On June 19, 2008, the United States Supreme Court held in a 7-1 ruling that an employer bears the burden of production and persuasion in a disparate impact claim under the Age Discrimination in Employment Act (“ADEA”) when raising “reasonable factors other than age” as an affirmative defense. Meacham v. Knolls Atomic Power Lab., Inc., No. 06-1505 (June 19, 2008).
Knolls Atomic Power Laboratories (“Knolls”), which contracted to maintain nuclear-powered ships for the Navy, was ordered to reduce its work force by approximately thirty employees. Knolls selected 31 employees based on several factors, including performance record, seniority, “flexibility” and “critical skills”. Of the thirty-one employees laid off, thirty were at least forty years old. Twenty-eight sued, alleging disparate treatment and disparate impact claims under the ADEA and state law. After a series of appeals, the Court of Appeals for the Second Circuit ruled in favor of the employer, Knolls.
At trial, the plaintiffs’ expert concluded that the two subjective factors, flexibility and critical skills, were the most influential in the RIF decision (i.e., those who scored lowest in those areas were most likely to be selected for layoff). Knolls argued, however, that these factors were “reasonable factors other than age (“RFOA”), and thus a permissible basis for the decision. The Supreme Court granted certiorari to resolve the issue of who bears the burden of persuasion when RFOA is raised in a disparate impact case.
Supreme Court Decision
In its ruling, the Supreme Court reaffirmed that the RFOA clause of the ADEA is in fact an affirmative defense, and as such, the burden of proving it falls on the party seeking its benefit – the employer. Even though the burden of persuasion is always ultimately on the employee, this ruling will make it somewhat more difficult for employers to rely on the RFOA defense.
The Court did, however, offer some further explanation of the defense that is likely to benefit employers. The RFOA defense, according to the Court, does not turn on whether there was some factor besides age at work. Instead, it merely asks whether the factors relied on by the employer were reasonable. The Court further noted a reasonable factor may “lean more heavily on older workers.” In this respect, the test is somewhat less burdensome than the bona fide occupational qualification (“BFOQ”) defense that is also available to employers. What’s more, the Court explained that the plaintiff is obligated to identify a specific test, practice or requirement that had an adverse impact on older workers. It is not enough to allege disparate impact or merely point to a generalized policy that leads to disparate impact.
In light of this decision, employers will need to be even more mindful of identifying clearly articulated selection criteria for reductions in force, and they must be prepared to explain why such criteria (a) were used, and (b) are reasonable in supporting the employer’s business.