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Older Workers Have More Leeway In Alleging Age Bias

April 18, 2005

It now will be easier for employees to sue their employers for age discrimination, as a result of the Supreme Court's March 30, 2005 decision in Smith v. City of Jackson, Mississippi.

Prior to the Smith decision, an employer could not be liable for age discrimination unless the employee could prove that the employer intentionally discriminated against the employee based on his or her age. The Smith decision expanded the scope of the age discrimination law by establishing that employers now can be held liable for age discrimination if their employment practices or policies have an unintentional but disparate adverse impact on employees age 40 or older. Disparate impact theory, well recognized in Title VII cases, had not been universally accepted in cases arising under the Age Discrimination in Employment Act (ADEA).

In Smith, the plaintiffs were police officers, age 40 and older, who challenged a police department plan giving larger salary increases to officers with less than five years of service and smaller salary increases to those with greater seniority. Under the plan, two-thirds of officers under age 40 received pay raises greater than 10%, whereas less than half of officers over age 40 received raises greater than 10%. A group of older police officers sued the city, alleging that the city intentionally discriminated against them and, further, arguing that the plan adversely affected them because of their age. The trial court dismissed both claims. The Fifth Circuit Court of Appeals upheld the dismissal of the disparate impact claim, holding that such claims are not available under the ADEA. The Supreme Court, resolving a split in the federal appellate courts, reversed, holding that the disparate impact claims could be brought under the ADEA.

Despite recognizing the viability of disparate-impact age discrimination claims, the Supreme Court, in Smith, held that the plaintiffs could not prevail, because the plan itself was based on a "reasonable factor other than age." The department implemented its pay plan to reduce attrition by making the salaries for its starting positions more competitive with comparable positions in neighboring departments. Thus, as long as an employer has a reasonable basis, other than age, for its policies, the employer can avoid ADEA liability under the disparate-impact theory.

After Smith, the number of age discrimination lawsuits likely will increase because a plaintiff no longer needs to prove that the employer intended to discriminate against him or her because of his age. Now, even facially neutral policies can be challenged if they disproportionately affect older employees.

The court in Smith found that seniority and position were reasonable bases upon which to differentiate in awarding pay raises. It remains to be seen what other factors courts will deem reasonable for employers to consider when implementing policies that disparately impact employees across age groups. Until lower courts further clarify Smith, employers should carefully review layoff decisions, pay plans and benefits, and other policies to determine whether they could have an unintentional disparate impact. In addition, employers would be wise to carefully document the business reasons for employment decisions that may impact a broad age range of employees.

Smith v. City of Jackson, No. 03-1160 (March 30, 2005) can be found at: http://www.supremecourtus.gov/opinions/04slipopinion.html.


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