(July 25, 2008) The U.S. Supreme Court has confirmed the 9th Circuit precedent that, in Age Discrimination in Employment Act (ADEA) cases, the employer has the burden to prove the reasons for termination were lawful despite any disparate impact on employees over the age of 40.

Employers may terminate employees based on reasonable factors other than age (RFOA) even if such terminations are prohibited by the ADEA. The court analyzed whether an employer facing a disparate impact claim and planning to defend on the basis of RFOA must produce evidence supporting its claims of RFOA and also persuade the jury or judge that the RFOA have merit. The court found that an employer must do both in Meacham v. Knolls.

Knolls is a federal contractor that has maintained warships since the 1940s. Since the end of the Cold War, the demand for Knolls’ work has declined and in 1996, it was ordered to reduce its workforce. More than 100 employees took Knolls’ buyout offer, but more than 30 jobs still had to be cut. Knolls instructed its managers to rate subordinates on three scales: (1) performance; (2) flexibility; and (3) critical skills. The scores were totaled and considered along with points for years of service.

Those with the lowest scores were laid off; 30 of 31 employees who were laid off were at least 40 years old and 28 of them sued Knolls under the ADEA. The workers claimed Knolls “designed and implemented its workforce reduction process to eliminate older employees and regardless of intent, the process had a discriminatory impact on ADEA-protected employees.” The workers’ expert said the results so skewed according to age could rarely occur by chance.

The lower court found Knolls provided sufficient evidence to establish RFOA were taken into consideration before the layoffs. The question before the Supreme Court was whether Knolls not only had to show evidence of RFOA, but whether it also had to prove that those factors were in fact reasonable. The Supreme Court overturned the lower court and sent the case back to the trial court with instructions that the employer – Knolls – has the burden of proving that RFOA were reasonable in order to avail itself of the defense.

The California Chamber of Commerce has recommended that employers:

• Always establish legitimate, objective business reasons before employee layoffs.
• Document all performance concerns consistently.
• Follow their policies regarding discipline and termination and train supervisors and managers to do so.