The disparate impact theory of discrimination, first developed under TITLE VII, is the theory that a facially neutral employment policy, which has a substantially disproportionate adverse impact on a protected group, is unlawful (even absent any discriminatory intent) unless the policy is justified by “business necessity.” In 2005, the U.S. Supreme Court held in Smith v. City of Jackson that the disparate impact theory not only applied under TITLE VII, but also under the Age Discrimination in Employment Act (“ADEA”), which exempts an employer from liability if the employer’s action is based on a “reasonable factor other than age” (“RFOA”). Using the ADEA's language, the Court held that the employment practice challenged in Smith—the City’s decision to give larger pay increases to police officers with less seniority than to those with greater seniority—was justified by an RFOA, i.e., the larger pay increases for junior officers would make the City’s pay scale competitive with other police departments and would improve retention of junior officers. However, left unresolved by Smith was the question of whether the employee/plaintiff or the employer/defendant bears the burden of proof regarding the RFOA exemption. On June 19, 2008, the Court resolved this issue in Meacham v. Knolls Atomic Power Laboratory.
In Meacham, significant budget cuts forced the employer to reduce its workforce. The employer initiated a procedure to determine who would be laid off based on managers’ assessments of employees’ performance, flexibility, and critical skills, in addition to consideration of the employees’ years of service. As a result, the employer laid off 31 employees, 30 of whom were over 40 years old. Some of the employees who were laid off sued the employer for age discrimination under a disparate impact theory.
At the trial court level, the jury found in favor of the Meacham plaintiffs. The Second Circuit vacated the judgment of the trial court and remanded the case with instructions to enter judgment for the employer, holding it is the plaintiffs’ burden to prove that the employer’s justification is unreasonable. The Supreme Court granted certiorari on the issue of whether the employee or the employer bears the burden of proof under the RFOA provision of the ADEA.
The Court concluded the employer bears both the burden of production of evidence and the burden of persuasion, holding Congress designed the RFOA exception to operate as an affirmative defense, not an additional element necessary for plaintiffs to establish a case of age discrimination.
The Meacham decision eases the burden on plaintiffs who bring disparate impact claims under the ADEA by forcing employers to prove their employment decisions were ultimately motivated by reasonable factors other than age. The Court acknowledges its decision will make it more difficult and costly for employers to defend themselves against disparate impact suits. However, the Court held such concerns need to be directed at Congress, because the Court’s duty is to read the RFOA provision the way Congress wrote it.