Disparate impact claims allege that facially neutral employment practices have a statistically discriminatory result when applied to a group of employees.  In its 2005 City of Jackson v. Smith decision, the U.S. Supreme Court first recognized the use of disparate impact claims in age discrimination cases.  This decision had major implications for employers, because of the use of statistical disparate impact claims to challenge layoffs that disproportionately affect older workers.  Last week, the Court revisited City of Jackson, and clarified the employer’s burden of proof once the plaintiff has demonstrated a statistical disparity.

In Meacham v. Knolls Atomic Power Laboratory, the employer laid off 31 employees, 30 of whom were 40 or older.  In making the layoff decisions, it used a rating system, comparing employees’ flexibility, performance, and critical skills.  These scores were totaled, along with points for years of service, to determine which employees were to be let go.  The laid off employees sued, claiming disparate impact based upon the large statistical disparity between the overall age of the workforce and the employees chosen for layoff.  The appellate court overturned a jury verdict for the plaintiffs, holding that under City of Jackson, the plaintiffs had not met their burden of demonstrating that the business reasons offered by the company for the layoff selections were unreasonable.

In a 7-1 decision, the Supreme Court reversed the appellate court’s decision regarding who bears the burden of proof in disparate impact cases under ADEA.  The Court concluded that the reasonable factor other than age defense under ADEA is an affirmative defense.  This means that the employer rather than the plaintiff retains the burden of demonstrating that legitimate factors other than age resulted in the statistical disparity among those employees chosen for layoff.

This decision means that terminated employees will have an easier time prevailing on statistical age discrimination claims.  Juries will be instructed that the employer bears the burden of explaining the statistical disparity, and must offer more detailed proof beyond a surface explanation of the selection criteria.  This decision may make plaintiff’s lawyers more willing to accept disparate impact age discrimination cases.  Employers planning layoffs should consult with legal counsel to make certain that the selection criteria and documentation backing it up are prepared to withstand legal challenge.