Impact of Gross on ADEA Claims

I cautioned earlier that the Supreme Court's decision in Gross v. FBL Financial shouldn't be taken by employers as dramatically making it harder for employees to prove age discrimination.  I have also said that newspaper reports saying Gross requires employees to prove age was the "sole" cause are dead wrong.

A recent decision by the  federal court of appeals in Atlanta (deciding appeals from Florida, Georgia and Alabama) illustrates that Gross doesn't  immunize an employer from its stupid mistakes and loose statements nor does it require employees to prove age was the sole cause of their firing.

A non-profit employed an older worker as a fundraiser.  She was moved to a different job for poor performance (instead of being fired - no good deed goes unpunished).  She was shortly later fired for poor performance in the new job.  The employee fought back by putting on evidence that her boss made the following age statements:

• “I need someone younger I can pay less"
• "you are very old, you are very inept. What you should be doing is taking care of old people. They really need you. I need somebody younger that I can pay less and I can control.”
• “[Plaintiff] is too old to be working here anyway.”

The employer tried to argue that under Gross, it should win because it would have fired the employee for poor performance, even if the decision had age issues (he denied making the statements).  The court didn't buy it, saying the jury had to decide whether age was the reason for the firing.

EEOC Proposes Definition of "Reasonable Factor Other Than Age"

In light of recent Supreme Court decisions construing disparate impact liability under the ADEA, the EEOC has issued a proposed rule meant to define what is a "reasonable factor other than age" or RFOA.  (This is one of the potential rules I mentioned in December.)

The EEOC's definition won't have a significant impact on the routine age discrimination claim most employers face.  It could, however, result in an increase in the number of disparate impact claims asserted in ADEA lawsuits, particularly in IRIF claims.

The RFOA defense only applies when the proof establishes that the employer has engaged in conduct that is "otherwise prohibited" by the ADEA.  In an intentional discrimination claim it will be unusual (but not theoretically impossible) for an employer to be able to show that its conduct is intentionally discriminatory but yet reasonable.  (Some "reasonable" factors are hard wired  into the ADEA and implementing regulations, most relate to employment benefits, allowing employers to "discriminate" against older workers in end result where the cost of providing the benefit is equal to what it costs for a younger employee).

So, the RFOA defense will appear most in disparate impact claims, where the employer has a facially neutral practice that adversely affects older workers.

The EEOC says that "a reasonable factor is one that an employer exercising reasonable care to avoid limiting the employment opportunities of older persons would use."  To decide this you look to various criteria.  I won't go deep into these criteria here.  They can be summed up as follows: An employer taking action that adversely affects employees should (1) make sure it is aware of the effect of the decision on older workers (indeed, on all classes), (2) evaluate the severity of the impact on older workers, (3) consider whether there is some other, less harmful, means of achieving the same goal, and (4) conduct training of managers on how to avoid age-stereotyping.

I said at the outset that the RFOA defense will apply primarily in disparate impact cases.  But as I was reading through the EEOC's comments, what struck me was that this rule will have a significant impact on reduction in force litigation when older employees are disproportionately laid off.

Employers need to realize that disparate impact age claims can be brought (in the same complaint that alleges intentional age discrimination) to challenge the result of any "practice" the employer adopts, including "practices" the employer does not "officially" adopt.   If there is a statistical disparity, it won't be too hard for an employee to argue that there is a  "practice" that causes the skewed statistics.  (One practice can be, the EEOC says, where the employer gives "supervisors unchecked discretion to engage in subjective decision making.")

At that point, the employer will need to be able to show, in an IRIF case, that the criteria used to select employees to be laid off were  "reasonable" and based on some factor other than age.  While the employer does not have to adopt an employment practice that has the least severe impact on older workers,ignoring ways to lessen the impact will not look good.  Employers must also remember that under existing EEOC regulations (not modified by this proposed rule): "A differentiation based on the average cost of employing older employees as a group is unlawful" (with certain exceptions for benefit issues).

Pending Tennessee Legislation Permitting Mandatory Direct Deposit - Debit Cards

Earlier this week, the Tennessee Senate Commerce, Labor & Agriculture Committee passed a bill (SB2633/HB 3095) that would amend Tenn. Code Ann. 50-2-103 so that employers could require employees to be paid by direct deposit or, if the employee does not want direct deposit, by a prepaid debit card.

 If a debit card is issued, it must permit the employee to make one no cost withdrawal from it (such as at an ATM within the network) for up to the full amount on the debit card.  That could pose problems for ATM withdrawals where there are daily limits on the amount that can be withdrawn.  The employee would then have to go into a bank and obtain the funds from a teller.

There would also be certain disclosure requirements for debit card use, namely, the employer must explain any fees the employee would have to pay for using the debit card.

Employers can do this now with the consent of the employee.  This bill - if it passes - would permit employers to require employees chose between direct deposit or debit cards instead of, as now, cash or checks.

The bill is being promoted by Visa.  Visa's lobbyist explained (the video of the committee meeting can be seen here) that over 20 other states have passed laws or adopted regulations of this nature.  Visa's interest, obviously, is in increasing the use of debit cards as they get a percentage (from the merchant) of every dollar spent.  I'm told by at least one bank that they do not charge an additional fee for obtaining a debit card over and above the fees charged for making direct deposits.

Must an Employer Provide Lodging as a Reasonable Accommodation

I'm always looking for unusual legal precedents.  I shouldn't be surprised when they come from unusual sources. I receive emails from the Government Accountability Office listing the Comptroller General decisions they issue.  The Comptroller General of the U.S. GAO issues legal decisions and legal opinions on appropriations law, bid protests, and other issues of federal law.  Agencies can ask the Comptroller General for advice on whether federal law permits a specific expenditure. 

Today's e-mail from the GAO addressed whether the Department of Housing and Urban Development, Office of Inspector General, could us appropriated funds to pay for a reasonable accommodation for an employee who wanted the IG's office to provide her with lodging closer to where she would be performing audits.  

The Comptroller General decision addresses an unusual accommodation request.  Federal employees, by statute, are paid lodging expenses when they are "away from the employee's designated post of duty."  The employee's need for lodging, however, was not away from her post of duty.  There was, in other words, no authorization for paying the employees lodging for these trips. 

The Comptroller then addressed whether the appropriated funds could be spent nonetheless, as part of a reasonable accommodation, and concluded they could not because the requested accommodation was not reasonable:

An employer, however, is not required to provide for accommodations that fall outside the scope of employment, like commuting. Laresca v. American Telephone and Telegraph, 161 F. Supp. 2d. 323 (D.N.J. 2001). In this case the employee's drive is akin to a commute, traveling from the employee's home to the work site. Reasonable accommodations are directed at enabling an employee to perform the essential functions of the job itself, 29 C.F.R. sect. 1630.2(o)(1)(ii), and federal courts have held that activities like commuting to and from the workplace fall outside the scope of a job. Consequently, an employer is not obligated to provide a reasonable accommodation for such activities.

The Comptroller General encouraged the IG's office to find some other accommodation that would be effective.

Sixth Circuit Clarifies Reduction in Force Standards

Today's decisions from the Sixth Circuit included a reduction in force age discrimination case, Harriet Schoonmaker v. Spartan Graphics Leasing, LLC, that helps to clarify the legal standards for RIFs and addresses other issues that commonly arise in RIF litigation.  The employer had between 50 and 75 employees and, as is not uncommon for employers of that size, did not have detailed RIF procedures.  When the employer decided to cut two employees because work was slow, they made a "consensus" decision to cut from the third shift because it was the least productive. One employee (not the plaintiff) was cut because she had been giving the job as a favor and was retiring soon. As to the 58 year old plaintiff, the employer chose a 29 year old because, as the decision says, plaintiff "was sometimes hard to work with" and the other employee was "the better team player." Both were equally qualified but the employer felt the other employee was "more productive" even though there were no work records to support this one way or the other.


Several parts of the decision are significant.  

• First, the court clarified that, in a RIF, the retaining a younger employee and laying off an older employee is not by itself enough to establish a prima facie case.  There had been some doubt about this because of loose language in a prior decision.
• Second, the court re-emphasized that an employee cannot show an employer's decision is discriminatory by arguing that she was more qualified or more productive than the employee retained.
• Third, the decision shows that minor discrepancies during a RIF do not necessarily amount to proof of discrimination.

Tennessee Court of Appeals Upholds Breach of Employment Contract Claims

Yesterday the Tennessee Court of Appeals issued a decision involving two physicians who sued Methodist Healthcare-Memphis Hospitals when the hospital decided that the doctors had "voluntarily relinquished" their medical staff privileges.  The physicians argued this decision breached their contract with the hospital and tortiously interfered with their patient relationships (at least those patients who had insurance through the hospital).  The hospital took the action it did because the physicians failed to obtain malpractice insurance coverage that satisfied the requirements in the hospital's bylaws (which the court assumed amounted to a contract of employment).

The decision isn't a remarkable one in the traditional HR sense.  It is a reminder that employment relationships are contractual, albeit usually a contract for at will employment.  Employers, however, must take care to observe  any contractual terms when they take action involving a contract employee.  The doctors were not, of course, employees in the strict sense but the same basic rules apply nonetheless.

In the world of contract law, a party that breaches the contract can't complain when the other party later refuses to perform the contract. Here, the court held the physicians could not complain when the hospital "fired" them because they failed to maintain a contractually required condition (insurance).  The lesson here is that any contract of employment should be clear in stating what is a condition the employee must maintain.  If driving is required, then the contract should say so.  Don't leave conditions of employment to chance.  Of course, being specific about the job prerequisites is a good practice even when there is no employment contract.

Ricci v DeStefano - Clarifying What it Means for Affirmative Action

This is for the federal government contractors.  The Office of Federal Contract Compliance Programs (OFCCP) enforces certain obligations contractually imposed on larger companies that contract with the government.   The rules OFCCP enforce require contractors to, among other things, have affirmative action plans. 

Ricci v. DeStefano raised some questions about these affirmative action plans but only if they were being relied upon to fullfil a quota, something genuine affirmative action eschews.

The OFCCP looks to remedy systemic discrimination, however, so it is only natural for the OFCCP to clarify that Ricci does not significantly (if at all) change the agency's procedures or a contractor's obligations.  Some highlights:

• Ricci does not affect how OFCCP examines the use and impact of selection procedures, such as tests.
• Ricci does not change a contractor's affirmative action obligations under the mandates enforced by OFCCP.
• Ricci indicates that an employer's failure to conduct an appropriate job analysis, or to validate a test or other selection procedure prior to its implementation, places an employer in a position that may be difficult to defend should the test be found to have an adverse impact after it is used.