Contributed by Allison Sues, February 23, 2017
On February 17, 2017, the United States District Court for the Eastern District of California held that job applicants could proceed with their disparate impact claim brought under the Age Discrimination in Employment Act (ADEA).
In Rabin v. Pricewaterhouse Coopers LLP, plaintiffs filed a putative class action alleging that the global accounting and auditing firm used hiring practices and policies for entry-level positions that gave preference to younger applicants and resulted in the disproportionate employment of younger employees. The complaint alleged that these hiring practices include recruiting through universities and maintaining a mandatory retirement policy that requires partners of the firm to retire by age 60. The complaint also alleged that the firm’s hiring practices focused on attracting younger workers. The complaint provided examples such as the firm’s employment opportunity promotion materials, which featured only pictures of younger employees, stated that the majority of their workforce is made up of millennials, and described perks geared towards younger employees, such as student loan repayment assistance. The complaint alleges that the result of these hiring practices and policies is a disproportionately young workforce, with the average age of firm employees being 27 years old.
While it is established law that the ADEA allows employees to bring both disparate treatment and disparate impact claims, the firm argued in its motion for judgment on the pleadings that the ADEA does not allow job applicants – as opposed to employees – to bring such claims. In its motion, the firm relied on the Eleventh Circuit’s 2016 decision in Villareal v. R.J. Reynolds Tabacco Co., which analyzed the language of section 4(a)(2) of the ADEA in determining that the statute does not authorize disparate impact claims by non-employees.
The Eastern District of California in Rabin declined to follow this eleventh circuit precedent and instead held that job applicants may bring disparate impact claims under the ADEA. In a thorough opinion, the court reasoned that the ADEA’s statutory language and legislative history, as well as the Supreme Court precedent, supported the holding that job applicants may bring disparate impact claims. The court also deferred to the Equal Employment Opportunity Commission (EEOC)’s current age discrimination regulation, which states that “[a]ny employment practice that adversely affects individuals within the protected age group on the basis of older age is discriminatory unless the practice is justified by a reasonable factor other than age.” 29 C.F.R. § 1625.7(c) (emphasis added).
Employers should be careful that their hiring practices and policies do not tend to favor younger workers. The following is a non-exhaustive list of practices that should be re-evaluated to ensure that job postings and hiring practices do not run afoul of the ADEA:
- Using such phrases as “Recent Graduates Wanted” or “Looking for High School Graduates” in job postings
- Advertising a youthful workforce in recruiting materials
- Exclusively recruiting through university programs
- Making any reference to “millennials” in any recruiting or job posting documents
- Promoting employee perks geared only to attract younger employees, such as student loan repayment assistance or daycare options for young children
Contributed by Suzanne Newcomb
The Older Workers Benefits Protection Act (OWBPA) amended the Age Discrimination in Employment Act (ADEA) back in 1990 to specifically permit bona fide seniority systems and voluntary early retirement incentive plans. Along with these allowances, the OWBPA mandated strict requirements for ADEA waivers and disclosures for group termination. The provisions are very technical and have tripped up many unsuspecting employers.
To be effective a waiver must be “knowing and voluntary.” That sounds straightforward, but the statute specifically spells out what “knowing and voluntary” means in this context. If the situation involves an isolated termination – a single employee terminated for cause or let go as a result of a restructuring that impacts his position alone – an ADEA waiver is not “knowing and voluntary unless at a minimum,” the waiver:
- is in writing and written in a manner the individual can understand;
- specifically refers to ADEA rights or claims;
- does not waive rights or claims arising after the waiver is executed;
- provides consideration over and above anything to which the individual is entitled already;
- advises the individual in writing to consult with an attorney prior to executing the agreement (advising the individual has the right to consult with an attorney may not be sufficient);
- allows the individual at least 21 days (45 in the case of group terminations addressed below) to consider the agreement before signing; and
- allows the individual at least 7 days to revoke following execution of the agreement.
The statute tacks on additional requirements for waivers “requested in connection with an exit incentive or other employment termination program offered to a group or class of employees.” Legislators complicated matters by failing to define the key terms in this phrase. Relevant regulations and considerable case law interpret them broadly to encompass any situation in which two or more employees are terminated at or near the same time under similar circumstances or are offered incentives which stem from a standardized plan.
Whenever a release is offered in conjunction with a reduction in force involving more than one employee or other group terminations, the employer must follow each of the requirements set forth above and must also disclose:
- the “decisional unit” or class, unit, or group of individuals covered by such program – in other words, the pool of employees from which the employer chose those who would be involuntarily terminated or offered an incentive to leave;
- the eligibility factors used to determine who was selected for termination or offered an exit incentive;
- any applicable time limits; and
- job titles and ages of all eligible or selected individuals and all individuals in the same job unit who are not eligible or selected.
If you are implementing a RIF or thinking about offering severance to a departing employee in hope of avoiding potential litigation, you should consult qualified legal counsel first. It is important to make sure the ADEA waiver contained in your release is enforceable.
Contributed by Allison Chaplick
If you feel like a tribute in the arena every time the Equal Employment Opportunity Commission changes the game’s rules on you, you are not alone. The best way to survive is to read and then add this blog to your quiver of arrows in understanding how the EEOC’s final rule amending the Age Discrimination in Employment Act applies to your decision making.
In February, I let you know that the EEOC issued a draft final rule to amend certain ADEA regulations, including that the EEOC’s new regulations recognized the reasonable factors other than age (RFOA) affirmative defense instead of the business necessity affirmative defense.
Well, guess what? The EEOC revised its final rule to clarify that the proposed final rule was never intended to place “significant burdens by requiring employers to meet all factors relevant to the RFOA determination.” Read the new rule here. Instead, the RFOA factors “are not required elements or duties, but considerations that are manifestly relevant to determining whether an employer demonstrates the RFOA defense.”
The final rule also clarifies that the “reasonable factor other than age” is a non-age factor that is objectively reasonable when viewed from the position of a prudent employer mindful of its responsibilities under the ADEA under like circumstances. If this sounds like the application of torts law to you, you get a silver parachute from your sponsors! The final rule refers to tort law for guidance to determine what constitutes a “reasonable” factor other than age—what the employer knew about the harm and what it did to correct it. Be aware that this “reasonable” standard test reflects a higher standard of proof, and thus the EEOC has effectively rejected the “rational-basis” test.
But, there is good news: under the final rule, an employer does not need to perform a validity study to establish a RFOA defense to an employment test (e.g., a physical fitness test). However, the final rule does emphasize the importance of defining a test’s employment criterion carefully and educating managers and supervisors on how to apply it fairly.
So, put the odds in your favor and good luck!
Contributed by Allison Chaplick
The Equal Employment Opportunity Commission just issued its January 2012 Status Report on Retrospective Regulatory Review. One of the items targeted for final review by the Office of Management and Budget (OMB) is the EEOC’s draft final rule to amend certain ADEA regulations.
The relevant regulations currently interpret the ADEA as prohibiting an employment practice that has a disparate impact on employees in the protected age group unless the practice is justified by a business necessity. However, the EEOC proposes to revise paragraph 1625.7(d) to state that an employment practice that has a disparate impact on individuals within the protected age group is discriminatory unless the practice is justified by a “reasonable factor other than age” (RFOA). Revisions to paragraph 1625.7(e) may also include that the employer has the burden of showing that a reasonable factor other than age exists factually. The OMB anticipates completing its review of this draft final rule by March of 2012.
So, why is the EEOC doing this? The answer is simple: to comply with the U.S. Supreme Court’s ruling in Smith v. City of Jackson, 544 U.S. 228 (2005) and to conform to Meacham v. Knoll Atomic Laboratory, 128 S.Ct. 2395 (2008). Smith arose out of the city of Jackson’s decision to grant raises to police officers and dispatchers who had less than five years of tenure in an effort to make these positions’ starting salaries comparable with the regional average. Accordingly, those police officers with less than five years of seniority received proportionately greater raises than those police officers with more seniority, many of whom were over the age of 40.
The Smith court agreed with the EEOC’s regulations that disparate impact claims were cognizable under the ADEA, but held that the proper defense for such a claim was not “business necessity” but RFOA. The Smith court remained silent as to whether the employee or employer had the burden of proof on the RFOA defense, but took up this issue in Meacham.
In Meacham, the employer was forced to make a reduction in force. To determine which employees should be laid off, the company instructed its managers to score their subordinates on “performance,” “flexibility,” and “critical skills” along with points for years of service. Following this review, thirty of the thirty-one employees laid off were over the age of 40. The Meacham court held that an employer defending a disparate impact claim under the ADEA bears the burden of production and persuasion for the RFOA affirmative defense.
Contributed by Allison Chaplick
On November 29, 2011, the Tenth Circuit issued a decision that impacts the application of the Lilly Ledbetter Fair Pay Act to the statutory limitations period for age discrimination claims. In Almond, et al., v. Unified School District No. 501 (No. 10-3315), the court was asked to review a district court’s dismissal of two employees’ untimely claims that their demotions and subsequent salary reductions were motivated by age discrimination. The employees filed charges of discrimination in 2006, even though they had been told in 2003 and 2004, respectively, that they were being demoted for budgetary reasons with a salary reduction to become effective in 2006. So, the court was faced with interpreting when parties have to file “discrimination in compensation” claims pursuant to the Ledbetter Act.
Immediately, the court distinguished this case from “unequal pay for equal work” claims, like the one brought in the seminal Ledbetter case; what the plaintiffs were claiming in this case was that the school district’s decision to demote them was the “unlawful practice” and a new cause of action arose for limitations purposes every time they received a paycheck based upon the reduced salary. According to the plaintiffs, the Ledbetter Act expanded the terms “unlawful practice” as used in §623(d)(3) of the Age Descrimintation in Employment Act to include situations where an employer adopts a “discriminatory compensation decision or other practice” that relates to compensation. The court did not agree with the plaintiffs’ expansive interpretation of the Ledbetter Act, and based its rejection on its own interpretation of the Act, the Act’s legislative history, other federal circuit courts’ decisions interpreting the terms “other practice” and “discrimination in compensation,” and even Justice Ginsburg’s dissenting opinion in the Ledbetter case. The court thus focused not on which claims accrue under the Act, but on when those claims accrue. According to the court:
- “compensation in discrimination” claims accrue for limitation purposes “when a discrimination in compensation decision or other practice” is “adopted” or “when” someone becomes “subject to” or “affected by” its application
- “other practices” discrimination claims accrue not only when the pay setting decision takes place but also when the discriminatory employment practices that result in compensation discrimination are “adopted”
Based on its exhaustive analysis, the court held that §623(d)(3) governs the accrual of discrimination in compensation (i.e., unequal pay for equal work) claims in violation of §623(a)(1), and not the accrual of other cases alleging discriminatory hiring, firing, demotions, or transfers, and affirmed the district court’s dismissal.