businesses, emphasizing that a court is a poor substitute for a personnel department and that the range of acceptable business practices is wide. See id. at 144.
What Remains of Wards Cove After City of Jackson?
The parties dispute the legacy of Wards Cove in the post-City of Jackson judicial climate. According to Meacham, City of Jackson did not indicate that the RFOA provision is an element of the plaintiff's case-in-chief, and is not to be read to substitute "reasonableness" for "business necessity." Brief for Petitioner at 45-47. The Wards Cove holding establishing the business necessity test encompasses the common language in the Title VII and ADEA statutes, but not the RFOA provision, which appears only in the ADEA. See id. Therefore, Meacham urges, the Second Circuit erred in replacing the Wards Cove test with the reasonableness test-a test that applies only to the RFOA defense, and not to the language of the ADEA as a whole. See id. at 46.
Further, there is no contradiction, per Meacham, in recognizing KAPL's burden of persuasion on the defense while maintaining Meacham's burden on the initial proof that the employer performed an "otherwise prohibited" action. 29 U.S.C. ? 623(a)(1); see Brief for Petitioner at 19-20; 48. In other words, an employment practice must first fail the business necessity test to prove it as "prohibited," for which burden is on plaintiff; and then employer can still prove reasonableness, but burden is on employer to do so. See id. at 47.
KAPL will likely agree with the "replacement" approach advocated by the Second Circuit. The Second Circuit reasoned the new reasonableness test still required that all other elements of the analysis under Wards Cove stay the same-including placing the burden of persuasion on the plaintiff. See Brief for Petitioner at 14-15. KAPL argues that the Second Circuit properly applied the Wards Cove analysis, as modified by the Court in City of Jackson. See Brief in Opposition at 3. In short, Wards Cove requires the plaintiff to prove that the employer practice proffered as reasonable produced by defendant is in fact unreasonable. See id. at 13.
Consequently, KAPL would condense the three step business necessity inquiry into a question of burden of proof, where the plaintiff is required to disprove the evidence offered by the defendant to fulfill the demands of the RFOA provision. See Brief in Opposition at 14; see also On the Legal Front: The Meacham and Gulino Rulings: Remnants of the Wards Cove Era.? Interestingly, this is the argument maintained by the U.S. in its amicus brief-the simpler statutory scheme is desirable, and the ADEA provides "no textual basis" for applying both tests in order. See Brief for U.S. at 26. This process consolidates the various burden-shifts required under Wards Cove and maintains the integrity of Wards Cove, a case that stands for is the total responsibility of a plaintiff for all elements of proof and persuasion. See id.
Do the Equal Employment Opportunity Commission Regulations Merit Deference?
Meacham argues that the agencies that enforce the ADEA have always viewed it as an affirmative defense. Six months after the law's passage, a regulation was promulgated that expressly recognized the RFOA as an affirmative defense. See 29 C.F.R. ? 860.103(e) (1968). The Equal Employment Opportunity Commission ("EEOC") affirmed this construction through regulation and intervention in litigation, for a consistent approach over almost 20 years. See 29 C.F.R. ? 1625.7(e); Brief for Petitioner at 39-40. Congress could have, but tellingly did not, take advantage of future amendments to reverse the agency's position. See Brief for Petitioner at 41-44. In fact, Congress built off of the EEOC's understanding of Section 4(f) in 1990 by overturning a Supreme Court decision that would have changed the EEOC's reading. See Brief for U.S. at 19-20.
KAPL counters that not only are EEOC regulations applicable only to disparate treatment (and thus not disparate impact) cases, those promulgated regarding the ADEA were precisely rejected in City of Jackson. See Brief in Opposition at 2-3; 20-21. The Second Circuit used similar reasoning in finding that the EEOC's regulation, 29 C.F.R. 1625.7(d), mandated a business necessity test, which was specifically judicially overruled in City of Jackson. Meacham II, 461 F.3d at 143. Further, KAPL contends that the EEOC intends to update its regulations to gel with City of Jackson. Id. at 21; see also Tradingmarkets.com, Disparate Impact Under the Age Discrimination in Employment Act, March 29, 2008.
Since 1963, the Age Discrimination in Employment Act ("ADEA") has provided both a means to ferret out insidious age discrimination and an effective defense for the business community to justify its actions through the "reasonable factors other than age" ("RFOA") defense. In this case, the U.S. Supreme Court will determine whether the burden of proving the "reasonableness" of the challenged employer practice falls upon the employer or the employee. In so doing, the Court will consider how to best maximize the ADEA's protective power while recognizing the legitimate need of employers to be able to practice involuntary reductions in force ("IRIF"). The outcome will offer guidance to employers on effective IRIF strategies and to employees on effective trial strategies under the ADEA, while interpreting the weight to be given to the Equal Employment Opportunity Commission's promulgated regulations on the ADEA.
Prepared by: Victoria Bourke
Edited by: Ferve Ozturk
- Equal Employment Opportunity Commission: ADEA Charges, FY 1997-FY 2007
- LII Law About . . . Employment Discrimination
- SIOP's On the Legal Front: The Meacham and Gulino Rulings: Remnants of the Wards Cove Era