Today, the Supreme Court issued the long-awaited opinion in Smith v. City of Jackson.

Resolving a circuit split, the Court held that under some circumstances an employer may be liable for age discrimination without proof of intent, under the disparate impact theory of discrimination.

(I took the opinion to lunch with me, devouring it along with my hot and sour soup, egg roll, and almond chicken. It’s kind of a ritual with me, going out to lunch alone when the Supreme Court decides an important employment case — just me, a highlighter, a red pen, and a photocopy of the opinion.)

I’ve now read most of it (except some footnotes and the tail end of the lengthy dissent) and in this post will give you links to a couple of decent media stories, my own brief summary of the decision, and a few of my initial thoughts.

The Court stated the issue succinctly:

[This] suit raises the question whether the “disparate-impact” theory of recovery announced in Griggs v. Duke Power Co., 401 U. S. 424 (1971), for cases brought under Title VII of the Civil Rights Act of 1964, is cognizable under the ADEA.

(For background on the Griggs case, and my reactionary critique of it, see this post, one of my all-time greatest hits: “Disparate impact law, Part I – where it all began”)

Here’s the AP story (via Forbes): “Court Issues Age Discrimination Ruling”

Here’s the Christian Science Monitor story: “Older workers get a new tool to fight age discrimination: A Supreme Court ruling Wednesday opens the door to lawsuits regarding age bias that may be unintentional” by Warren Richey

Here’s the full text of the case: Smith v. City of Jackson

Case Summary

Stevens wrote the majority opinion, joined in full by Souter, Ginsburg, and Breyer. Scalia provided the key fifth vote, differing slightly on the rationale.

O’Connor dissented, joined by Kennedy and Thomas. Rehnquist did not participate, evidently due to his illness.

Despite the different views on the issue presented — the availability of the disparate impact theory — all eight justices ruling on the case agreed on the outcome. They affirmed the Fifth Circuit’s ruling, which had affirmed summary judgment for the employer.

The majority reached this result because of its conclusion there was insufficient evidence for a disparate impact case to go forward; the dissent because of their conclusion that disparate impact is not a viable theory under the ADEA.

Facts

The case was brought by older police officers against the city employing them. They challenged a revised pay plan, “which was motivated, at least in part, by the City’s desire to bring the starting salaries of police officers up to the regional average.” Each wage level “was based on a survey of comparable communities.”

Statistics established:

First, almost two-thirds (66.2%) of the officers under 40 received raises of more than 10% while less than half (45.3%) of those over 40 did.

Second, the average percentage increase for the entire class of officers with less than five years of tenure was somewhat higher than the percentage for those with more seniority. Because older officers tended to occupy more senior positions, on average they received smaller increases when measured as a percentage of their salary.

Measured in dollars, rather than percentage, the older employees’ increases were actually higher.

So who is to say that percentage rather than absolute dollars is the proper measure for determining discrimination? (Just wondering — maybe there’s some legal authority out there — I’ve never looked at the issue)

Majority opinion

Availability of disparate impact theory

Although the majority applied more of a textual analysis than an analysis of legislative intent, the body of the opinion starts with a reference to the Secretary of Labor’s 1965 report, which led to the 1967 enactment of the Age Discrimination in Employment Act (ADEA).

The point from this report upon which the majority relies is that “discriminatory effects resulted from ‘institutional arrangements that indirectly restrict the employment of older workers.’”

Curiously, earlier in this paragraph of the opinion, the majority cites the Secretary of Labor’s finding that “there was little discrimination arising from dislike or intolerance of older people,” although age discrimination did result from “certain age limits” (presumably a reference to the then-common practice of mandatory retirement age).

Curious that such a broad prohibition of age discrimination was enacted after the Secretary of Labor found little evidence of a general discriminatory attitude towards older people.

This led to generations of age discrimination litigation, coming in predictable waves with each major recession, as it created an unchallenged, though apparently incorrect, assumption that age discrimination was a societal problem — else why would Congress legislate against it?

In any event, the majority uses the Secretary of Labor report to lead into the specific discussion of disparate impact under the ADEA.

The majority correctly notes the identity between some of the key operative language of the ADEA and that of Title VII. It reasonably concludes from this that therefore Griggs, which interpreted the identical operative language in Title VII, is “a precedent of compelling importance.”

The subsequent discussion of Griggs blithely repeats the failed textual analysis in that case — the failure to give the ordinary meaning, indeed any meaning, to the words “because of” [the person's age, race, etc.].

One could not find any clearer legal requirement of causation. Disparate impact analysis ignores this requirement by allowing a mere statistical correlation to substitute for proof of causation.

The majority moves on to discuss the “reasonable factors other than age” provision. This provision states it shall not be unlawful for an employer to take any otherwise prohibited action if “the differentiation is based on reasonable factors other than age discrimination.” There is no parallel provision in Title VII.

The majority essentially reasons that this provision would be redundant unless the ADEA permitted disparate impact claims, since with intentional discrimination (disparate treatment) claims, a factor other than age would already be an implied defense, as it is in Title VII (factor other than sex, race, etc.)

In concluding this portion of the opinion, the majority also notes that “both the Department of Labor . . . and the EEOC . . . have consistently interpreted the ADEA to authorize relief on a disparate impact theory.”

Proof of disparate impact

In this portion of the opinion, the majority places two substantial hurdles before age discrimination plaintiffs seeking to use the disparate impact theory.

First, the majority notes a key difference between the ADEA and Title VII: the ADEA was unaffected by the Civil Rights Act of 1991 (CRA ‘91).

The significance of this is that CRA ‘91 includes provisions specifically intended to correct a Supreme Court interpretation of Title VII that made disparate impact cases much harder to prove (WARDS COVE PACKING CO. v. ATONIO, 490 U.S. 642 (1989)). Since the ADEA was not included in CRA ‘91, the majority says the interpretation in this case is still applicable to disparate impact claims under the ADEA.

That interpretation requires the identification of “the specific employment practices that are allegedly responsible for any observed statistical disparities.”

The majority concludes the plaintiffs failed to satisfy this requirement because “they have not identified any specific test, requirement, or practice within the pay plan that has an adverse impact on older workers.”

Funny, three paragraphs later, the majority says “the disparate impact is attributable to the City’s decision to give raises based on seniority and position.”

If that’s not a specific practice, what is?

The second major hurdle the majority says the plaintiffs failed to leap concerns the employer’s defense of its pay decisions.

In Title VII cases, the employer must achieve the near-impossible feat of proving a “business necessity” for its practice, proof that includes evidence there are not other ways to achieve the same objectives that do not result in a disparate impact.

In contrast, building on the distinction between the statutes noted above — that only the ADEA contains a “reasonable factor other than . . . ” provision, the majority holds that the City’s pay scale changes were not unreasonable, even if there may have been other ways to achieve the same goals with less disparate impact.

Based on the plaintiffs’ failure to leap these two hurdles, the majority agrees with the dissent on the result — that there is no submissible case and summary judgment for the employer was properly granted.

Scalia concurrence

This opinion is interesting merely because it exists. Scalia joins all except Part III of the majority opinion (which deals with the availability of the disparate impact theory).

He even agrees with Part III, but writes separately to state that he would proceed from the reasoning set forth therein not to an independent interpretation of the ADEA, but to “deferral to the reasonable views of the . . . EEOC.”

Hair-splitting? Yes, but in support of what he apparently sees as an important principle — that when Congress expressly authorizes an administrative agency to make rules, and when it does so following proper procedures, including public notice and comments, the rule should be examined under a less exacting standard.

The dissent

This lengthy opinion was notable to me because of how close it comes to saying that Griggs was wrong.

The dissent even cites the “Griggs’ Folly” law journal article I mentioned in my critique of Griggs.

The dissent relies heavily on both textual interpretation and legislative history. Looking at the text, it makes a point that would be equally applicable to Title VII regarding the key operative provision:

That provision plainly requires discriminatory intent, for to take an action against an individual “because of such individual’s age” is to do so “by reason of” or “on account of” her age. See Webster’s Third New International Dictionary 194 (1961).

(Did I say that?)

The participation of Thomas shows him again splitting off from his usual buddy, Scalia. I speculate it is for a predictable — and excellent — reason. Thomas is known as an enemy of affirmative action.

I know, this was not an affirmative action case on its face. But the fact is, the threat of disparate impact litigation is a huge incentive to employers to adopt de facto quota systems, hiring and promoting not by merit, but to ensure the numbers look good and there is no appearance of disparate impact.

So George (you’re probably thinking), you’ve done it again — made me read through a big longwinded post before telling me what you really think.

OK, you’re right, I did do that, and now I’ll tell you a couple of things I think and a few predictions.

I predict that the media, including legal publications, will portray this case as a huge victory for age discrimination plaintiffs (and their contingent fee lawyers).

(See Christian Science Monitor: “Older workers get a new tool to fight age discrimination”)

I think such portrayals overstate the purely legal significance of this case, for several reasons.

First, I would have been very surprised if the Court had not held that disparate impact claims can be brought under the ADEA.

Second, in at least three key circuits (Second, Eighth, and Ninth) such claims were already expressly permitted, whereas only five circuits had expressly prohibited them. So in vast and populous areas of the nation, including New York and California, this decision hasn’t given anybody any “new tools.”

Third, the big news of this decision is that a unanimous Court outright rejected this disparate impact claim, placing what are likely to be insurmountable hurdles in the path of most disparate impact age discrimination plaintiffs.

Those hurdles are: 1) the requirement to identify extremely precisely the standard or practice causing the statistically significant disparate impact; and 2) the lower threshold of defense, requiring only proof that the employer’s standard or practice is a “reasonable factor other than age,” as opposed to the much more stringent “business necessity” defense under Title VII.

Sadly, I predict that at least for a time, the upshot will be a flood of age discrimination class actions.

While perhaps quite weak on the ultimate merits, many of such cases, including some high profile ones against major companies, will be settled for big bucks. In particular, defendants will seek to avoid the cost of discovery directed towards establishing a statistically significant disparate impact and pinpointing its cause, as well as the obvious exposure to class action liability.

And all because the Court in Griggs failed to give “because of” its ordinary meaning, as today’s three dissenters would have!

Related Posts

Told you so! Update on Wednesday’s Supreme Court age discrimination decision

Age Discrimination and Disparate Impact: How Will the Supreme Court Weigh In?

Some experts agreeing with my assessment of the General Dynamics age case

Supreme Court to decide age discrimination disparate impact issue

Coming soon: is requiring laborers to have high school diplomas race discrimination? (George’s upcoming posts on statistics & disparate impact)


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