Recent U.S. Supreme Court ruling permits employees to pursue disparate impact claims under ADEA

The U.S. Supreme Court recently had bad news for employers and good new for employees. In an age discrimination case with possibly far reaching consequences, the High Court held that the disparate impact theory of recovery is available to employees under the Age Discrimination in Employment Act ("ADEA") . Smith v. City of Jackson, Mississippi, 2005 U.S. LEXIS 2931, *1 (2005).

The ruling means that employees may now pursue age discrimination claims without having to show their employer "intended" to discriminate.

The Court, however, did provide a valid defense for employers. It ruled that the ADEA permits an employer to take “otherwise prohibited” action where the differentiation is based on “reasonable factors other than age” ("RFOA").

Here are the facts. In Smith, the City of Jackson revised its employee pay plan and granted raises to all police officers and police dispatchers in an attempt to bring their starting salaries up to the regional average. Officers with less than five years service received proportionately greater raises than those with more seniority, and most officers over 40 had more than five years of service. A group of older officers filed suit under the ADEA, claiming, among other things, they were adversely affected by the plan because of their age.

The Court agreed that the City of Jackson was entitled to have the case dismissed because it articulated several RFOAs as the basis for its actions.

The Court ruled against the employees because they failed to demonstrate that the policies disproportionately harmed them. The Court did not provide examples of valid RFOAs. Yet, it did note that the City of Jackson's reliance on "seniority and rank" was unquestionably reasonable given the City's goal of raising employees' salaries to match those in surrounding communities. Finally, the Court held that the RFOA standard does not require a determination of whether there are other ways for the employer to achieve its goal without resulting in a disparate impact on a protected class.

Practical application: When taking action that may adversely affect persons in the protected age category, employers must be able to articulate reasonable factors for their actions other than age.