Meacham v. Knolls Atomic Power Laboratory

Issues 

After an employee shows that an employment practice had a disparate impact on older workers, and after an employer presents evidence that the challenged practice was neutral, does the employer have to convince the jury that its policy was "reasonable," or does an employee have to convince the jury the policy was "unreasonable?"

Oral argument: 
April 23, 2008
Court below: 
United States Court of Appeals for the Second Circuit

 

In this case, a hair's breadth of analytical difference is worth almost $6 million dollars, as the plaintiffs, former employees at Knolls Atomic Power Laboratory ("KAPL") ask the U.S. Supreme Court to overturn the Second Circuit's finding for the defendants. The plaintiffs had prevailed at trial and on appeal on a disparate impact theory of illegal age discrimination under the Age Discrimination in Employment Act (the "ADEA"), 29 U.S.C. 621 et seq., when the Supreme Court remanded for reconsideration in light of Smith v. City of Jackson. While upholding the disparate impact theory, City of Jackson also requires the touchstone of the analysis to be whether employers considered "reasonable factors other than age," which the Second Circuit determined was a burden of persuasion to be borne by the plaintiffs. The employee-plaintiffs disagree, maintaining that the "reasonable factors other than age" harbor in the ADEA statute is a traditional affirmative defense on which the employer-defendants bear the burden of proof. In determining where the burden rests, the Supreme Court's decision will impact the nature of future employee litigation under the ADEA, shape the strategies for a successful reduction in force, and determine what deference is due the Equal Employment Opportunity Commission's regulations interpreting the ADEA.

Questions as Framed for the Court by the Parties 

Whether an employee alleging disparate impact under the ADEA bears the burden of persuasion on the "reasonable factors other than age" defense, as held by the Second Circuit in this case in conflict with the decisions of other circuits and a regulation of the Equal Employment Opportunity Commission.

Facts 

Knolls Atomic Power Laboratory (the "Lab") draws its workforce of 2,600 from the small upstate New York towns of Niskayuna and New Milton. The Lab is a government initiative funded by a joint program of the Navy and the Department of Energy, and is operated by KAPL Inc. ("KAPL"), a Lockheed Martin company. For fiscal year 1996, a reduction in the Lab's operating budget required an "involuntary reduction in force" ("IRIF") resulting in the firing of thirty-one employees, thirty of whom were over forty years old. 

KAPL instructed its managers in the "matrix" method of evaluating employee performance to select employees for layoff.  This method required managers to assign points to employees in their groups based on performance, flexibility, criticality of skills, and time with the company. Management let go employees scoring lowest on the matrix until staffing was reduced to meet budgetary constraints. 

KAPL further instructed its managers to perform a disparate impact analysis for protected classes of employees under the Age Discrimination in Employment Act of 1967, 29 U.S.C. ? 621 et seq. ("ADEA"), but the managers lacked adequate training to assess ADEA compliance.  A review board assessed those identified by management for layoff but did not review for possible age discrimination.  KAPL performed a final disparate impact analysis, but the methodology used did not highlight the statistical anomaly of the layoff's disproportionate impact on an ADEA-protected class. 

The former employees, including Clifford Meacham, sued under the ADEA and the New York Human Rights Law, charging both disparate treatment and disparate impact in the IRIF process.  The U.S. District Court for the Northern District of New York held for Meacham and his fellow former employees, and the U.S. Court of Appeals for the Second Circuit affirmed because it felt constrained by precedent. 

The U.S. Supreme Court first heard this case in 2005, when it remanded for reconsideration in light of Smith v. City of Jackson, a case that confirmed the availability of disparate impact claims under the ADEA.  However, contrary to the analysis conducted in Meacham I, City of Jackson held that the question of whether an employer practice violates the ADEA requires a "reasonableness" inquiry.    In order to comply with City of Jackson, a panel of the Second Circuit reversed itself and remanded with instructions to enter judgment as a matter of law for the defendants. 

Significantly, City of Jackson did not explain which party bears the burden of proof on proving the reasonableness of the employer practice. The Second Circuit found that the "best reading" of City of Jackson results in the plaintiff bearing the burden of proof of persuading the court that the employer's justification is unreasonable. 

On January 18, 2008, the Supreme Court granted certiorari to resolve the issue of which party bears the burden of proof under the City of Jackson "reasonableness" inquiry. 

Analysis 

Like many seemingly minute analytical distinctions, the U.S. Supreme Court's decision on the burden of proof issue under the Age Discrimination in Employment Act of 1967 ("ADEA") will in fact have important repercussions for businesses and employees throughout the United States. With company general counsels reporting yet again that their biggest litigation fear in 2007 was labor and employment litigation, and predicting the same trend for the future, an outcome in this case will significantly influence both the character and amplitude of that litigation.  A decision either way will impact employees' ability to bring suit and their likelihood of success, inform employers' strategies for implementing successful reductions in force ("RIF"), and update courts' understanding of the deference due to Equal Employment Opportunity Commission ("EEOC") regulations.

Who brings ADEA suits? Every year, between 15,000 and 20,000 people do, with numbers rising due to the recent economic downturn and consequent reductions in force ("RIF").  Of those complaints received, between 2,500 and 3,500 completed a trial on the merits.  Furthermore, this issue will only grow in importance as the country's population continues to age, presenting employers with difficult decisions.

The Effect on Employees

One law firm notes that the tricky burden of proof issue may be decisive either at summary judgment or at trial, because the plaintiffs could conceivably be required, under a holding for KAPL, to provide evidence at the pleadings stage of the unreasonableness of an employer practice.  Summary judgment, the AARP worries, would be unavoidable for plaintiffs bearing a burden that requires a "second sight" to know what reasons the employer might advance without the benefit of discovery. ? According to the AARP, a finding for KAPL increases the possibility of loss at the pleadings stage, relegating employee claims under the ADEA to an "exercise in futility."  A win for KAPL would render the RFOA part of plaintiffs' pleading, requiring plaintiffs to guess at the rationales an employer will present and rebut them.   This would be impossible without access to employer records in pre-discovery stages of the trial. 

Likewise, a heavier burden may undermine ADEA enforcement. The tendency towards "inaccurate age-based assumptions" that Congress sought to counter through the ADEA would re-emerge, with a very limited ability to review such decisions.  Purported use of age-correlated factors would mask age-stereotyping, and would be unassailable in court if employers are not required to prove the factors' neutrality. 

The Effect on Employers

If KAPL prevails, it will signal that employers have greater freedom than previously thought in the decision and planning of RIF's.  In validating the Second Circuit's recognition that age is fundamentally different from race, sex or other classifications, because some functions are legitimately impaired by advanced age, the Court would effectively sanction so-called "subjective" evaluation methods, like those employed by KAPL in its RIF.  Company-wide layoffs based on apparently subjective criteria would benefit from a new legitimacy, and as such, immunity from challenge in the courts.  A jury faced even with "startlingly skewed" statistics of laid-off employees will no longer be able to find unintentional discrimination if those employees cannot prove that their selection for the RIF was "unreasonable."  This is a strikingly high bar.

The American Psychological Association ("APA") points out that under the new analysis, the crucial factor for employers becomes convincing jurors that the challenged policy is reasonable. Per the APA, if KAPL prevails, the role of experts' testimony in convincing jurors of the truth of the employer's proposition will take on new importance, because as soon as the jury believes the employment practice is "reasonable," the employer is off the hook.  " Conversely, if Meacham prevails, the burden on employers will be to convince jurors that the policy is reasonable, which is a higher bar requiring a different strategy. The burden of production has been referred to as "disparate impact lite," whereas the traditional affirmative defense is typically thought to distribute the burdens equally. Therefore, a decision for KAPL will be viewed as favorable to the business community, and likely be acted upon as such, while a decision for Meacham will be viewed as more employee-friendly.

An outcome either way will implicitly clarify how much deference is due to the EEOC's regulations regarding the ADEA. Additionally, a decision for Meacham would validate the EEOC's long-standing interpretation of the ADEA, and end its projected review to bring its regulations into line with City of Jackson.

Discussion 

Like many seemingly minute analytical distinctions, the U.S. Supreme Court's decision on the burden of proof issue under the Age Discrimination in Employment Act of 1967 ("ADEA") will in fact have important repercussions for businesses and employees throughout the United States. With company general counsels reporting yet again that their biggest litigation fear in 2007 was labor and employment litigation, and predicting the same trend for the future, an outcome in this case will significantly influence both the character and amplitude of that litigation.  A decision either way will impact employees' ability to bring suit and their likelihood of success, inform employers' strategies for implementing successful reductions in force ("RIF"), and update courts' understanding of the deference due to Equal Employment Opportunity Commission ("EEOC") regulations.

Who brings ADEA suits? Every year, between 15,000 and 20,000 people do, with numbers rising due to the recent economic downturn and consequent reductions in force ("RIF").  Of those complaints received, between 2,500 and 3,500 completed a trial on the merits.  Furthermore, this issue will only grow in importance as the country's population continues to age, presenting employers with difficult decisions.

The Effect on Employees

One law firm notes that the tricky burden of proof issue may be decisive either at summary judgment or at trial, because the plaintiffs could conceivably be required, under a holding for KAPL, to provide evidence at the pleadings stage of the unreasonableness of an employer practice.  Summary judgment, the AARP worries, would be unavoidable for plaintiffs bearing a burden that requires a "second sight" to know what reasons the employer might advance without the benefit of discovery. ? According to the AARP, a finding for KAPL increases the possibility of loss at the pleadings stage, relegating employee claims under the ADEA to an "exercise in futility."  A win for KAPL would render the RFOA part of plaintiffs' pleading, requiring plaintiffs to guess at the rationales an employer will present and rebut them.   This would be impossible without access to employer records in pre-discovery stages of the trial. 

Likewise, a heavier burden may undermine ADEA enforcement. The tendency towards "inaccurate age-based assumptions" that Congress sought to counter through the ADEA would re-emerge, with a very limited ability to review such decisions.  Purported use of age-correlated factors would mask age-stereotyping, and would be unassailable in court if employers are not required to prove the factors' neutrality. 

The Effect on Employers

If KAPL prevails, it will signal that employers have greater freedom than previously thought in the decision and planning of RIF's.  In validating the Second Circuit's recognition that age is fundamentally different from race, sex or other classifications, because some functions are legitimately impaired by advanced age, the Court would effectively sanction so-called "subjective" evaluation methods, like those employed by KAPL in its RIF.  Company-wide layoffs based on apparently subjective criteria would benefit from a new legitimacy, and as such, immunity from challenge in the courts.  A jury faced even with "startlingly skewed" statistics of laid-off employees will no longer be able to find unintentional discrimination if those employees cannot prove that their selection for the RIF was "unreasonable."  This is a strikingly high bar.

The American Psychological Association ("APA") points out that under the new analysis, the crucial factor for employers becomes convincing jurors that the challenged policy is reasonable. Per the APA, if KAPL prevails, the role of experts' testimony in convincing jurors of the truth of the employer's proposition will take on new importance, because as soon as the jury believes the employment practice is "reasonable," the employer is off the hook.  " Conversely, if Meacham prevails, the burden on employers will be to convince jurors that the policy is reasonable, which is a higher bar requiring a different strategy. The burden of production has been referred to as "disparate impact lite," whereas the traditional affirmative defense is typically thought to distribute the burdens equally. Therefore, a decision for KAPL will be viewed as favorable to the business community, and likely be acted upon as such, while a decision for Meacham will be viewed as more employee-friendly.

An outcome either way will implicitly clarify how much deference is due to the EEOC's regulations regarding the ADEA. Additionally, a decision for Meacham would validate the EEOC's long-standing interpretation of the ADEA, and end its projected review to bring its regulations into line with City of Jackson.

Conclusion 

Since 1963, the Age Discrimination in Employment Act ("ADEA") has provided both a means to ferret out insidious age discrimination and an effective defense for the business community to justify its actions through the "reasonable factors other than age" ("RFOA") defense. In this case, the U.S. Supreme Court will determine whether the burden of proving the "reasonableness" of the challenged employer practice falls upon the employer or the employee. In so doing, the Court will consider how to best maximize the ADEA's protective power while recognizing the legitimate need of employers to be able to practice involuntary reductions in force ("IRIF"). The outcome will offer guidance to employers on effective IRIF strategies and to employees on effective trial strategies under the ADEA, while interpreting the weight to be given to the Equal Employment Opportunity Commission's promulgated regulations on the ADEA.

Written by:

Victoria Bourke

Edited by:

Ferve Ozturk

Acknowledgments 

Additional Resources