Third Circuit Decision Creates Split on Important ADEA Issue

February 23, 2017
Joseph E. Abboud

The federal Age Discrimination in Employment Act (ADEA) prohibits age discrimination against individuals who are 40 or older, granting important protections to millions of American workers.  Since the ADEA’s enactment in 1967, courts have confronted a variety of questions about the extent and application of the law.  One question that remains unsettled is whether the ADEA applies only when a 40+ worker has been discriminated against in favor someone else who is under 40, or if the law also prohibits employers from discriminating in favor of individuals who are over 40 but younger than their colleagues.  In other words, does an employer violate the ADEA when it treats an older employee worse than her younger colleague, if both employees are in the class of protected persons 40 or older?

In a 1996 case, O’Connor v. Consolidated Coin Caterers Corp., the Supreme Court held that “subgroup” discrimination of older workers in favor of their younger colleagues who are also over 40 constitutes age discrimination, even though the discrimination happens entirely within the protected class.  While O’Connor made clear that subgroup age discrimination claims are viable under the ADEA when a younger 40+ worker is favored over an older one, lower federal courts continue to disagree about certain aspects of subgroup discrimination.  For example, what if an employer does not directly target one employee but implements a facially age-neutral policy that in fact harms all employees who are 50 and older but not those younger than 50? Does the ADEA prohibit this policy because it has a “disparate impact” on an older subgroup within the protected class? Until recently, every federal appeals court to address this question has decided that the ADEA does not prohibit such policies.  On January 10, 2017, the Third Circuit Court of Appeals decided otherwise, creating a split among federal appeals courts that will likely draw Supreme Court review.

About Karlo v. Pittsburgh Glass Works LLC

In the Third Circuit case Karlo v. Pittsburgh Glass Works LLC., a group of fired employees over age 50 sued their employer, Pittsburgh Glass Works, for age discrimination following the layoff of 100 workers in 2009.  During the trial for their ADEA claim, the employees sought to present statistical evidence showing that the layoff disproportionately affected those 50 and over.  The trial court refused to accept this evidence into the record because it was related only to the impact on a subgroup of ADEA-protected workers, and did not establish any discriminatory effect on the entire class of workers 40 and over.

On appellate review of this ruling, the Third Circuit acknowledged that the trial court’s decision was consistent with reasoning of the Second, Sixth, and Eighth Circuit Courts of Appeal. These courts have all held that employees bringing disparate impact claims under the ADEA cannot divide the protected class into subgroups but must prove that all employees 40 and over were disproportionately harmed compared to those younger than 40. In coming to this conclusion, these courts pointed to the practicality of allowing subgroup disparate impact claims, observing that if employees are allowed to slice and dice statistical data any way they see fit, almost any decision an employer makes could be shown to have a disparate impact on some subgroup of older workers.

The Third Circuit’s Opinion

Despite the decisions from three other circuit courts, the Third Circuit nonetheless overturned the ruling of the trial court in Karlo and held that the plaintiffs were allowed to present evidence that employees over 50 were disproportionately harmed by the 2009 layoffs.  In explaining its decision, the court acknowledged that it was departing from the rule set out by three sister circuits, a division that federal appellate judges generally try to avoid. The Third Circuit opinion explained that it was unable to join the other courts on this question for two reasons. First, the court did not share their concern about the practical problems that would supposedly follow from allowing statistical evidence of subgroup discrimination at trial.  More importantly, the court found that the plain text of the ADEA and the Supreme Court’s holding in O’Connor required recognition of subgroup disparate impact claims. Simply put, the ADEA prohibits discrimination on the basis of an employee’s age, not on the basis of an employee being a member of the class of people aged 40 or older. According to the Third Circuit, any attempt to prevent subgroup disparate impact claims for policy reasons, such as concerns for employer liability, amounts to an effort to amend the ADEA itself, which Congress alone may do. Quoting the Supreme Court, the Third Circuit stated “We have read it the way Congress wrote it.”

Although Pittsburgh Glass Works has not yet sought review of the Third Circuit ruling from the Supreme Court, the circuit split created by the decision can only be resolved by the Supreme Court and the issue will likely end up before that Court before long.  Should that happen, older workers will be best served if the Supreme Court follows the Third Circuit’s reasoning on this important federal statute, and rules that employees are permitted to show age discrimination in whatever form it takes.

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