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March 30, 2005
ADEA allows disparate impact claims - sort of
The US Supreme Court has endorsed using disparate impact theory in ADEA cases, but now we have to go back and relearn all the pre-1991 cases. Smith v. City of Jackson (US Supreme Court 03/30/2005).
Older cops sued the City claiming that a new pay plan gave them lower raises than younger cops got. Reason? The City granted proportionately more money to officers with less than five years' service in an attempt to bring starting salaries up to the regional average. The 5th Circuit said the plaintiffs must lose because the ADEA categorically disallows disparate impact claims. The US Supreme Court affirmed the judgment for the City on totally different grounds: the ADEA does allow disparate impact claims, but the plaintiffs lost on the merits.
Disparate impact theory got its wings in Griggs v. Duke Power, 401 US 424 (1971), a Title VII case. Those wings got clipped in Wards Cove v. Atonio, 490 US 642 (1989). Wards Cove says that plaintiffs are "responsible for isolating and identifying the specific employment practices that are allegedly responsible for any observed statistical disparities." Congress then adopted the Civil Rights Act of 1991 which codified disparate impact theory and made things a bit easier for plaintiffs - at least in Title VII cases. But Congress never amended the ADEA the way it amended Title VII.
The ADEA and Title VII are identical in one respect.
ADEA Section 4(a)(2) is the same as Title VII Section 703(a)(2) except for substituting "age" for "race, color, religion, sex, or national origin." From that similarity in statutory text the Court concluded that the ADEA does permit employees to use the disparate impact theory.
But there are two huge differences between Title VII and the ADEA.
Unlike Title VII, the ADEA significantly narrows its coverage via the "RFOA" provision which permits any "otherwise prohibited" action "where the differentiation is based on reasonable factors other than age."
Applying the RFOA provision, the Court said "the disparate impact is attributable to the City's decision to give raises based on seniority and position. Reliance on seniority and rank is unquestionably reasonable given the City's goal of raising employees' salaries to match those in surrounding communities." Thus, the City's decision was based on a "reasonable factor other than age." There may have been other reasonable ways, including ways that did not have a disparate impact on older workers, but unlike the business necessity test, "the reasonableness inquiry includes no such requirement."
Law teachers will be pleased to learn that pre-1991 cases are now relevant to ADEA disparate impact analysis. Why? The 1991 Civil Rights Act overruled those cases for Title VII litigation, but not as they relate to the ADEA.
For ADEA cases, the Court will apply its pre-1991 interpretation of Title VII's identical language, most notably the interpretation in Wards Cove v. Atonio, 490 US 642 (1989). Wards Cove says that plaintiffs are "responsible for isolating and identifying the specific employment practices that are allegedly responsible for any observed statistical disparities," and the employees in this case have failed to do so. They did "little more than point out that the pay plan at issue is relatively less generous to older workers than to younger workers. They have not identified any specific test, requirement, or practice within the pay plan that has an adverse impact on older workers."
My view: (1) Employees can use disparate impact theory, but must sharpen their analysis and proof to fit the Court's pre-1991 cases interpreting Title VII. (2) Employers will easily win many cases under the RFOA provision because it only needs to be "reasonable" rather than a matter of "business necessity." Almost by definition, distinctions based on length of service or on rank will be reasonable.
Posted March 30, 2005 by Ross Runkel, Editor at LawMemo, publisher of Employment Law Memo. Try it.
March 20, 2005
Transfer was not retaliation
California is rejecting the EEOC's and the 9th Circuit's definition of an "adverse employment action" in retaliation cases.
Dr. McRae was a surgeon at the California Medical Facility in Vacaville who filed a complaint with the California Department of Fair Employment claiming race discrimination, and later got transferred to the California State Prison in Solano. She sued under California law, claiming retaliation.
Prior California law
Earlier California cases made it clear that in a retaliation claim the plaintiff must show more than some form of adverse treatment, but must show that the employer's retaliatory actions had a detrimental and substantial effect on the plaintiff's employment.
9th Circuit position
In Ray v. Henderson, 217 F.3d 1234 (9th Cir 2000), the 9th Circuit adopted a broad statement of the kind of employer action that can constitute retaliation: "any adverse treatment that is based on a retaliatory motive and is reasonably likely to deter the charging party or others from engaging in protected activity." That was based on the EEOC Compliance Manual.
The outcome for McRae
The California Court of Appeal said she did not suffer "the kind of adverse employment action required for a claim of retaliation." McRae v. Dept of Corrections (California Ct App 03/18/2005).
The court said that a transfer can be an adverse employment action, but only if it "results in substantial and tangible harm." McRae's transfer was not a demotion and resulted in no loss of pay or benefits. The court said, "the record must contain substantial evidence that Solano Prison in fact presented a less desirable work environment than CMF, and, further, that the change was not just somewhat less pleasant, but had materially adverse consequences comparable in significance to a demotion, a decrease in wages or salary, a less distinguished title, a material loss of benefits, or significantly diminished responsibilities."
As for actual evidence, the court went through a number of assertions McRae made about the dangerousness of Solano Prison and the increased difficulties of working there, but the court discounted them all as being without evidence.
Posted March 20, 2005 by Ross Runkel, Editor at LawMemo, publisher of Employment Law Memo. Try it.
March 13, 2005
An arbitration system goes down in flames
The 6th Circuit used some interesting logic in refusing to enforce an arbitration agreement under which Employment Dispute Services, Inc. (EDSI) would be the sole source of arbitrators. Ryan's Family Steak House required job applicants to agree that their employment claims would be arbitrated by EDSI. Employees wanted to go to court instead, arguing that the arbitration system was fatally flawed.
Most of the flaws found by the court are discussed in the Arbitration Blog.
The court ruled that the plaintiffs' agreements were unenforceable under the Federal Arbitration Act (FAA) "because they do not allow for effective vindication" of their federal statutory (FLSA) claims. Walker v. Ryan's (6th Cir 03/09/2005)
This finding was based on the conclusion that EDSI's arbitral forum is not neutral. Why? Here's the interesting logic: EDSI is a for-profit company. Ryan's provided 42 percent of EDSI's gross income in 2002. This resulted in a "symbiotic relationship." "Ryan's effectively determines the ... pools of arbitrators."
There was no evidence cited by the court that indicated that Ryan's had every exerted any actual influence in the selection of arbitrators, or that any of the individual arbitrators in EDSI's pool was actually biased, or that any arbitration conducted under the EDSI system had ever been overturned on the ground of arbitrator bias.
In short, the court didn't like the system, and didn't want to wait and see whether a neutral panel of arbitrators would be selected.
My view: I would expect to see conclusions like these supported by some evidence of actual bias rather than the fear of it.
Oh, well. The court also found the agreements unenforceable as a matter of Tennesee contract law.
Posted March 13, 2005 by Ross Runkel, Editor at LawMemo, publisher of Employment Law Memo. Try it.
March 09, 2005
Two tales of failure to exhaust administrative remedies
Today's Employment Law Memo from LawMemo.Com tells two tales of employees who went to court without exhausting their administrative remedies. In one case it was a failure to include all his claims in his EEOC charge, and in the other it was a failure to use the employer's internal remedies.
In Parisi v. Boeing (8th Cir 03/07/2005) The Boeing Company was selling its plant and laid off many employees, including Parisi, on January 12, 2001. Parisi filed an EEOC charge on July 23 alleging that Boeing violated the ADEA by laying him off and by refusing to rehire him (both took place January 12). OK, one refusal to rehire. When he sued in federal court, Parisi claimed Boeing had failed to rehire him not just once, but on 94 occasions - all later. One problem. Parisi never mentioned these 94 incidents in his EEOC charge. The 8th Circuit held that each failure to rehire was a separate incident that was not "reasonably related" to what was in his EEOC charge. Claims dismissed. Message to plaintiffs: Tell everything in the EEOC charge. File an amended charge or an additional charge if you need to.
Campbell v. Regents of University of California (California 03/07/2005) involved a university employee bringing a whistleblower suit under California statutes. The university was set up by the state constitution with "quasi-legislative powers." The court held that the university exercised those powers when it adopted a formal Policy that required that a whistleblower's complaint be filed under that Policy. The employee did not file a complaint under the Policy. The California Supreme Court wrote a lot of words, as usual, and unanimously concluded that the employee "should have exhausted the university administrative remedies before proceeding to court." Judgment for the university.
Posted March 09, 2005 by Ross Runkel, Editor at LawMemo, publisher of Employment Law Memo. Try it.
March 04, 2005
NLRB's new "full consent election" agreement
Parties to an NLRB election now have a third form of voluntary agreement that waives appeal to the Board and allows the Regional Director to make a final decision on all pre-election and post-election disputes. [press release]
The new Full Consent Election agreement is a welcome option. For those parties who want to avoid the time and expense of appeals to the Board, this option allows them waive a Board appeal to agree that the Regional Director will make all the decisions.
Effective March 1, 2005, new Section 102.62(c) provides:
"Where a petition has been duly filed, the employer and any individual or labor organizations representing a substantial number of the employees involved may, with the approval of the Regional Director, enter into an agreement providing for a hearing pursuant to sections 102.63, 102.64, 102.65, 102.66 and 102.67 to resolve any issue necessary to resolve the question concerning representation. Upon the conclusion of such a hearing, the Regional Director shall issue a Decision. The rulings and determinations by the Regional Director thereunder shall be final, with the same force and effect, in that case, as if issued by the Board. Any election ordered by the Regional Director shall be conducted under the direction and supervision of the Regional Director. The method of conducting such consent election shall be consistent with the method followed by the Regional Director in conducting elections pursuant to sections 102.69 and 102.70, except that the rulings and determinations by the Regional Director of the results thereof shall be final, and the Regional Director shall issue to the parties a certification of the results of the election, including certifications of representative where appropriate, with the same force and effect, in that case, as if issued by the Board, provided further that rulings or determinations by the Regional Director in respect to any amendment of such certification shall also be final."
Posted March 04, 2005 by Ross Runkel, Editor at LawMemo, publisher of Employment Law Memo. Try it.
March 03, 2005
NASD rules preempt state ethics rules for arbitrators?
The 9th Circuit says NASD rules preempt state ethics rules for arbitrators in employment disputes. The California Supreme Court hears arguments on a similar preemption issue on March 8, 2005.
The 9th Circuit case: Credit Suisse v. Grunwald (9th Cir 03/01/2005) [pdf]. Under Credit Suisse's Employment Dispute Resolution Program, Grunwald was obligated to use arbitration to resolve his employment dispute. He wanted arbitration conducted by the American Arbitration Association (AAA), but Credit Suisse preferred arbitration conducted by the National Association of Securities Dealers (NASD).
Why would it matter? California has a statute requiring neutral arbitrators to make extensive disclosures relating to potential conflicts of interest, and these would apply in an AAA arbitration. NASD rules also require disclosures but they are partly in conflict with the California rules.
The 9th Circuit held that the California rules are preempted and do not apply to NASD arbitrations.
The theory in brief: NASD is a private organization regulated by the Securities Exchange Commission (SEC). Acts of Congress can preempt state law and so can regulations of agencies such as the SEC. The arbitration rules adopted by the NASD were approved by the SEC, and therefore have preemptive force. Some California rules are preempted because they directly conflict with NASD rules; some are preempted because they would be an obstacle to executing Congress' purposes.
The California case: Jevne v. Superior Court, to be argued in the California Supreme Court March 8. Court of Appeal decision is Jevne v. Superior Court (California Court of Appeal 11/09/2003) [pdf]. This is not an employment case, but the court similarly held that the NASD arbitration rules preempted California's rules.
Interesting that the 9th Circuit decision is not binding on California courts. Although California is geographically within the 9th Circuit, it is a separate court system. So let's wait and see whether the cases come out the same. It could be that California doesn't think that the rules of a private organization (NASD) can preempt state law.
Posted March 03, 2005 by Ross Runkel, Editor at LawMemo, publisher of Employment Law Memo. Try it.
