Court ruling stiffens 'disparate impact' claims: employers now must prove 'reasonableness' in ADEA suits.

The U.S. Supreme Court ruled last June in Meacham v. Knolls Atomic Power that employers must prove their decision-making is "reasonable" to avoid liability under the Age Discrimination in Employment Act, or ADEA, for "disparate impact" claims.

While acknowledging that such a burden of proof will present significant risks and costs for employers, the court noted that such policy concerns are for the Congress to address through amendment of the statute rather than by the judiciary through policy-oriented interpretation.

In Meacham v. Knolls, Clifford Meacham and 29 other plaintiffs--all former employees of Knolls Atomic Power Laboratory--appealed the dismissal of their age discrimination case against the company to the Supreme Court. Their critical issue: Who has the burden to prove whether the employer's decision-making process in determining whom to lay off is reasonable?

Prior to conducting its layoff, Knolls used certain criteria that the plaintiffs asserted were unduly subjective, such as "flexibility" and "criticality" as well as "performance" Knolls ranked its employees' performance between zero and 10, and then ranked the "criticality" of their skills to the organization as well as their "flexibility." In the end, 31 employees were selected for layoff, 30 of whom were over 40.

The decision

While the numbers looked bad, a business practice would not be found to be discriminatory on the basis of age under the ADEA just because of a disparate impact on older workers--even if the company could have accomplished the same task efficiently without such impact--so long as the method used by the company to determine whom to lay off was "reasonable."

To answer the question as to who must prove reasonableness, the court simply read the language of the statute. The ADEA outlaws age discrimination, and sets forth five exceptions, which the court said should be read as "affirmative defenses."

One of those exceptions, the "bona fide occupational qualification" exception, has time and again been treated as an "affirmative defense," meaning that the defendant retains the burden to prove that defense in order to prevail. The "reasonableness" exception is listed right after that exception. Accordingly, as a matter of the plain language of the statute, the court ruled that the "reasonableness" exception should be treated as an "affirmative defense" because it is listed in the statute in a place where one would expect to find affirmative defenses, and because it sits right after another affirmative defense which, as all parties had already accepted, the defendant has the burden to prove.

While the court's decision reflects perfectly reasonable statutory construction, it is often said that the "reason behind the rule should govern rather than a mere literal translation of a statute Yet the court was not interested in arguments along policy lines. It expressly acknowledged and discounted the policy arguments in favor of the employer, stating, "We have to read it the way Congress wrote it."

Here are some practices employers should consider when conducting layoffs to help avoid litigation:

* Specify goals: Articulate the specific business need for a reduction in force.

* Standardize: Articulate a plan for how you expect the business to operate after the layoff.

* Specify skills: Identify precisely the specific skills necessary for your new, continuing operation to work. "Fry not to use vague categories that can be viewed as euphemisms for discrimination.

* Supervise selection: Monitor your managers' decision-making to ensure judgments are made based on provable, business reasons.

* Audit results: Once the layoff population has been identified, audit the results and determine if any skewed impact has occurred.

Knolls, the employer, issued guidelines and reviewed selection results, but allegedly did "nothing to audit or validate the results." In the end. Evidence-based and audited decision-making focused on business needs will not only serve companies best in the courtroom, it will better serve them in the market as well.

Chistopher T. Vrountas leads the Employment Counseling and Litigation Practice Group for Nelson, Kinder, Mosseau & Saturley, a law firm with offices in Manchester as well as Boston and Portland, Maine. He can be reached at 603-606-5015 or [e-mail].