Thursday, June 19, 2008

Employer Has Burden of Proof on RFOA

SupctAnd number four of the Supreme Court's worklaw-llapalooza is Meacham v. Knolls Atomic Power Laboratory (06-1505), reported here. Breyer took no part in the decision, which was almost unanimous, with Justice Scalia concurring in the judgment and Justice Thomas joining in part, concurring in part, and dissenting in part.

The primary issue in Meacham was who bears the burden of proof in a disparate impact case under the Age Discrimination in Employment Act (ADEA) on whether the adverse employment action was based on a Reasonable Factor other than Age (RFOA) as laid out in the statute. The Supreme Court held that the RFOA was an affirmative defense and that the employer bears the burden of proof.

The case involved a layoff of thirty-one workers at the Knolls Atomic Power Laboratory. Thirty of those workers were aged 40 or over. In order to select those for layoff, Knolls told its managers to score their subordinates on three scales, “performance,” “flexibility,” and “critical skills.” A statistics expert demonstrated that this distribution was so skewed by age that it was extremely unlikely to have occurred by chance. Additionally, the expert demonstrated that the categories of flexibility and critical skills, over which managers had the most discretion, were most closely connected to the statistical outcome. A jury found for the workers that this layoff procedure disparately impacted them based on their age.

The Court of Appeals had reversed the jury's verdict, finding that the RFOA provision was different from the business necessity defense available under Title VII and further finding that the employee had not carried the burden of persuasion that this method of layoff selection was unreasonable and thus violated the ADEA.

The Supreme Court held first that the RFOA was an affirmative defense because of its placement in the statute. It is placed apart from the prohibitions in a section that contains other doctrines considered defenses, like the bona fide occupational qualification (BFOQ) affirmative defense. Additionally, the Court noted the general principle that where a statute provides an exception, the side that claims the benefit of that exception has the burden to prove it, in finding that the employer would have the burden to prove the affirmative defense. Similar language had also been construed the same way for other parts of the ADEA, as well as for other statutes, like the Equal Pay Act's "reasonable factor other than sex," and the Fair Labor Standards Act. Finally, Congress had amended the ADEA after the Supreme Court found a similar provision not to be an affirmative defense to clarify that all of the items in that section were justifications or excuses--classic affirmative defenses.

The Court further clarified comments made in Smith v. City of Jackson, 544 U. S. 228 (2005), in which the Court had held that disparate impact was a cognizable claim under the ADEA. The Court in City of Jackson  had said that “Wards Cove’s pre-1991 interpretation of Title VII’s identical language remains applicable to the ADEA.” All that meant was that disparate impact was an available theory and that the employee had the burden of identifying which particular practices allegedly cause an observed disparate impact.

The Court also clarified that the RFOA inquiry is not the same as the business necessity defense. The business necessity defense requires the defendant to demonstrate both that the neutral practice or criterion is job related and that it is necessary to the business. That means that if there are alternative practices without the disparate impact, the employer will have a heavy burden to demonstrate why it did not adopt those. Under a reasonableness standard, the employer need only prove that its adoption of this practice was reasonable even if there are other reasonable tests it could have chosen.

To the arguments of Knolls and several amici that putting the burden on the employer would open the floodgates to frivolous cases, the Court stated that the burden on the employee to demonstrate a specific practice that caused the disparate impact was a heavy one. And even if that weren't enough, the parties needed to take their complaint to Congress, which had created this structure.

Scalia concurred but would simply have deferred to the EEOC's regulations on the subject, which would have led to the same result. Thomas dissented from the view that disparate impact was cognizable under the ADEA, but agreed that the RFOA was an affirmative defense (to disparate treatment in his view.).

On remand, the Second Circuit will still have to decide whether the employer proved this was reasonable. Meacham had sought certiorari as to “[w]hether respondents’ practice of conferring broad discretionary authority upon individual managers to decide which employees to lay off during a reduction in force constituted a ‘reasonable factor other than age’ as a matter of law.” The Court denied certiorari on this question and expressed no views on it in the decision.

The Second Circuit will also have to flesh out a bit the difference between this reasonabless test from business necessity. Certainly, reasonableness is less burdensome for the employer. Still, if alternatives that did not have a disparate impact were available, it may be somewhat burdensome to show that it was not unreasonable to pick an alternative without a disparate impact--although if the employer knows about the disparate impact caused by the practice and knows of an alternative without that impact, we might be getting back into the realm of disparate treatment.


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