AGE DISCRIMINATION

ADEA defense burden rests solely on employer

According to a recent U.S. Supreme Court decision, an employer defending a disparate-impact claim filed by an employee under the Age Discrimination in Employment Act (ADEA) bears both the obligation to produce evidence and the burden to prove the affirmative defense of "reasonable factors other than age" (RFOA). Let's take a closer look at the case.

Facts

Knolls Atomic Power Laboratory, which is operated by KAPL, Inc., is a private contractor hired by the federal government to maintain nuclear-powered warships. Knolls, which is funded by both the Navy and the U.S. Department of Energy, has recently been primarily involved in designing prototype naval nuclear reactors and training Navy personnel how to operate them. With the decline of the Cold War, the nation's need for Knolls' services decreased, and it was ordered in 1996 to cut back its workforce. Approximately 100 employees accepted the company's buyout offer at that time, but almost 30 jobs still needed to be cut.

Knolls implemented a process for the mandated layoffs in which managers were asked to score subordinate employees according to their performance, flexibility, and critical skills. The "per-formance" portion of the assessment was based on the employee's last two performance evaluations. The "flexibility" portion asked managers to determine whether an employee's skills could easily be applied or transferred to other current or future work assignments that differed from his current tasks. The "critical skills" portion of the process looked at whether the employee's skills were still a "key technical resource" for the naval reactors program.

The scores were totaled and taken into account along with the employee's number of years of service to the company, and the final score was used in determining which employees to lay off. Ultimately, Knolls laid off 31 employees, 30 of whom were at least 40 years old. Twenty-eight of the laid-off employees subsequently sued Knolls, alleging disparate impact (discriminatory result) under the ADEA.

The employees' arguments rested on expert testimony about the statistical improbability that such age-related results would happen by chance and that the "flexibility" and "criticality" portions of the evaluations were the most discretionary scores used and had the strongest statistical ties to the outcome. At trial, the jury found in favor of the employees. On appeal, the U.S. Court of Appeals for the Second Circuit reversed the trial court's decision and ruled in favor of Knolls, holding that the employees hadn't carried their burden of persuasion for refuting the employer's RFOA.

The employees appealed to the Supreme Court, pointing out the conflicting decisions among the federal circuit courts of appeals in placing the burden of persuasion for RFOA on the employee or the employer. The Supreme Court agreed to hear the case.

Supreme Court's decision

The Court began its review by noting that Section 623(f) of the ADEA creates exemptions to practices by employers that the Act would otherwise prohibit. Those exemptions, or affirmative defenses, include "bona fide occupational qualifications" (BFOQ) and RFOA. The Court reversed the Second Circuit's decision, finding that both the burden of proving the RFOA defense, as well as the obligation to produce evidence sufficient to support it, should have been placed on Knolls. The Court found that the appeals court erred by requiring the employees to refute the defense instead of making the employer support it.

The Court cited numerous previous cases reiterating the idea that the burden of proving a justification or exemption should generally be placed on the party who claims the benefit of the exemption, which would be the employer in these types of cases. The Court also pointed out that it has held the BFOQ exemption to be an affirmative defense to claims of disparate treatment, and because the RFOA is the BFOQ's "nearest neighbor" within the ADEA, it would be "impossible" to hold that it would work any differently.

The Court dismissed Knolls' argument that the RFOA provision is a mere elaboration on liability under the statute because it bars accountability for actions taken for reasons other than age. In general, according to the Court, most disparate-impact cases involve liability for actions based on factors other than age. That's the very idea of disparate-impact liability, as opposed to disparate-treatment liability, which arises from decisions actually based on age. The RFOA exemption therefore doesn't negate the premise of disparate-impact liability; rather, it's a justification for some types of disparate action.

The Court stated that an employee alleging disparate-impact cannot prevail merely by pointing out a generalized policy that might have such an impact. Instead, he must "isolate and identify the specific employment practices" that are the basis of the claim. That requirement will protect employers from a flood of litigation arising from "innocent causes that may lead to statistical imbalances."

At the heart of the Court's analysis was the gap between the burdens of production and persuasion for RFOA evidence. According to the Court, both of those burdens ultimately lie with the employer after an employee has established a disparate- impact claim. The more clearly reasonable the RFOA truly are, the easier it will be for the employer to produce evidence of them and persuade a court of their reasonableness. Meacham v. Knolls Atomic Power Lab., 2008 U.S. LEXIS 5029.

Bottom line

The text and structure of the ADEA itself provides for an affirmative RFOA defense. The RFOA exemption can allow you to take action that would otherwise be prohibited under the Act. However, when defending claims of disparate impact under the ADEA, you'll have the obligation of producing evidence of the affirmative defense as well as the burden of proving your case by showing the reasonableness of your RFOA in regard to the questioned action.