Under the Age Discrimination in Employment Act (ADEA), employers may not discriminate against employees 40 years of age or older based on age. However, employers may “take any action otherwise prohibited where the differentiation is based on reasonable factors other than age.” In the mid-90s, Knolls Atomic Power Lab instituted an involuntary workforce reduction, determining which employees to dismiss based primarily on three factors — performance, flexibility, and criticality of skills. Even though years of service also factored into the determination, 30 of the 31 employees terminated were over the age of 40. Subsequently, 26 of the dismissed workers filed suit, alleging age discrimination in violation of the ADEA.
At trial, a jury rendered a verdict in favor of the former employees, based on the employer’s failure to monitor the discretionary process in deciding who should be terminated, which resulted in an unlawful disparate impact on older workers. Although the Second Circuit initially affirmed the verdict, its decision was vacated and remanded as a result of the Supreme Court’s decision in Smith v. City of Jackson, 544 U.S. 228 (2005). In that case, the Court held that in disparate impact suits filed under the ADEA, employers must be given the opportunity to show that their actions were reasonable. On remand, the Second Circuit reversed its earlier ruling, concluding that the employees had the burden of demonstrating the employer’s discretionary termination process was unreasonable and that they failed to carry this burden.
The Supreme Court ruled on 6/19/08 that the employer bears the burden of production and the burden of persuasion under the ADEA in establishing that it acted in reliance on “reasonable factors other than age” in a disparate impact case. This is an affirmative defense that, like other affirmative defenses, the employer must prove. Because this is a disparate impact case, involving alleged discrimination that results in a workplace disparity based on statistical evidence, plaintiffs must still point to a specific employment practice that caused the disparity. The case was sent back to the lower courts to determine whether the employer proved its defense.