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Supreme Court Rules on Age Discrimination, Unionization Cases

In the discrimination case, the court said a company must show that criteria for layoffs didn’t involve the employees’ age. In the other, the court prohibited states from restricting an employer’s communication with workers regarding unionization.

June 19, 2008
Related Topics: Downsizing, Discrimination and EEOC Compliance, Workforce Planning, Latest News
Employees who sue a company asserting a layoff disproportionately affects older workers may find it easier to prove their case following a Supreme Court decision handed down Thursday, June 19.

In another case, the court prohibited states from restricting an employer’s communication with workers regarding unionization.

The two Supreme Court rulings were among five issued simultaneously.

In the age discrimination decision, the court held, 7-1, that a company must show that the criteria it used when reducing its workforce did not involve the age of employees.

The case centered on a federal research center, Knolls Atomic Power Lab, that implemented layoffs in 1996. The organization told supervisors to consider three factors when determining which workers to cut: performance, flexibility and critical skills.

Of the 31 employees who lost their jobs, 30 were older than 40 years of age. More than two dozen of them filed a lawsuit under the Age Discrimination in Employment Act. After the case bounced around the judicial system, the 2nd Circuit Court of Appeals ruled that the workers failed to demonstrate that the ranking system was unfair.

But the Supreme Court opinion places the burden of proof on the employer to show that its layoff decision was based on factors other than age.

In writing for the majority, Justice David Souter said that traditionally the party claiming an exemption—in this example, the company is trying to avoid running afoul of the age discrimination statute—must prove its case.

“That longstanding convention is part of the backdrop against which the Congress writes laws, and we respect it unless we have compelling reasons to think that Congress meant to put the burden of persuasion on the other side,” Souter wrote.

Employers will no longer be able simply to list the factors in a layoff decision. They have to convince a jury that age was not the motivation.

Companies will have to marshal reams of facts when they defend themselves, according to Regan Dahle, an attorney with Butzel Long in Ann Arbor, Michigan.

“It’s important to have strong backup documentation and record keeping to demonstrate why you made the decision you made and that it was not related to age,” Dahle says.

Putting the burden on employers makes sense because they are the ones who know the details of their approach, according to Tom Osbourne, a senior attorney at AARP Litigation. An employee only knows the result—job loss.

If the Supreme Court had not ruled as it did, “it would have been nearly impossible for an employee to prove a disparate impact case,” Osbourne says.

What’s left unsettled is the definition of a “reasonable factor,” Osbourne says. “The court didn’t address that in this case.”

In the unionization decision, the court held, 7-2, that a California law that prohibits employers who receive more than $10,000 in state funds annually from using them “to assist, promote, or deter union organizing,” violates the National Labor Relations Act.

Under the California measure, a company could use its own financing to combat unionization, but it had to document that it kept state money separate.

The court ruled that the federal statute pre-empts state efforts to regulate communication, reversing a decision by the 9th Circuit Court of Appeals that allowed California to attach special rules to its funds.

“Congress’ express protection of free debate forcefully buttresses the pre-emption analysis in this case,” wrote Justice John Paul Stevens for the majority.

The court found that the costs of keeping track of the state money and segregating it would be a burden on companies and subject them to litigation risk.

In his dissent, Justice Stephen Breyer argued that it was reasonable for California to put restrictions on how its money is used.

“California’s statute … does not seek to compel labor-related activity,” Breyer wrote. “Nor does it seek to forbid labor-related activity. It simply says to those employers, do not do so on our dime. To refuse to pay for an activity is not the same as to compel others to engage in that activity.”

Justice Ruth Bader Ginsburg joined Breyer.

If the California law had stood, it would have forced companies to reveal financial information if unions challenged them on the use of state funds, says John DiNome, a partner at Reed Smith in Philadelphia.

“This would be a real lever for unions to put pressure on an employer who was complying with the law,” DiNome says.

He’s not surprised at the margin of the decision. “In this arena, both liberal and conservative justices over the years have agreed that there should be pre-emption for the National Labor Relations Act,” he says.

A call to the AFL-CIO for comment was not returned.

—Mark Schoeff Jr.

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