The landscape of age discrimination lawsuits against employers has just changed – and not for the better.  In a recent case that will almost certainly increase the number of age discrimination claims against employers, the U.S. Supreme Court ruled that the Age Discrimination in Employment Act (ADEA) allows current or former employees to sue for age discrimination even if no evidence of intentional discrimination exists. 

In 1967 Congress enacted the federal Age Discrimination in Employment Act (ADEA) to protect older workers  - defined as those age 40 and older - from age discrimination in employment.  Since that time, the law has evolved significantly through  judicial interpretation. The most recent change to the law occurred on March 30, 2005 when the United States Supreme Court issued its decision in the case of Smith v. City of Jackson, Mississippi and announced that age discrimination claims may now be brought on the basis of disparate impact to older employees.

What does this mean?.  Generally there are two types of discrimination claims– disparate treatment and disparate impact.  Disparate treatment occurs when an employer intentionally acts in a different way towards an employee because of a protected category – in this case age.  On the other hand, disparate impact occurs when an employer has a facially neutral policy which, when implemented, has an unequal impact on a protected class – again, in this case age. 

In the City of Jackson case, the city had adopted a pay plan to improve retention and bring starting salaries of police and public safety officers up to the regional average. Under the policy, officers who had less than five years of tenure would receive proportionately greater raises when compared to their former pay than those with more seniority. Most officers over the age of 40 had more than five years of service.  A group of older officers sued the city, claiming that the salary increases they received violated the ADEA because the increases were less generous to officers over the age of 40 than to younger officers.  This claim was not that the City intentionally discriminated against them, but rather that the implementation of a facially neutral policy had an unequal impact on the older employees. 

While ultimately finding that there was no disparate impact in the officers’ case, the Court in the City of Jackson case, for the first time recognized that age discrimination claims need not be based on disparate treatment, but could also be based on a disparate impact which a policy had on older employees.  Although the Court determined that ADEA permits disparate-impact claims, the Court also decided that the ADEA permits employers to take an action otherwise prohibited when the “differentiation” is based on reasonable factors other than age

Distilled to its basics, the Court held:  (1) Employees over the age of 40 did not have to prove that their employer intentionally discriminated against them because of their age to show a violation of the ADEA, rather it was enough to demonstrate that their employer has a policy or a plan that, although neutral on its face, operated to have a higher adverse impact on workers over the age of 40 and (2) An employer may escape liability under a disparate impact claim only if they can provide that the policy which created the disparate impact is rationally related to some legitimate business objective, 

The practical implication of this decision is that it expands both the rights of older workers under the ADEA and the potential liabilities of employers. Employers must now understand they face liability for practices that adversely affect older workers even if the practices were not intended to do so.  The Court’s ruling will undoubtedly trigger evaluation by employers of employment plans and programs such as reductions in force plans, benefit plans, retirement policies or salary practices that may, unintentionally have a negative and disproportionate impact on employees over the age of 40.

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Stephen M. Moloney and Rebecca J. Smith are partners with Gilbert, Kelley, Crowley & Jennett LLP