Supreme Court Allows Age Discrimination Claims Based on Disparate Impact

In a decision of great significance, the U.S. Supreme Court has ruled that an individual protected by the Age Discrimination in Employment Act (ADEA) can sue an employer if a policy, practice, or other employment action has had a disparate impact because of that individual's age.

In a split decision, the Supreme Court determined that the ADEA, which protects individuals age 40 or over from employment discrimination, authorizes recovery of damages resulting from the adverse impact of an employer's actions on an age-protected individual or group of individuals.

The case decided by the Court involved a change in the pay plan for the police officers and police dispatchers of the City of Jackson, Mississippi. The City attempted to bring the starting salaries for such positions up to the regional average by raising the pay of existing officers according to their years of service. Officers with less than 5 years of service were given proportionately larger raises than officers with more seniority. Those with more seniority also tended to be age 40 or over.

The plaintiffs, 30 police officers over age 40, sued the city under the ADEA claiming they were adversely affected by the plan because of their age. They were unsuccessful in their claims at the federal district and federal appeals courts. In affirming the lower court's grant of summary judgment for the city, the U.S. Court of Appeals for the Fifth Circuit ruled that disparate impact claims are categorically unavailable under the ADEA, even though the same facts brought under Title VII of the Civil Rights Act of 1964 would have entitled them to relief.

Affirming the result of the Fifth Circuit's reasoning, the U.S. Supreme Court found the older workers did not have a valid claim under a theory of disparate impact. However, in a significant development in the law of discrimination based on age, the Court found that the language of the ADEA and Title VII is identical in its broad prohibition on discriminatory actions based on a protected characteristic. As such, the ADEA supports a disparate impact claim that is comparable to a disparate impact claim under the legal standards under Title VII.

The Court explained there are important textual differences between the ADEA and Title VII: the ADEA permits any "otherwise prohibited" action "where the differentiation is based on reasonable factors other than age." The result is that the ADEA's protection against the adverse effects of an employer's action because of age is narrower in scope. If reasonable factors other than age account for the disparate impact, the action will not be found unlawful. This limitation is grounded in the fact that age may often be relevant to an individual's capacity to engage in certain types of employment.

In this case, the U.S. Supreme Court held that the older workers had not established a valid claim for age discrimination based on the adverse effects of the city's pay raise plan. The older workers did not identify any specific test, requirement, or practice within the plan that adversely impacted the older workers, beyond pointing out that the plan was less generous to them. The Court also held that the city's stated reasons for the pay plan, including the need to bring the junior officers' salaries into line with comparable positions in the labor market, were reasonable. As such, the Court found no basis to support the older workers' claims of disparate impact resulting from the city's actions. [Smith v City of Jackson, Mississippi, (Petition for certiorari Fifth Circuit) Docket No. 03-1160, March 30, 2005.]

Employers should, among other things, review their current compensation, benefit, and other employee policies to evaluate their impact on older workers and address any unintended consequences in light of this decision which authorizes courts to look beyond "disparate treatment"—where the adverse treatment based on age is clearly deliberate—to "disparate impact"—where the adverse impact on older workers is disproportionate even if not deliberate.