At issue is the theory of disparate impact, which unintentionally results from a workplace policy, like compensation, that is ostensibly neutral but is in fact based on something that correlates with another factor, like age. Companies already can be held liable for disparate impact in instances where sex, religion or race are involved. With the court’s ruling, companies can now be held liable for such instances in federal court under the Age Discrimination in Employment Act.
Consultants and employment law-yers reacted calmly to the ruling, in part because it merely brings the ADEA closer to another federal law, Title VII of the Civil Rights Act, and to statutes already on the books in a number of states. Nevertheless, companies need to ensure they aren’t vulnerable to a valid claim.
"Employers will have to consider the factors when making changes in policy, being careful in their underlying reasoning" for them, says Aliza Herzberg, a labor and employment attorney with Morea & Schwartz in New York. Those factors are central to the safe harbor the Supreme Court granted companies, known as "reasonable factors other than age."
That’s what the city of Jackson asserted when a group of its police officers sued, claiming that a new plan that granted raises to officers in lower ranks unintentionally discriminated against older officers. The "reasonable factor," the city countered, was that it was merely attempting to compete for recruits with police departments in neighboring areas. The justices accepted that argument and dismissed the officers’ case, but they settled the larger question of disparate impact in the ADEA.
Attorneys and consultants don’t expect to see a flood of age-discrimination lawsuits, but the ruling does have practical ramifications for businesses. Companies should review their employment practices to identify any potential discrimination, says Neil Grossman, a principal with Mercer Human Resource Consulting in New York.
Before a layoff, for instance, a company should do a mock workforce reduction, which could expose an underlying discriminatory flaw. "I would typically advise a client to identify employees who are staying, and those who are going," Grossman says. "Before implementation, analyze the results for disparate impact: What percentage of your workforce are over 40 before you went through this mock exercise, and compare it to what percentage that would be over 40 after you do that."
A significant decrease in the percentage of workers over age 40 could be reason enough to examine the policy more thoroughly. And a plaintiff could prevail in a disparate impact suit if he shows that the company failed to adopt an alternative practice that could have had lesser harm.