When an employer engages in business practices that have a disproportionately harmful effect on older workers, and when equally effective but less discriminatory alternatives were available, an employer may nevertheless avoid liability for age discrimination if its practices were based on a "reasonable factor other than age" (RFOA). But if an employee brings action under the Age Discrimination in Employment Act, and the evidence of reasonableness presented by the parties is in equipoise "“ that is, it ultimately comes down to a tie "“ is the employer still liable for age discrimination, or has the plaintiff failed to prove her case?

This question depends on who bears the burden of proof under the RFOA provision: Does it simply operate as an affirmative defense, for which the employer bears the burden of persuasion, or does it instead define an additional element necessary to establish a prima facie case of age discrimination, for which the burden of persuasion rests with the plaintiff? On April 23, the Supreme Court will consider this issue in Meacham v. Knolls Atomic Power Laboratory, and its answer to this seemingly technical question could have significant ramifications any time a business seeks to reorganize or streamline its workforce to adapt to changing market conditions.

Background

The Age Discrimination in Employment Act

The Age Discrimination in Employment Act (ADEA) prohibits employers from taking any action which "in any way . . . would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual's age." Congress based the ADEA's substantive prohibitions on an earlier version of Title VII of the Civil Rights Act of 1964, which prohibits discrimination on the basis of race, sex, religion, or national origin. Recognizing, however, that age is different from these other characteristics because age is often closely correlated with other factors that have a direct impact on an employee's job performance, Congress also provided that "[i]t shall not be unlawful for an employer . . . to take any action otherwise prohibited . . . where the differentiation is based on a reasonable factor other than age."

Three Terms ago, in Smith v. City of Jackson (2005), the Court found that the ADEA gives rise to liability not just for intentional discrimination (known as "disparate treatment" cases), but also for "disparate impact" claims. In a disparate impact case, the plaintiff points to a policy that has a statistically significant adverse impact on older employees, shows that the employer had equally effective and less discriminatory alternatives available, and argues that the failure to adopt one of those less discriminatory alternatives constitutes age discrimination.

Disparate impact claims are traditionally governed by the three-step analysis laid out in Wards Cove Packing Co. v. Antonio (1989). In the first step, the plaintiff must identify a specific employment practice and show that this practice has a statistically significant disparate impact upon older workers. The burden then shifts in the second step to the employer, who must produce a legitimate business justification for the practice. Importantly, this burden is only one of production; the burden of persuasion still remains with the plaintiff, who in the third stage of the Wards Cove analysis may meet this burden by showing either that the given justification does not support the policy or that the employer could have adopted an equally effective alternative that would have been less discriminatory.

In Smith, the Court emphasized the importance of the RFOA provision in protecting employers from liability for many routine employment practices. Thus, for example, employers need not choose the employment practice with the least disparate impact of all possible alternatives; rather, they must merely choose one which is "not unreasonable." But because the Court found that the practice before it in Smith was "unquestionably reasonable," it had no occasion to address how the RFOA provision interacts with the Wards Cove framework or to decide which party bears the burden of persuasion on the RFOA issue.

Proceedings Below

This case arose after budget cuts forced respondent KAPL, Inc., which operates the Knolls Atomic Power Laboratory under contract with the Department of Energy, to reduce the size of its approximately 2000-person workforce by 108 employees. Because of changing research priorities, KAPL identified several areas that would be critical to the laboratory's future work, as well as a number of other areas in which it had "excess skills." KAPL created a "voluntary separation plan" which offered early retirement incentives to workers in the latter category who had at least twenty years' experience, but even after offering these incentives, KAPL found that it still needed to reduce its workforce by approximately thirty-five more employees.

As a result, KAPL was forced to implement an "involuntary reduction in force" (IRIF), using procedures that were based in part on practices used by companies such as IBM, GE, Pepsi, and Ford. First, KAPL developed a budget for each unit within the lab and identified those units that were over-budget. Within these units, it placed all employees on a "matrix" and asked managers to rate their employees based on four factors: performance, "flexibility," "criticality," and years or service. Performance scores were based taken from recent performance reviews, and years of service scores were determined by a simple formula. But for flexibility and criticality scores, managers were given only limited guidance, and they were ultimately left with substantial discretion to make highly subjective evaluations. Once these matrices were completed, the lowest-ranked employees were tentatively designated for termination. KAPL then performed an "impact analysis" to make sure that the results did not discriminate by race or by sex, but no comparable analysis was performed with regard to age.KAPL ultimately laid off thirty-one workers, thirty of whom were over forty years of age and thus deemed "older workers" protected under the ADEA; the court of appeals would later refer to this result as "startlingly skewed." Twenty-eight of these employees filed suit in federal court in the Northern District of New York alleging that the IRIF violated the ADEA as well as New York's Human Rights Law, which mirrors the ADEA. A jury later found, after being instructed to apply the traditional Wards Cove framework, that the IRIF had a disparate impact that discriminated on the basis of age, and it awarded plaintiffs more than $6 million in damages. The district court ultimately upheld this judgment against KAPL's motion for judgment notwithstanding the verdict or for a new trial, ruling that the jury could have found that KAPL discriminated against older workers by undertaking the involuntary reduction in force without considering other alternatives, such as a hiring freeze or an expansion of the voluntary separation program to make more workers eligible for early retirement.

The Second Circuit initially affirmed, although on somewhat different grounds. The court held that the evidence was sufficient to show that KAPL violated the ADEA through its "unaudited and heavy reliance on subjective and assessments of "criticality' and "flexibility.'" This decision was issued shortly before the Supreme Court granted certiorari in Smith, and the Supreme Court subsequently granted, vacated, and remanded the Second Circuit's decision in this case for reconsideration in light of Smith.

On remand, the Second Circuit voted 2-1 to reverse its earlier decision and vacate the jury verdict. The court read Smith as modifying the traditional Wards Cove test for ADEA cases by replacing the "business necessity" test, which a plaintiff could meet by showing the existence of an equally effective but less discriminatory alternative practice, with the more stringent "reasonableness" test. Reviewing the evidence of reasonableness, the court appeared to find this a close question, but ultimately held that the plaintiff bore the burden of persuasion "“ as is true throughout the Wards Cove analysis "“ and that this burden had not been met. In dissent, Judge Pooler argued that the RFOA provision is an affirmative defense, for which the burden of persuasion instead falls on the employer, and that KAPL did not meet that burden.

The employees petitioned for certiorari on two questions: (1) who bears the burden of persuasion for showing a "reasonable factor other than age"; and (2) whether the practice at issue in this case, whereby employers "confer[] broad discretionary authority upon individual managers to decide which employees to lay off," should be deemed reasonable as a matter of law. The Court called for the views of the Solicitor General, who recommended that cert. be granted on the first question but denied on the second. The Court followed SG's recommendation, granting certiorari limited to the question of which party bears the burden of persuasion for proving whether an employment practice that has a disparate impact on older workers was nonetheless based on reasonable factors other than age.

Merits Briefing

Petitioners' Opening Brief

Petitioners begin their opening brief by focusing on the text of the ADEA and related statutes. Petitioners argue that the RFOA provision's reference to action "otherwise prohibited" establishes it as an exception to a general prohibition, and they explain that this sort of exception has long been construed as an affirmative defense for which the party claiming its benefits bears the full burden of proof. Petitioners argue that this rule has been applied with special vigor for cases brought under the Fair Labor Standards Act, through which the ADEA is enforced. Petitioners also emphasize close ties between the text of the ADEA and that of other employment discrimination statutes, for which many parallel exceptions have previously been construed as affirmative defenses.

The petitioners also argue that the burden of persuasion belongs on the employer because much of the information relevant to the question of whether an employment practice was reasonable "“ such as the purposes of the practice and the methods used to pursue those objectives "“ rests exclusively in the employer's knowledge. Employees, by contrast, would face extraordinary difficulties in assembling the information required to make an affirmative showing of unreasonableness, and imposing such an obstacle would upset the "balance of interests" struck by the statute.

Finally, to the extent that any ambiguity remains as to which party should bear the burden of persuasion, petitioners argue that the Court should defer to the consistent interpretation of the agencies charged with enforcing the statute "“ originally the Department of Labor, now the EEOC "“ that the RFOA provision operates as an affirmative defense and the burden falls upon the employer. Borrowing from an argument advanced by Justice Scalia in his Smith concurrence, petitioners pose this as a classic case for agency deference: Congress authorized the agencies to issue "such rules and regulations as it may consider necessary and appropriate" to carry out the statute, and the agencies have done so pursuant to notice and comment. Petitioners argue that the case for deference is especially strong here because Congress opted to leave the agencies' interpretation undisturbed when amending a closely related provision of the ADEA in 1990; indeed, these regulations have remained on the books in one form or another for nearly four decades.

Petitioners then address the difficult question of how the RFOA provision interacts with the three-stage Wards Cove framework that the Court previously established to govern the common text which the ADEA shares with Title VII. In their view, the reasonableness test does not "substitute" for the business necessity test in the third step of the Wards Cove analysis; rather, once the plaintiff has navigated the Wards Cove framework and shown a disparate impact created by an employment practice that is not necessary to its business, the employer can then invoke the RFOA provision and show that its practices were nonetheless reasonable. But petitioners also argue in the alternative that if the Court were to integrate the reasonableness test into the Wards Cove framework and establish a more "consolidated" burden-shifting scheme, it would still be most appropriate to place the burden of persuasion for reasonableness on the employer.

Government Brief

The United States filed an amicus curiae brief in support of the employees. Like petitioners, the government begins by focusing on the text and structure of the Act. The government explains that the ADEA's substantive prohibitions are laid out in Sections 4(a)-(c) and 4(e), whereas Section 4(f) "“ which contains the RFOA provision "“ creates "exceptions" to those general rules. The government points to the "otherwise prohibited" language as also supporting this view, and notes that its interpretation "squares with the background rule that "the burden of proving justification or exemption under a special exemption to the prohibitions of a statute generally rests on one who claims its benefits.'" The government also argues that the RFOA should be construed consistently with its "neighboring exceptions" and with a similarly worded exception in the Equal Pay Act, which have each been interpreted as affirmative defenses. And the government maintains that the Court should defer to the longstanding DOL and EEOC regulations assigning the burden of proving reasonableness to the employer.

The government's position diverges from that of the petitioners, however, on the issue how of the RFOA provision interacts with the traditional Wards Cove analysis. The government criticizes petitioner's four-stage framework "“ the three stages of Wards Cove supplemented with a separate affirmative defense "“ on the ground that "[t]he ADEA provides no textual basis for asking both whether a challenged employment practice is supported by a business justification and whether it is based on reasonable factors other than age." Instead, the government suggests, the reasonableness test replaces the business necessity test in the Wards Cove framework, but with the burden of persuasion falling on the employer.

Respondents' Brief

Respondents begin by focusing on the ADEA's prohibition on discrimination "because of . . . age" and argue that a plaintiff has not established this part of a prima facie case until she has shown that the challenged business practice was not based on a reasonable factor other than age. Respondents suggest that this extra showing is required under the ADEA, but not under Title VII, because age, unlike race, "is often relevant to certain employment-related categories," and thus "a statistically significant adverse impact on older workers cannot establish that a particular employee has suffered disadvantage "because of' age." Put differently, "because the probative value of the [Wards Cove] prima facie case in the age context is weaker, the remaining steps in the analysis must do more work than in a Title VII case." Consequently, respondents argue, it should be the ADEA plaintiff "“ and not the employer "“ who bears the burden of proving whether or not the employment practice was based on reasonable factors other than age.

The respondents then criticize the petitioners' proposed four-step analysis as "unworkably complex and functionally at odds with RFOA." Respondents contend that asking whether an employment practice was "reasonable" after already asking whether it was a "business necessity" would be redundant and counterintuitive, and in any case "it is unclear how it could function in a set of jury instructions." Moreover, respondents argue, Wards Cove characterized the third step "“ in which a plaintiff proves that the challenged practice was not a business necessity because there were equally effective and less discriminatory alternatives "“ as showing "pretext"; but if a plaintiff has shown that a challenged practice is a pretext for intentional age discrimination, it would make no sense to then ask whether the practice was based on reasonable factors other than age.

Respondents thus agree with the government that the reasonableness test replaces Wards Cove's business necessity test in ADEA disparate impact cases, but reject the government's position that the employer, rather than the employee, bears the burden. Respondents argue that the government's approach, like petitioners', fails to satisfy the statutory requirement that the plaintiff prove discrimination "because of" age. They also suggest that the government's approach could result in employers facing a greater burden in ADEA cases than in Title VII cases, even though all parties agree that it should be harder for plaintiffs to win an age discrimination case than it would be a sex or race discrimination case. Therefore, respondents conclude, the only proper reading of the ADEA is to place the burden of proof under the RFOA provision on the plaintiff.

Respondents also dispute the petitioners' interpretation of the ADEA's text and structure. They point to Public Employees Retirement System v. Betts (1989), in which the Court concluded that one of the ADEA's Section 4(f)(2) exceptions does not operate as an affirmative defense, to show that the ADEA's structure alone is not sufficient to establish the RFOA provision as an affirmative defense. (Betts's interpretation of Section 4(f)(2) was later overridden by statute, but Congress left the RFOA provision "“ which had significant textual differences from the provision at issue in Betts "“ unchanged.) Respondents also argue that the "otherwise prohibited" language cannot bear the weight that petitioners assign to it; to the contrary, Congress could have written the RFOA provision as simply applying to action "prohibited" elsewhere in the statute, so the use of the phrase "otherwise prohibited" must mean "which would have been prohibited if not for this RFOA provision." If this is the case, then a plaintiff has not shown prohibited action until she has affirmatively disproved the existence of a reasonable factor other than age.

Respondents then counter petitioners' policy argument with one of their own. According to respondents, the burden of persuasion must fall on "the party who asserts the more uncommon occurrence," and because many of the policies that have a disparate impact on older workers will turn out to be reasonable, the burden should be on the plaintiff to demonstrate that this is one of the uncommon cases in which the challenged practice is unreasonable. Respondents also argue that even if the Court were to focus on petitioners' "access to information" argument, this would mean only that employers should bear a burden of production, not the burden of persuasion.

Respondents further argue that the EEOC's interpretation is not entitled to deference because the text of the relevant EEOC regulation does not actually seem to apply to disparate impact cases. And even if it did, respondents maintain, the Court should give little or no deference to a regulation which "does not implicate the agency's interest in administering its own proceedings," but rather "purports to allocate the RFOA burden of proof in judicial proceedings."

Petitioners' Reply Brief

Petitioners devote the start of their reply brief to the respondents' "because of age" argument. They argue that this language refers only to "causation" "“ that is, the factor which distinguishes those who face an adverse impact from those who do not is their age, a requirement that is always met by the first step of the Wards Cove analysis. Petitioners claim that respondents' argument would treat disparate impact liability as simply a sophisticated way of showing intentional discrimination through circumstantial evidence, but the Court has repeatedly explained that disparate impact liability is very different from disparate treatment claims. Having disputed respondents' main textual hook, petitioners return to the text of the statute and reiterate their arguments that the text and structure of the statute overwhelmingly point in petitioners' favor.

Petitioners then address the respondents' policy-based objections. In response to the concern that their proposed four-stage analysis would be unworkably complex, petitioners argue that the Court has approved similar burden-shifting schemes in the past, such as for Title VII mixed-motive cases; tacking on an affirmative defense to the Wards Cove framework "“ a framework that has proven workable in the past "“ would not add significant additional complexity. They likewise dispute respondents' claim that unreasonable discrimination is the more "uncommon occurrence," arguing that the proper question is not simply whether these employment policies are likely to be based on reasonable factors other than age, but rather whether such policies are likely to be reasonable in cases in which less discriminatory alternatives were available. Finally, petitioners urge the Court not to address the question of whether the policies at issue in this case were reasonable as a matter of law, suggesting instead that the Court simply decide the legal standard and then remand for further proceedings.

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