Meacham v. Knolls Atomic Power Laboratory (2d Cir.) Brief as amicus June 14, 2005 02-7378(L), 02-7474(XAP) _____________________________________ IN THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT _____________________________________ CLIFFORD B. MEACHAM, THEDRICK L. EIGHMIE, and ALLEN G. SWEET, individually and on behalf of all other persons similarly situated, Plaintiffs-Appellees-Cross-Appellants, JAMES R. QUINN, Phd., DEBORAH L. BUSH, RAYMOND E. ADAMS, WALLACE ARNOLD, WILLIAM F. CHABOT, ALLEN E. CROMER, PAUL M. GUNDERSEN, CLIFFORD J. LEVENDUSKY, BRUCE E. PALMATIER, NEIL R. PAREENE, WILLIAM C. REYNHEER, JOHN K. STANNARD, DAVID W. TOWNSEND and CARL T. WOODMAN, Consolidated-Plaintiffs-Appellees, HILDRETH E. SIMMONS, JR., HENRY BIELAWSKI, RONALD G. BUTLER, SR., JAMES S. CHAMBERS, ARTHUR J. KASZUBSKI, DAVID J. KOPMEYER, CHRISTINE A. PALMER, FRANK A. PAXTON, JANICE M. POLSINELLE, TEOFILS F. TURLAIS and BRUCE E. VEDDER, Consolidated-Plaintiffs-Appellees, v. KNOLLS ATOMIC POWER LABORATORY, a/k/a KAPL, Inc., LOCKHEED MARTIN CORPORATION and JOHN J. FREEH, both individually and as an employee of KAPL and Lockheed Martin, Defendants-Appellants-Cross-Appellees. ___________________________________________________ On Appeal from the United States District Court for the Northern District of New York ___________________________________________________ BRIEF OF THE EQUAL EMPLOYMENT OPPORTUNITY COMMISSION AS AMICUS CURIAE ON REMAND FROM THE SUPREME COURT ____________________________________________________ ERIC S. DREIBAND General Counsel BARBARA L. SLOAN VINCENT J. BLACKWOOD Attorney Acting Associate General Counsel EQUAL EMPLOYMENT OPPORTUNITY COMMISSION 1801 L. Street, N.W., 7th Floor Washington, DC 20507 (202) 663-4721 TABLE OF CONTENTS TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . ii STATEMENT OF INTEREST. . . . . . . . . . . . . . . . . . . . . .1 STATEMENT OF THE ISSUES. . . . . . . . . . . . . . . . . . . . .2 STATEMENT OF THE CASE 1. Nature of the Case and Course of Proceedings . . . . .2 2. Statement of Facts . . . . . . . . . . . . . . . . . .4 3. Court of Appeals Decision. . . . . . . . . . . . . . .7 ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 1. The Smith Decision . . . . . . . . . . . . . . . . . .9 2. Implications for Meacham . . . . . . . . . . . . . . 13 CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . 22 CERTIFICATE OF COMPLIANCE. . . . . . . . . . . . . . . . . . . 23 CERTIFICATE OF SERVICE TABLE OF AUTHORITIES CASES Page(s) Air Line Pilots Association v. TWA, 713 F.2d 940 (2d Cir. 1983), aff'd in part & rev'd in part on other grounds sub nom TWA v. Thurston, 469 U.S. 111 (1985). . . . . . . 15 Griggs v. Duke Power Co., 401 U.S. 424 (1971) . . . . . . . . . . . . . . . . . .9, 10 McKennon v. Nashville Banner Publishing Co., 513 U.S. 352 (1995) . . . . . . . . . . . . . . . . . . . 10 Meacham v. KAPL, 185 F. Supp. 2d 193 (N.D.N.Y. 2002), aff'd 381 F.3d 56 (2d Cir. 2004), vacated and remanded 125 S. Ct. 1731 (2005) . . . . . . 3-6 Meacham v. KAPL, 381 F.3d 56 (2d Cir. 2004), vacated and remanded 125 S. Ct. 1731 (2005) . . . . . passim Meacham v. KAPL, 125 S. Ct. 1731 (2005). . . . . . . . . . . . . . . . . . 3 Public Employees Retirement System v. Betts, 492 U.S. 158 (1989) . . . . . . . . . . . . . . . . . . . 15 Smith v. City of Jackson, 125 S. Ct. 1536 (2005). . . . . . . . . . . . . . . . passim MacPherson v. University of Montevallo, 922 F.2d 766 (11th Cir. 1991) . . . . . . . . . . . . . . 9 Wards Cove Packing Co. v. Atonio, 490 U.S. 642 (1989) . . . . . . . . . . . . . . . . . passim Watson v. Fort Worth Bank & Trust, 487 U.S. 977 (1988) . . . . . . . . . . . . . . . . . . . 20 Western Air Lines v. Criswell, 472 U.S. 400 (1984) . . . . . . . . . . . . . . . . . . . 17 STATUTES and REGULATIONS The Age Discrimination in Employment Act, 29 U.S.C. §§ 621 et seq.. . . . . . . . . . . . . . . passim 29 U.S.C. § 621(b). . . . . . . . . . . . . . . . . . . . 21 29 U.S.C. 623(f)(1) . . . . . . . . . . . . . . . . . passim 29 U.S.C. § 623(f)(2)(2004) . . . . . . . . . . . . . . . 16 29 U.S.C. § 623(f)(2)(1990) . . . . . . . . . . . . . . . 16 The Civil Rights Act of 1991, Pub. L. 102-166, 105 Stat. 1071 (1991). . . . . . . . passim Civil Rights Act of 1991 § 2, 105 Stat. 1071. . . . . . . 11 The Older Workers Benefit Protection Act, Pub. L. 101-433, 104 Stat. 978 (1990) . . . . . . . . . . 15 Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e et seq.. . . . . . . . . . . . . . passim 42 U.S.C. § 2000e-2(k)(1)(A)(ii). . . . . . . . . . . . . 20 29 C.F.R. § 1625.7 . . . . . . . . . . . . . . . . . . . . . . 15 OTHER AUTHORITY S. Rep. No. 263, 101 Cong., 2d Sess. (1990), reprinted at 1990 U.S.C.C.A.N. 1509 . . . . . . . . . . . 16 IN THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT ________________________ 02-7378(L), 02-7474(XAP) ________________________ CLIFFORD B. MEACHAM, et al., Plaintiffs-Appellees/Cross-Appellants, v. KNOLLS ATOMIC POWER LABORATORY, a/k/a KAPL, INC., et al., Defendants-Appellants/Cross-Appellees. ____________________________________________________ On Appeal from the United States District Court for the Northern District of New York ____________________________________________________ SUPPLEMENTAL BRIEF OF THE EQUAL EMPLOYMENT OPPORTUNITY COMMISSION AS AMICUS CURIAE ____________________________________________________ STATEMENT OF INTEREST The Equal Employment Opportunity Commission is the agency charged by Congress with interpreting and enforcing the Age Discrimination in Employment Act, 29 U.S.C. §§ 621 et seq. ("ADEA"), and other federal employment discrimination laws. The Commission participated as amicus curiae in this appeal to argue that disparate impact claims are cognizable under the ADEA. The Supreme Court vacated this Court's decision and remanded the case for reconsideration in light of its decision in Smith v. City of Jackson, 125 S. Ct. 1536 (2005). In Smith, the Supreme Court held that claims under a disparate impact theory are cognizable under the ADEA and that the standard for determining the lawfulness of a practice that disproportionately affects older workers is the "reasonable factors other than age" ("RFOA") provision in the ADEA, 29 U.S.C. 623(f)(1). See Smith, 125 S.Ct. at 1546. Interpretation of Smith and its implications for disparate impact age claims, particularly regarding the RFOA provision, raise important and complex policy issues that will require considerable study. However, in response to this Court's invitation to amici to file briefs addressing the impact of Smith on this case, we offer some preliminary views to the Court. STATEMENT OF THE ISSUES 1. Whether the "reasonable factors other than age" provision in the ADEA constitutes an affirmative defense as to which the employer bears the burden of proof. 2. Whether proof of an RFOA defense requires evidence that the challenged practice was reasonably designed to further or achieve an important and legitimate business purpose and was implemented in a way that reasonably and fairly advances that purpose. STATEMENT OF THE CASE 1. Nature of the Case and Course of Proceedings This case is on remand from the Supreme Court following vacation of this Court's August 23, 2004, judgment affirming a jury verdict under the ADEA and state law in favor of 26 former exempt employees of Knolls Atomic Power Laboratory ("KAPL"). The plaintiffs allege that they were terminated during an involuntary reduction in force ("IRIF") because of their age. District court docket number ("R") 1. The case was tried to a jury, beginning on June 20, 2000. R79. On July 26, the jury returned a verdict finding under plaintiffs' disparate impact theory that defendants had discriminated against the 26 exempt employees and that such discrimination was willful. The jury returned a verdict for defendants on plaintiffs' disparate treatment claims. Meacham v. KAPL, 185 F.Supp.2d 193, 203 (N.D.N.Y. 2002). Damages were determined in separate proceedings during the fall of 2000 (id.), and the district court denied in large part defendants' motions for a new trial and for judgment as a matter of law. See R212. Defendants appealed (R215), and plaintiffs cross-appealed. R219. On August 23, 2004, this Court affirmed, without reaching plaintiffs' cross-appeal. Meacham v. KAPL, 381 F.3d 56 (2d Cir. 2004). Following denial of rehearing and rehearing en banc, defendants petitioned for certiorari review. See R291. On April 11, 2005, the Supreme Court granted the writ, vacated the judgment and remanded the case for further proceedings in light of Smith v. City of Jackson, 125 S. Ct. 1536 (2005). Meacham v. KAPL, 125 S. Ct. 1731 (2005). In its May 25, 2005, order, this Court then requested the parties and amici to file briefs addressing, inter alia, "whether Smith impacts [the Court's] ruling under the ADEA." 2. Statement of Facts Knolls Atomic Power Laboratory ("KAPL") manages and operates a federally-owned research and development laboratory under contract with the Department of Energy ("DOE"). In fiscal year 1996, KAPL was required by DOE to reduce its staffing levels by 108 positions. In addition, according to the company, because it was necessary to hire a number of new employees to perform new work, KAPL needed to eliminate 30 additional positions. To meet these needs, KAPL instituted a voluntary buy-out program for employees with non-critical skills and at least 20 years of service; 107 employees left the company under this program. KAPL then initiated an involuntary reduction in force ("IRIF") to terminate 31 additional employees. Such employees would hold positions that KAPL had determined to be "excess" and would be selected from units that were already over budget. 185 F.Supp.2d at 202; 381 F.3d at 63. To identify employees for the IRIF, managers in over-budget units were asked to rate their employees from 0 to 10 on three factors – performance, flexibility, and criticality of their skills – and add in up to 10 points for years of service. Tests for "flexibility" included whether the employee's documented skills could be used in other assignments at the Lab that would add value to current or future work and whether the employee was "retrainable for other Lab assignments." "Critical skills" were skills critical to continuing work at the Lab as a whole, and included consideration of whether the skill was a "key technical resource" and whether it was readily accessible within the Lab or from the external market. 381 F.3d at 63-64. Employees were then placed on matrices by category of excess skill and ranked by numerical score. Employees with the lowest scores were identified for lay-off. Id.; 185 F.Supp.2d at 202. Under this system, only one of the 31 employees selected for layoff was under the age of 40, although approximately 40% of the workforce was under 40. See 381 F.3d at 65. Managers doing the scoring were told to check for race, sex and age bias by conducting an "adverse impact" analysis under EEOC's 4/5 rule, but several managers stated that they received no training in avoiding age discrimination. Id. at 64, 77. A human resources representative also purportedly conducted an adverse impact analysis, but she simply compared the average age of the workforce before and after the IRIF. In addition, a review board considered the accuracy of the results, but it did not look at age discrimination issues. Finally, KAPL's general manager and chief counsel checked the layoff lists, but only to the extent of verifying the math and spot-checking some decisions "to see if there was a legitimate nondiscriminatory reason" for the selection. Id. at 65. Plaintiffs filed suit challenging their terminations under the ADEA and state law, alleging claims under disparate impact and disparate treatment theories. Their expert determined that, even assuming the matrices were drawn up properly, the odds of 30 older workers being laid off by chance were approximately 1 in 73, and the results were statistically significant. Id. at 65. The expert further determined that the subjective criteria, "criticality" and "flexibility," were chiefly responsible for determining who was RIF'd and that the review procedures did not offer adequate protection to prevent managers' prejudices from influencing the outcome. Id. The disparate impact claim was submitted to the jury under an evidentiary framework consistent with Wards Cove Packing Co. v. Atonio, 490 U.S. 642, 659 (1989). See 381 F.3d at 73-74. In response to interrogatories, the jury found that plaintiffs had "‘proven that a specific employment practice of the defendants, . . . although non-discriminatory on its face, had an adverse impact on the plaintiffs because of their ages'; that defendants failed to ‘articulate[] a business justification for selecting the plaintiffs for termination'; that plaintiffs had proven ‘that an alternative practice would have been equally effective in achieving the defendants' legitimate employment goals as the method actually followed by the defendants' and that defendants acted willfully." 381 F.3d at 67. Accordingly, pursuant to the district court's instructions, the jury found for the plaintiffs on their disparate impact claims. The jury found for defendants on the disparate treatment claims. Id. 3. Court of Appeals Decision This Court affirmed. Rejecting defendants' challenge to ADEA disparate impact claims generally, the Court reaffirmed its precedent holding that such claims are cognizable. 381 F.3d at 69- 71. The Court then addressed defendants' specific arguments with respect to liability. In particular, the Court held that plaintiffs adequately identified a specific employment practice – the "unaudited and heavy reliance on subjective assessments of ‘criticality' and ‘flexibility'" – and proved that it caused the alleged adverse impact. Id. at 74-75. The Court noted that plaintiffs' expert found that "managers' judgments on flexibility and criticality had the greatest impact on the persons selected for layoff" and that the IRIF process was flawed in two major respects: "the degree of subjective decision making" that individual managers had in scoring these criteria, and KAPL's failure to audit for that tendency. Id. at 74. The Court also determined that, contrary to the jury's finding, defendants offered a "facially legitimate business justification for the IRIF and its constituent parts: to reduce its workforce while still retaining employees with skills critical to the performance of KAPL's functions." Id. However, the Court concluded, plaintiffs nonetheless prevail because there was sufficient evidence to support the jury's finding "‘that another practice would achieve the same result at a comparable cost without having a disparate impact on the protected group.'" 381 F.3d at 74-75 (citation omitted). The Court stated, "[a]t least one suitable alternative is clear from the record: KAPL could have designed an IRIF with more safeguards against subjectivity, in particular, tests for criticality and flexibility that are less vulnerable to managerial bias." Id. at 75 & n.8 (adding that jury could find that KAPL "could have made simple adjustments to the criticality and flexibility criteria that would have led to a nondiscriminatory distribution of layoffs"). The Court also upheld the jury's willfulness finding, reasoning that evidence would support a finding that defendants "acted in reckless disregard of their obligations under the ADEA." Id. at 76-77. ARGUMENT This Court has requested briefing concerning the impact of the Supreme Court's decision in Smith v. City of Jackson, 125 S. Ct. 1536, on this Court's ruling on the ADEA claims presented by the plaintiffs in this case. Because we have not reviewed the lengthy trial record, we do not take a position on whether the jury verdict can be affirmed in light of Smith. We note, however, that Smith clearly agrees with this Court's longstanding position that disparate impact claims are viable under the ADEA, and the standard Smith articulates for establishing that a challenged practice has a disparate impact is consistent with the standard that this Court applied in this case. In addition, Smith establishes that the standard for determining the lawfulness of a practice that disproportionately affects older workers is the RFOA provision. The case also provides some guidance as to the proper interpretation of the RFOA provision which, in our view, constitutes an affirmative defense. 1. The Smith Decision The Supreme Court granted certiorari in Smith to determine "whether the disparate impact theory of recovery announced in Griggs v. Duke Power Co., 401 U.S. 424 [] (1971), for cases under Title VII of the Civil Rights Act of 1964 [42 U.S.C. §§ 2000e et seq.] is cognizable under the ADEA." 125 S. Ct. at 1539. The plaintiffs in Smith, who were senior police and public safety officers, alleged inter alia that the defendant City's pay plan had a disparate impact on older officers because the raises given to newer officers constituted a higher percentage of their salaries than did the raises given to more senior officers. Id. The City explained that the plan was adopted because, after conducting a survey of salaries in comparable communities, the City determined that it needed to raise the salaries of junior officers to make them competitive with comparable positions in the market. Id. at 1546. Nothing in the Supreme Court's decision suggests that plaintiffs questioned the importance of that purpose or proposed any alternative pay plan that would achieve that purpose at comparable cost. Cf. id. (citing MacPherson v. University of Montevallo, 922 F.2d 766, 722 (11th Cir. 1991) (senior professors challenged a similar plan arguing that defendant should raise all salaries). The Court of Appeals dismissed the claim on the ground that "disparate-impact claims are categorically unavailable under the ADEA." 125 S. Ct. at 1540. The Supreme Court disagreed, holding that plaintiffs may in fact challenge facially neutral employment practices under the ADEA although the "scope of disparate-impact liability under the ADEA is narrower than under Title VII" as amended by the Civil Rights Act of 1991, Pub. L. 102-166, 105 Stat. 1071 (1991). Id. at 1544-45. In holding that such claims are viable, the Supreme Court relied in large part on the parallel prohibitory language and the common purposes of Title VII and the ADEA. See 125 S. Ct. at 1541- 45. Accord McKennon v. Nashville Banner Pub. Co., 513 U.S. 352, 358 (1995) (statutes share "common substantive features" and "common purpose: ‘the elimination of discrimination in the workplace'") (quoting Oscar Meyer & Co. v. Evans, 441 U.S. 750, 756 (1979)). The Court noted that, in passing the ADEA, Congress was concerned that application of facially neutral employment standards, such as a high school diploma requirement, may "unfairly" limit the employment opportunities of older workers. 125 S. Ct. at 1541 n.5 (quoting Report of the Sec'y of Labor, The Older American Worker: Age Discrimination in Employment 21 (1965), reprinted in U.S. EEOC, Leg. History of the ADEA (1981)) ("Wirtz Report"). The Court observed that there is a "remarkable similarity between the congressional goals" the Court cited in Griggs, 401 U.S. at 430, in holding that disparate impact claims were viable under Title VII, "and those present in the Wirtz Report." 125 S. Ct. at 1541 n.5. At the same time, however, the Court identified two key textual differences that affect the relative scope of disparate impact liability under the two statutes. First, the ADEA contains the RFOA provision (29 U.S.C. § 623(f)(1)), which has no parallel in Title VII and precludes liability for actions "otherwise prohibited" by the statute "where the differentiation is based on reasonable factors other than age." 125 S. Ct. at 1544. Second, in reaction to the Supreme Court's decision in Wards Cove, 490 U.S. at 659, which "narrowly construed the employer's exposure to liability on a disparate-impact theory," Congress amended Title VII, but not the ADEA, to "expand the coverage of Title VII." 125 S. Ct. at 1544 (citing Civil Rights Act of 1991, § 2, 105 Stat. 1071). Accordingly, the Court stated, "Wards Cove's pre-1991 interpretation of Title VII's identical language remains applicable to the ADEA." Id. at 1544-45. In the Court's view, these textual differences indicate that Congress intended to allow employers to avoid liability for using practices with a disparate impact based on age more readily than, for example, on race or sex. Id. at 1545. The Court reasoned that more limited coverage may make sense under the ADEA because, although society may perceive that variations between older and younger workers' abilities are "greater" than they actually are, age, unlike race or sex, nevertheless "not uncommonly has relevance to an individual's capacity to engage in certain types of employment." Id. Having thus held that disparate impact theory is available under the ADEA and explained how it resembles and differs from disparate impact theory under Title VII, the Smith Court applied its analysis to that case and rejected the disparate impact claims on the merits. Initially, the Court held that plaintiffs failed to satisfy Wards Cove's requirement that they identify a "specific test, requirement, or practice within the pay plan that has an adverse impact on older workers." 125 S. Ct. at 1545. Furthermore, the Court stated, "it is also clear from the record that the City's [pay] plan was based on ‘reasonable factors other than age.'" 125 S. Ct. at 1545. Focusing on the relationship between the design and implementation of the plan and its underlying purpose, the Court explained that, after grouping officers by seniority in five ranks, the City set wage ranges for each group based on the results of a survey of salaries in comparable communities and ensured that no officer would receive less than a 2% raise. Id. In addition, the Court observed that in none of the three lowest ranks, where most of the officers were, "did [the officers'] age affect their compensation." Id. at 1545. In the two highest ranks, where all of the officers were over 40, "[t]heir raises, though higher in dollar amount than the raises given to junior officers, represented a smaller percentage of their salaries, which of course are higher than the salaries paid to their juniors." Id. at 1545-46. The Court concluded that the plan, as designed and administered, was a reasonable response to the City's "legitimate" goal of "raising employees' salaries to match those in surrounding communities" so as to retain qualified police officers. Id. at 1546. The Court added that, while "there may have been other reasonable ways for the City to achieve its goals, the one selected was not unreasonable." Id. Unlike the "business necessity test," which was added to Title VII by the 1991 Civil Rights Act and "asks whether there are other ways for the employer to achieve its goals that do not result in a disparate impact on a protected class, the reasonableness inquiry includes no such requirement." Id. 2. Implications for Meacham Smith has implications for this case with respect to both the formulation of plaintiffs' prima facie case and the applicable defense to plaintiffs' disparate impact claim. Regarding the prima facie case, as noted above, the Supreme Court adopted the standard articulated in Wards Cove for establishing that a challenged practice has a disparate impact. That standard is consistent with the standard this Court and the district court applied in this case. Compare 125 S. Ct. at 1545-46 (plaintiff must identify "the specific employment practices that are allegedly responsible for any observed statistical disparity"), with 381 F.3d at 71 (plaintiffs must "identify the specific policy or policies responsible for the disparate impact"). In addition, this Court held that plaintiffs in this case, unlike the Smith plaintiffs, satisfied the requirements of that standard by proving that the "unaudited and heavy reliance on subjective assessments of ‘criticality' and ‘flexibility'" disproportionately adversely affected older workers. 381 F.3d at 73-74. Once it is established that a challenged practice has a disparate impact, Smith makes clear that the standard for determining whether the practice is lawful is the "reasonable factors other than age", or RFOA, provision, found in § 4(f)(1) of the ADEA, 29 U.S.C. § 623(f)(1). This Court and the district court applied the standard enunciated by the Supreme Court in Wards Cove. We discuss the implications of this difference below. The majority opinion in Smith does not state which party has the burden of proof with respect to whether a practice is an RFOA. However, the language of § 4(f)(1), the structure of the ADEA, the Commission's interpretive regulation, and the legislative history of the Older Workers Benefit Protection Act all compel the conclusion that RFOA is an affirmative defense. The provision is found in the same subsection of the statute as the bona fide occupational qualification ("BFOQ") provision. See 29 U.S.C. § 623(f)(1) ("[i]t shall not be unlawful for an employer . . . to take any action otherwise prohibited [by the statute] 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"). The employer undisputedly bears the burden of proving BFOQ. See Smith, 125 S. Ct. at 1540 n.3 ("ADEA provides an affirmative defense to liability where age is ‘a bona fide occupational qualification reasonably necessary to the normal operation of the particular business'"); Air Line Pilots Ass'n v. TWA, 713 F.2d 940, 954 (2d Cir. 1983) ("Because the BFOQ provision creates an exception to the statute's general prohibition against discrimination based on age, it . . . may be invoked only if an employer proves ‘plainly and unmistakably' that its employment practice meets the ‘terms and spirit' of the remedial legislation."), aff'd in part & rev'd in part on other grounds sub nom TWA v. Thurston, 469 U.S. 111 (1985). The only reasonable construction of § 4(f)(1) as a whole is that the employer likewise bears the burden of proving RFOA. The Commission's regulation similarly interprets RFOA to be an affirmative defense that the employer must establish. See 29 C.F.R. § 1625.7. Moreover, in the legislative history of the Older Workers Benefit Protection Act, Pub. L. 101-433, 104 Stat. 978 (1990), Congress specified that the RFOA and BFOQ defenses place the burden of proof on the employer. Specifically, in Public Employees Retirement System v. Betts, 492 U.S. 158 (1989), the Supreme Court had construed the slightly different language then found in § 4(f)(2) of the ADEA, the provision regarding employee benefit plans, as placing the burden of proof on plaintiffs. See 29 U.S.C. § 623(f)(2)(1990) ("It shall not be unlawful for an employer . . . to observe the terms of . . . a bona fide employee benefit plan"). In response, Congress promptly amended the provision, copying from § 4(f)(1), so that § 4(f)(2) now reads "It shall not be unlawful for an employer . . . to take any action otherwise prohibited [under the statute] to observe the terms of . . . a bona fide employee benefit plan . . . ." 29 U.S.C. § 623(f)(2)(2004). Congress explained that the Commission and a number of courts had read § 4(f)(1) as an affirmative defense, and, because it intended that the new § 4(f)(2) likewise be read as an affirmative defense, it was incorporating "the language of § 4(f)(1) that is commonly understood to signify an affirmative defense (‘it shall not be unlawful . . . to take any action otherwise prohibited by the ADEA' (emphasis added))" into § 4(f)(2) to ensure the intended reading. S. Rep. No. 263, 101 Cong., 2d Sess. 29-30 (1990), reprinted at 1990 U.S.C.C.A.N. 1509, 1535 (emphasis in Senate Report). Defendants may argue, in reliance on Wards Cove, that, despite the plain language of the provision, plaintiffs should be required to bear the burden of proof on the RFOA defense -- that is, to prove that the challenged practice was based on unreasonable non- age factors. Any such argument should be rejected. It is true that Wards Cove construed the judge-made defense to Title VII disparate impact claims as placing the burden of proof on plaintiffs and that the 1991 Civil Rights Act amendments overturning that and other aspects of Wards Cove do not apply to the ADEA. However, Smith made clear that Wards Cove's interpretation of Title VII's pre-1991 language extends only to "identical language" in the ADEA. 125 S. Ct. at 1545. Since Title VII has never contained a provision "identical" or even similar to the RFOA, that provision should be interpreted, like the neighboring BFOQ provision, as an affirmative defense. As for the substance of the RFOA defense, the Supreme Court's analysis of the facts in Smith provides substantial guidance on that question. Specifically, in concluding that the challenged pay plan in Smith was based on reasonable factors other than age, the Supreme Court focused on the importance of the business purpose that defendant identified for the challenged pay plan – the need to maintain competitive salaries in order to attract and retain qualified people – and on whether the plan was reasonably designed and administered so as to attain that stated purpose. Describing the stated goal as "legitimate," the Court held that the method the City adopted and the factors it relied on to achieve that goal were "unquestionably reasonable." 125 S. Ct. at 1546 ("decision to grant a larger raise to lower echelon employees for the purpose of bringing salaries in line with [those] of surrounding police forces was . . . based on a ‘reasonable factor other than age' that responded to the City's legitimate goal of retaining police officers"). Consistent with this analysis, this Court should hold that, to establish an RFOA defense, an employer such as KAPL initially must prove that the challenged employment practice was reasonably designed to further or achieve an important and legitimate business purpose and was administered in a way that reasonably advances that purpose. See Smith, 125 S.Ct. at 1546 (examining the design and administration of challenged pay plan in relation to the defendant's stated business purpose as well as the severity of its impact on the plaintiffs). Aside from the burden of proof, this standard is not unlike the business justification standard in Wards Cove, where the "dispositive issue" was "whether a challenged practice serves, in a significant way, the legitimate employment goals of the employer." 490 U.S. at 659. It is, moreover, not surprising that the standards here and in Wards Cove would resemble one another since the Supreme Court used the term "narrow" to describe the scope of disparate impact liability under the ADEA and under Title VII before the 1991 Civil Rights Act amendments. Compare 125 S. Ct. at 1545 (in light of the RFOA, "the scope of disparate-impact liability under the ADEA" is "narrower" than under Title VII post-1991), and id. (Wards Cove Court "narrowly construed the employer's exposure to liability on a disparate-impact theory"). Turning to this case, the defendants explained that the purpose of the IRIF and its constituent parts was to reduce the workforce while still retaining employees with skills critical to the performance of KAPL's functions. Meacham, 381 F.3d at 74. Since this purpose is important and facially legitimate, the first question is whether the factors or devices KAPL adopted were reasonably designed to further or achieve that purpose and whether they were implemented in a way that was reasonably calculated to advance the stated business purpose. However, the Smith Court also noted that disparate impact theory aims at facially neutral policies that "unfairly" affect a protected class (see id. at 1541 n.5). In assessing the lawfulness of the plan at issue in Smith, the Court noted that none of the plaintiffs received less than a 2% raise under the plan. Id. at 1545. Furthermore, the Court noted, although as a result of the plan, officers over 40 received on average lower annual raises as a percentage of their salaries, plaintiffs in the two top ranks actually received higher raises than younger officers in terms of dollars. 125 S. Ct. at 1545-46. Thus, here, assuming that the challenged practice is found to be designed and implemented to advance KAPL's business objective, the question becomes whether the practice nonetheless "unfairly" limited the opportunity of KAPL's older employees to continue working. See 125 S.C. at 1541 n.5 (one of the purposes of the ADEA which is served by disparate impact liability is to prevent employers from using facially neutral factors that "unfairly" "‘work against the employment of older workers'") (quoting Wirtz Report at 21). In resolving this question, consideration of the alternatives available to the employer is clearly relevant. Under Title VII, as amended by the 1991 Civil Rights Act, if a plaintiff demonstrates that a challenged test or selection device has a disparate impact on a protected class, an "unlawful employment practice" is established if other tests or devices without a similarly undesirable disparate effect would also serve the employer's legitimate interests and the employer "refuses to adopt such alternative employment practice." See 42 U.S.C. § 2000e- 2(k)(1)(A)(ii). In essence, therefore, Title VII requires an employer to adopt and use tests or selection devices with the least disparate impact. The Smith Court contrasted this "requirement" with the RFOA, noting that the ADEA's "reasonableness inquiry includes no such requirement." 125 S. Ct. at 1546. The Court explained that there may be more than one "reasonable" way for an employer to achieve its goal; there is no ADEA liability if what the employer did was reasonable. Id. The Court, however, did not state and, in our view, did not mean that the existence of other alternatives is irrelevant. On the contrary, to the extent that a plaintiff could show that there are other equally effective ways, at comparable cost, of achieving the employer's stated goals with less disparate impact on older employees, that would bear on the reasonableness of the employer's choice. Cf. Watson v. Fort Worth Bank & Trust, 487 U.S. 977, 998 (1988) (evidence of less discriminatory alternative suggests that the challenged practice was the "functional equivalent of a pretext for discrimination"). In its brief below, defendants suggested that the RFOA defense is little different from the affirmative defense under the Equal Pay Act ("EPA") excusing differences in pay where based on "any other factor other than sex." Cf. KAPL's Original Brief at 25-26 (suggesting that EPA's defense resembles RFOA). That is simply wrong. Cf. Smith, 125 S. Ct. at 1544 n.11 (describing as "instructive" the fact that, unlike EPA's defense which may extend even to unreasonable factors, ADEA defense must meet reasonableness standard). Unless the RFOA provision is construed as a limited defense, rather than an unlimited one, employers such as KAPL could freely terminate or otherwise limit the employment opportunities of older workers based – even knowingly – on factors that significantly – or overwhelmingly - disparately affect older workers, even if those practices bear only marginally on some conceivable business purpose. Such a result is clearly contrary to Congress's expressed purpose in the ADEA to "promote the employment of older persons based on their ability" rather than their age. 29 U.S.C. § 621(b). Accordingly, to ensure that this broad purpose is fully effectuated, we urge this Court to hold that disparate impact theory, though narrow, has real meaning under the ADEA. CONCLUSION For the foregoing reasons, the Commission respectfully asks that this Court construe the RFOA defense to a disparate impact claim under the ADEA in accordance with the approach set forth in this brief. Respectfully submitted, ERIC S. DREIBAND General Counsel VINCENT J. BLACKWOOD Acting Associate General Counsel __________________________ BARBARA L. SLOAN Attorney EQUAL EMPLOYMENT OPPORTUNITY COMMISSION 1801 L Street, NW, 7th Floor Washington, DC 20507 (202) 663-4721 CERTIFICATE OF COMPLIANCE In accordance with Federal Rule of Appellate Procedure 32(a)(7)(C), I certify that this brief was prepared using Courier New (monospaced) font, 12 point, and contains 4988 words from the Statement of Interest through the Conclusion, as determined by the Corel Word Perfect 9 word counting program. ____________________________ Barbara L. Sloan CERTIFICATE OF SERVICE I certify that two copies of the foregoing Brief of the Equal Employment Opportunity Commission As Amicus Curiae were sent this 14th day of June, 2005, by express mail, postage prepaid, to: Margaret A. Clemens NIXON PEABODY LLP P.O. Box 31051 Clinton Square Rochester, NY 14604-1051 John E. Higgins NIXON PEABODY LLP 30 South Pearl Street - Omni Plaza Albany, NY 12207 John B. DuCharme BERGER & DUCHARME, LLP 1023 Route 146 Clifton Park, NY 12065 Mark S. Dichter MORGAN LEWIS & BOCKIUS 1701 Market Street Philadelphia, PA 19103 Laurie A. McCann AARP FOUNDATION LITIGATION 601 E Street, N.W., Fourth Floor Washington, DC 20049 Cathy Ventrell Monsees LAW OFFICES OF CATHY VENTRELL-MONSEES 3208 Flushing Meadow Terrace Chevy Chase, MD 20815 _________________________________ Barbara L. Sloan