On June 19, 2008, the United States Supreme Court is its decision in Meacham v. Knolls Atomic Power Laboratory holding that an employer defending a disparate impact claim under the Age Discrimination in Employment Act (ADEA) bears the burden of persuading the factfinder that its use of "reasonable factors other than age" (RFOA) was reasonable.
As part of a reduction in force, Knolls developed a review system to determine which managers to lay off. Under Knoll’s system, managers were scored on their "performance," "flexibility," and "critical skills." Managers were also given points based on years of service. Based on its review system, Knoll’s terminated 31 managers, 30 of whom were over the age of 40.
Twenty-eight of the terminated managers filed suit in the District Court for the Northern District of New York alleging both disparate treatment and disparate impact claims under the ADEA. At trial, the plaintiffs relied on a statistical expert’s testimony that the result of Knoll’s review system was so skewed that it could not have occurred by chance. The jury found for the plaintiffs on the disparate impact claim, but not on the disparate treatment claim. Knolls appealed the decision to the Second Circuit Court of Appeals.
Following the Supreme Court’s decision in Smith v. Jackson, the Second Circuit ruled in favor of Knolls and vacated the judgment. Meacham appealed the case to the Supreme Court citing the Ninth Circuit Court of Appeals decision in Criswell v. Western Airlines, Inc., which placed the burden on the plaintiff to prove that the employer’s RFOA was unreasonable. The Supreme Court agreed to decide the issue, and vacated the judgment of the Second Circuit.
In its decision, the Supreme Court focused on the fact that the language of the RFOA exemption appears alongside the exemption for bona fide occupational qualifications (BFOQ). These exemptions provide an affirmative defense "where age is a bona fide occupational qualification reasonably necessary to the normal operation of the particular business, or where the differentiation is based on reasonable factors other than age." 29 U.S.C. § 623(f). Based on how Congress drafted the RFOA and BFOQ exemptions, the Court concluded that the legislature intended the two exemptions to be treated the same. As the BFOQ exemption has always been treated as an affirmative defense, the Court concluded that the RFOA exemption should also be treated as an affirmative defense. As such, the Court ruled that the employer has the burden of persuading the factfinder that its RFOA was reasonable.
While the Court did reiterate that a plaintiff cannot establish an ADEA disparate impact claim merely by pointing to a generalized policy that has caused a disparate impact, the Court did admit that this decision "makes it harder and costlier to defend than if employers merely bore the burden of production; nor [did the Court] doubt that this [decision] will sometimes affect the way employers do business with their employees."