US Supreme Court holds that employers must prove RFOA exception in disparate impact cases

On June 19, 2008, in a 7-1 decision, the U.S. Supreme Court held that an employer defending a disparate impact claim under the Age Discrimination in Employment Act of 1967 (ADEA), 29 U.S.C. §621 et seq., bears the burden of persuasion for the “reasonable factors other than age” (RFOA) affirmative defense under §623(f)(1).

The ADEA has been interpreted as prohibiting employment practices that have a disparate impact on older workers. It includes an exception, however, for “otherwise prohibited” practices that are “based on reasonable factors other than age.” The circuits were divided on whether the employer has the burden of persuasion, as well as that of production, with respect to this exception.

In Meacham v. Knolls Atomic Power Lab., U.S., No. 06-1505 (June 19, 2008), a group of 28 employees over the age of 40 whose jobs were eliminated in 1996 by defense contractor KAPL, Inc., a subsidiary of Lockheed Martin Corp., petitioned the Supreme Court to review the Second Circuit’s 2-1 decision in August 2006, overturning a $5 million jury verdict in their favor. The layoffs were based on managers’ assessments of employees’ “performance,” “flexibility” and “critical skills.” Of the 31 employees laid off, 30 were at least 40 years of age – the threshold for protection under the ADEA. Initially, the Second Circuit upheld the verdict for the employees finding that the employer’s reliance on subjective assessments in deciding which workers to let go was not a “business necessity,” and that a suitable alternative was available which would have had less of an adverse impact on older workers. The Second Circuit later reversed its decision after the Supreme Court directed it to reconsider the case in light of its March 2005 opinion in Smith v. Jackson, Miss., 544 U.S. 228 (2005), which held that disparate impact claims may be brought under the ADEA, but that the test to be applied is whether the employment practice constitutes a reasonable means to the employer’s legitimate goals – not whether it is a business necessity. In reversing its opinion, the Second Circuit held that the employees had not carried their burden of persuading the jury that the non-age factors used by the employer were unreasonable. The Supreme Court again vacated and remanded.

Writing for the Court, Justice Souter explained that the ADEA’s text and structure, as well as other federal statutes, make it “impossible to…imagine” that the RFOA exception creates anything other than an affirmative defense, for which the burden of persuasion falls on the employer, not the employee. Looking at the structure of the ADEA, the Court noted that a nearby clause providing a defense “where age is a bona fide occupational qualification” had already been construed as an affirmative defense. Both clauses “exempt otherwise illegal conduct by reference to a further item of proof, thereby creating a defense for which the burden of persuasion falls on the ‘one who claims its benefits.’” Looking to the text, the Court noted that both of these statutory defenses apply to what is “otherwise prohibited” by the ADEA. The Court reasoned that such language should be read as a “clear signal from Congress” that the exception is an affirmative defense. Lastly, the Court explained that Congress had intended the ADEA to be “enforced in accordance with” the Fair Labor Standards Act, under which exceptions are affirmative defenses. The Court remanded to allow the Second Circuit to decide “[w]hether the outcome should be any different when the burden is properly placed on the employer.”

The decision answers a narrow, but important, question in age-discrimination suits and, more importantly, underscores the importance of having employers carefully plan for and implement reduction-in-force programs. While some worry that the decision will tie the hands of employers responding to market changes and will make it more difficult for employers to defend ADEA claims, the Court seemed to have anticipated these concerns. In its decision, the Court predicted that, “it will be mainly in cases where the reasonableness of the non-age factor is obscure for some reason, that the employer will have more evidence to reveal and more convincing to do in going from production to persuasion.” However, the Court noted that, while the employer now carries the burden of proof on the reasonableness question, plaintiffs bringing ADEA disparate-impact claims “still must carry the burden of identifying the specific employment practices that are allegedly responsible for any observed statistical disparities,” which is “not…trivial.”

US Supreme Court holds that retaliation is a form of discrimination under the ADEA and Section 1981

In decisions that rely heavily on past precedents, the United States Supreme Court recently issued opinions in Gomez-Perez v. Potter, No. 06-1321 (May 27, 2008) and CBOCS West, Inc. v. Humphries, No. 06-1431 (May 27, 2008), holding that the anti-discrimination provisions of § 633a(a) of the Age Discrimination in Employment Act of 1967 (ADEA) and 42 U.S.C. § 1981 also prohibit retaliation.

In CBOCS West, Inc. v. Humphries, the Court held that 42 U.S.C. § 1981 protects against both direct racial discrimination and retaliation based on complaints of discrimination. Hedrick Humphries, a black male who worked as an assistant manager for Cracker Barrel, alleged that his employer terminated his employment because of his race and in retaliation for complaints of racial discrimin-ation that he had made to other managers on behalf of another black employee. He brought claims of discrimination under both Title VII of the Civil Rights Act of 1964 and § 1981, a civil rights statute that prohibits discrimination regarding the right “to make and enforce contracts.” The trial court granted summary adjudication on the retaliation claim on grounds that § 1981 did not support a separate retaliation claim. The Seventh Circuit reversed, finding that the prohibition on discriminatory “termination of contracts” encompasses a retaliatory discharge of an employee. The Supreme Court, in a 7-2 decision, affirmed the Seventh Circuit, holding that an employee may bring a claim for retaliation under § 1981. The Court concluded that the legislature intended to prohibit employers from retaliating against individuals who attempt to defend the rights of those protected by the statute itself.

The decision has significant implications for employers for a number of reasons. First, the statute of limitations under § 1981 is four years, in comparison with 300 days under Title VII. Second, Section 1981 does not contain any limitation on either pain and suffering or punitive damages available to a successful plaintiff. Finally, unlike Title VII, § 1981 allows employees to file an action in court immediately without first having to exhaust administrative remedies.

In a companion opinion issued the same day, the Court in Gomez-Perez v. Potter, held that § 633a(a) of the ADEA, the provision that prohibits federal employers from discrimin-ating against employees based on age, also prohibits federal employers from retaliating against employees for complaints about age discrimination. In Gomez-Perez, a United States Postal Service worker claimed she was retaliated against after she filed an age discrimination complaint with the EEOC. The Postal Service moved for summary adjudication of the retaliation claim, arguing that the anti-discrimination provision of the ADEA does not address retaliation by federal-sector employers. The trial court denied the Postal Service’s motion but the First Circuit reversed, thereby creating a split among the federal circuit courts.

The Supreme Court reversed the circuit court’s opinion, holding that “the statutory phrase ‘discrimination based on age’ includes retaliation based on the filing of an age discrimination complaint.” In finding that §633a(a) prohibits retaliation, the Court equalized anti-retaliation protections that are available to federal employees with those found in 29 U.S.C. §623a, the ADEA provision that explicitly protects private sector employees from retaliation as well as other forms of age discrimination.

Genetic Information Nondiscrimination Act signed into law

On May 21, 2008, Congress signed into law the Genetic Information Nondiscrimination Act (GINA). The law is designed to prevent discrimination based on a person’s genetic information in connection with health insurance coverage and employment. The legislation had been debated in Congress for 13 years. As with other forms of discrimination, employers are prohibited from discharging, refusing to hire, or otherwise discriminating against an employee in the terms and conditions of employment based upon the employee’s genetic information. It also applies to employment agencies and labor unions. Employers are prohibited from collecting genetic information and may only conduct workplace genetic testing in discrete circumstances, such as monitoring the effects of hazardous workplace exposures. Employers also are required to maintain the confidentiality of any genetic information they possess and to disclose it only to the employee or under certain other controlled circumstances.

The law also amends the Employee Retirement Income Security Act (ERISA) and the Public Health Service Act to prohibit discrimination by group health plans and health insurance issuers against individuals based on genetic information, including restricting enrollment or adjusting premiums on the basis of genetic information or genetic services, and prohibiting insurers from requiring genetic testing.

Employers not required to engage in interactive process when no reasonable accommodation is possible

The Seventh Circuit recently held in Dargis v. Sheahan that the employer did not discriminate against a correctional officer by failing to reinstate him to his position after a stroke left him unable to rotate through the required tasks of his position. The court reasoned that “no reasonable accommodation was possible.”

Liutauras Dargis was employed by the Cook County (Ill.) Sheriff’s Office of Corrections for 18 years. He had a stroke that significantly incapacitated him and left him unable to perform routine physical activities. He claimed that he communicated his disability to the sheriff’s office, and that this required the employer to engage him in the interactive process of exploring possible avenues of reasonable accommodation. The sheriff’s office did not reinstate him and reduced him to “zero pay status.” Dargis sued, alleging violations of the Americans with Disabilities Act, the Due Process clauses of the U.S. and Illinois constitutions, 42 U.S.C. §§1983 and 1985, and state law.

With respect to his disability claim, the court found that the sheriff’s office made the required showing that no “reasonable accommodation” was possible. Accordingly, it had no further duty to engage in the interactive process as Dargis’ limitations were “severe enough to bring the interactive process to a prompt end once they were made known.” To establish a prima facie case under the ADA, Dargis had to show that (1) he had a disability, (2) he was qualified to perform the essential functions of the job at issue, with or without reasonable accommodation, and (3) he sustained an adverse employment action as a result of his disability. The sheriff’s office argued that he could not show that he was qualified for the job because he could not perform its essential functions even if reasonably accommodated.

In order to show that he was qualified, the court noted that Dargis had to meet two requirements. First, he had to satisfy the sheriff’s office’s skill, experience, education, and other job-related requirements; the court found that he met that requirement. Second, Dargis had to show that he could perform the essential functions of the job, with or without reasonable accommodation. The court ruled that he failed to meet this requirement since he “admitted during his deposition that he cannot stand watch over the inmates, break up fights, inspect cells, escort inmates when they were out of their cells, or search for escaped inmates.” Although Dargis claimed that he could perform the essential functions if he were assigned to a position requiring no inmate contact, including work at the prison’s entrances, tower, control center, records department, or computer room, the court held that the sheriff’s office was not required “to manufacture a job that will enable the disabled worker to work despite his disability.” “Carving out a job that includes very few of the duties all other correctional officers were expected to perform would have the effect of creating a new position for an employee who would not be otherwise qualified.”

Sexual harassment claims must be viewed in light of workplace

The United States District Court for the Northern District of Mississippi, in Brockington v. Circus Circus Mississippi, Inc. dba Gold Strike Casino Resort, recently granted partial summary judgment to the employer in a sexual harassment suit filed by a former female bartender. The court concluded that the plaintiff’s allegations of sexual harassment were not so severe or pervasive as to alter the terms and conditions of her employment; in making this finding, it considered the context of her employment as a bartender in a casino.

The plaintiff, Brockington, alleged she was subjected to sexual harassment by her female supervisor as well as her former boyfriend, who also worked at Gold Strike. Specifically, the plaintiff claimed that her supervisor, whom she believed was bisexual, grabbed her buttocks and breasts, popped her on the buttocks with a towel, and made sexually suggestive remarks to others about the plaintiff’s breasts. She also claimed that less than a week after she reported the alleged harassment, she was retaliated against when she was suspended for a violation of the casino’s free drink policy. Shortly after returning from suspension, she was again suspended, and ultimately terminated for violating the attendance policy. The plaintiff claimed that similarly situated employees were not terminated for such offenses and that the casino took these actions in retaliation for her reports of sexual harassment.

Gold Strike filed a motion to dismiss the harassment claim regarding her supervisor’s conduct, arguing that, within the context of this particular casino bar, the alleged harassment was not sufficiently severe or pervasive to alter the terms and conditions of plaintiff’s employment. The court found that the supervisor’s alleged behavior was reprehensible. Even so, the court held that the context in which the alleged harassment arose was a relevant consideration in determining whether the alleged harassment was so severe or pervasive as to alter the terms and conditions of plaintiff’s employment.

In doing so, the court took into consideration the plaintiff’s own conduct. Brockington admitted that she had off-color conversations with her female coworkers in the workplace. She also conceded that she and her female coworkers sometimes patted each other on the buttocks and that she frequently joked and talked about sex in the workplace. Additionally, at her deposition, one of Brockington’s coworkers testified that the “bar was not like ‘church’” and added that the “people at the bar were ‘more uninhibited, use[d] a little more spicier language’ than most work locations.” The co-worker also stated that people offended by sexually charged conversations would find it difficult to work in the bar. Furthermore, Brockington’s coworker testified that Brockington had given sexually related gifts to one of her male supervisors.

The court concluded that Brockington could not legitimately contend that the actions by her supervisor were either “physically threatening or humiliating” or that such conduct “unreasonably interfered” with her work performance. The court further held that Brockington, who initiated similar conduct, could not establish liability against Gold Strike simply because a coworker who engaged in similar conduct with her happened to be her supervisor. “For harassment to affect a ‘term, condition, or privilege of employment,’ it must be, both objectively and subjectively, so ‘severe or pervasive as to alter the conditions of employment and create an abusive working environment.’” Accordingly, the court dismissed Brockington’s sexual harassment claim. The court allowed Brockington to proceed with her retaliation claim based primarily upon the temporal proximity between her report of harassment and the imposition of her disciplinary action by Gold Strike.

Massachusetts employers now subject to treble damages for wage and hour violations

Massachusetts Senate Bill No. 1059, “An Act to Clarify the Law Protecting Employee Compensation,” became law on April 14, 2008 (2008 Mass. Acts c. 80). The law directs the courts to triple the damages for violations of state wage and hour laws and to award successful plaintiffs their litigation costs and attorneys’ fees. The requirement of treble damages applies to any wage and hour violation – both intentional and unintentional. Although Massachusetts Governor Deval Patrick recommended that the bill be amended to allow judges some discretion if employers could prove they had acted in good faith, the legislature rejected the proposed change, leaving employers with no defense to the treble damages.

The legislation takes effect on July 13, 2008. Whether it will apply retroactively remains to be seen. The new law’s mandatory treble damages likely will increase the number of wage and hour lawsuits brought against Massachusetts employers and may make Massachusetts a preferred venue for employees asserting wage and hour claims.

Federal minimum wage increased to $6.55 on July 24, 2008

In May, 2007, the Fair Labor Standards Act (FLSA) was amended to raise the federal minimum wage annually over a three-year period. The second increase in the federal minimum wage is set to take effect on July 24, 2008. The federal minimum wage will rise from $5.85 per hour to $6.55 per hour. The third increase, to $7.25 per hour, will be effective July 24, 2009. Employers also are subject to state minimum wage laws. Many states currently have a minimum wage that is higher than the new federal minimum wage and a number of jurisdictions, including those highlighted below, have additional increases planned in the next few months.