ADEA Recognizes Disparate Impact Claim by Subgroup of Employees in the Protected Class: Third Circuit | Practical Law

ADEA Recognizes Disparate Impact Claim by Subgroup of Employees in the Protected Class: Third Circuit | Practical Law

In Karlo v. Pittsburgh Glass Works, the US Court of Appeals for the Third Circuit recognized the disparate impact claims of a subgroup of protected employees under the Age Discrimination in Employment Act (ADEA) and concluded that the ADEA prohibits discrimination based on age, not 40-and-older status.

ADEA Recognizes Disparate Impact Claim by Subgroup of Employees in the Protected Class: Third Circuit

by Practical Law Labor & Employment
Law stated as of 18 Jan 2017 • USA (National/Federal)
In Karlo v. Pittsburgh Glass Works, the US Court of Appeals for the Third Circuit recognized the disparate impact claims of a subgroup of protected employees under the Age Discrimination in Employment Act (ADEA) and concluded that the ADEA prohibits discrimination based on age, not 40-and-older status.
On January 10, 2017, in Karlo v. Pittsburgh Glass Works, the US Court of Appeals for the Third Circuit recognized the disparate impact claims of a subgroup of protected employees under the ADEA. A subgroup of employees aged 50 and older alleged that they were treated unfavorably compared to younger employees in the protected group. The Third Circuit concluded that this subgroup's claims were cognizable because ADEA prohibits discrimination based on age, not 40-and-older status. This holding conflicted with decisions by the Second, Sixth, and Eighth Circuits (, at *2 (3d Cir. Jan. 10, 2017).)

Background

Automotive glass manufacturer Pittsburgh Glass Works (PGW) engaged in several reductions in force (RIFs) including one, in March 2009, in which it terminated the employment of 100 salaried workers. PGW gave discretion to the unit directors to make the termination decisions, and the directors were given no training or guidelines. Several terminated employees, all of whom were over fifty years of age, filed EEOC discrimination charges. After their charges were dismissed, they filed a lawsuit alleging disparate treatment, disparate impact, and retaliation.
The district court conditionally certified a collective action of employees terminated by RIF who were 50 or older, but eventually granted summary judgment to PGW on the grounds that:
  • The plaintiffs' 50-and-older disparate impact claim was not cognizable under the ADEA.
  • The plaintiffs lacked evidence to support disparate impact following the exclusion of expert statistics-related testimony.
The plaintiffs appealed.

Outcome

The Third Circuit reversed the district court's grant of summary judgment, holding that subgroup disparate impact claims are cognizable under the ADEA and, more specifically, that disparate impact claims can proceed if a facially neutral employment practice causes significantly disproportionate adverse impact based on age.
The Third Circuit noted that:
  • The ADEA's discrimination protections are limited to those individuals who are at least 40 years old (29 U.S.C. § 631(a)).
  • Disparate impact claims do not require proof of discriminatory intent, but policies that are "fair in form but discriminatory in operation" (Griggs v. Duke Power Co., 401 U.S. 424 (1971)).
  • Once a prima facie ADEA disparate impact case is established, an employer can argue that its practice was based on reasonable factors other than age (RFOA).
  • The plain text of the ADEA's disparate impact provision supports subgroup claims, making it unlawful "to adversely affect [an employee's] status ... because of such individual's age" (29 U.S.C. § 623(a)(2)).
  • In 1996, the US Supreme Court held, in a disparate treatment case, that the ADEA prohibits discrimination based on age, not on 40-and-over status, noting that:
    • the ADEA prohibits discrimination based on an individual's age, not based on the individuals being aged 40 or older; and
    • limiting a prima facie case to replacement by an employee younger than 40 lacks logical connection to the ADEA's plain text.
    (O'Connor v. Consolidated Coin Caterers Corp., 517 U.S. 308, 312 (1996).)
  • O'Connor featured a disparate treatment claim, but the ADEA's disparate impact provision addresses the same issue and uses the same phrase as the disparate treatment provision, "because of such individual's age" (29 U.S.C. § 623(a)(2)).
  • In Connecticut v. Teal, a Title VII disparate impact case, the Supreme Court confirmed that the plain text of Title VII was designed to protect the rights of individual employees, not the rights of an entire class (457 U.S. 440 (1982)).
  • Teal prohibited using bottom-line statistics to justify ignoring a disproportionate impact against certain people for which the statute's plain text would allow action.
  • Its decision creates a split with the Second, Sixth, and Eighth Circuits, which have not recognized the validity of claims from subgroups (Lowe v. Commack Union Free Sch. Dist., 886 F.2d 1364 (2d Cir. 1989); Smith v. Tenn. Valley Auth., 924 F.2d 1059, (6th Cir. 1991); E.E.O.C. v. McDonnell Douglas Corp., 191 F.3d 948 (8th Cir. 1999)).
The Third Circuit found that:
  • The US Supreme Court's reasoning leads to the conclusion that subgroups are cognizable.
  • O'Connor answered the question raised in Karlo, that a facially-neutral policy significantly disfavoring employees over 50 supports a disparate impact claim under § 623(a)(2).
  • As the Supreme Court concluded regarding Title VII in Teal, the ADEA:
    • protects employees who are members of a protected class, not the class itself; and
    • "does not permit the victim of a facially discriminatory policy to be told that he has not been wronged because other persons" aged 40 or older were preferred (457 U.S. at 455).
  • Refusing to recognize subgroups would:
    • allow those individuals who most need ADEA protection to be victimized by a highly discriminatory policy without redress; and
    • render the ADEA useless to the oldest members of the protected class.

Practical Implications

In Karlo, the Third Circuit held that the ADEA recognizes disparate impact claims brought by subgroups of employees within the protected class. The key arguments were that:
  • The statute's plain text states that it protects individuals who face discrimination based on their age, not just those who face discrimination based on being 40 years or older.
  • The ADEA protects the rights of individuals, not the rights of the class in which those individuals are members. Discriminatory conduct against an individual does not avoid liability just because the class as a whole is treated fairly overall.
This decision created a split with the Second, Sixth, and Eighth Circuits, but it remains to be seen how other circuits will address the situation of disparate impact claims by subgroups.
Employers within the Third Circuit should recognize that treating those over 40 the same as those under 40 is not enough to ensure the avoidance of liability. They must also treat older employees protected by the ADEA with the same fairness as those younger protected employees.