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Age Article

According to a study conducted by the California Budget Project, the proportion of Californians between the ages of 65 and 69 jumped from 20 percent in 1995 to 27 percent in 2006. The trend is attributed to improvements in health and longer life expectancy, coupled with a diminishment in retirement security. According to the federal Administration on Aging, people 65 and older represented 12.4% of the population in the year 2000 but are expected to grow to be 20% of the population by 2030.

Although the federal Equal Opportunity Commission (EEOC) reports that age bias claims have dropped from 19,921 claims in 2002 to 16,548 claims in 2006, the fact that an increasing number of Californians are leaving the workforce at a later age will certainly pose age bias challenges for employers. Moreover, the federal statistics do not reflect the number of age bias claims that are working their way through the state courts.

The Circuit City Case

While reading the Los Angeles Times a few weeks ago, I came across an article that seems to indicate that it may not be the frequency, but rather the nature of age bias claims that may pose serious challenges to employers in the coming years. The article, in the April 6, 2007 issue of the L.A. Times, details a lawsuit filed by three older employees in Los Angeles County Superior Court against their former employer, Circuit City.

In the claim filed on April 2, 2007, the former employees, aged between 57 and 66, allege that Circuit City violated California’s fair employment law when it laid them off because they were earning too much. While new workers at Circuit City are said to earn less than $10 an hour, at least one of the plaintiffs in this action was earning $15.13 an hour, after more than 17 years of employment. The displaced workers were told that they could reapply for jobs with the company after ten weeks, but would earn lower wages if hired. The workers are seeking class action status.

Although the plaintiffs in this case face a legal hurdle because of a recent appellate decision that upheld Circuit City’s requirement that employee arbitrate employment disputes, their claim could have serious implications for California employers, should it be adjudicated in court.

U.S. Supreme Court Decision Had Huge Impact On Age Claims

Under federal law, employees aged 40 and over are protected from age discrimination by the Age Discrimination in Employment Act, or “ADEA” for short. What this means is that employers cannot take adverse action against an employee, such as refusal to hire, demotion, or termination, simply because of the employee’s age. Until recently, in order to succeed on an age discrimination claim under ADEA, an employee was required to demonstrate that the employer intentionally discriminated against him/her in hiring, promotion, or firing. An example of this would be a job posting that states that an employer will not hire anyone over 40 years old.

In 2005, the Supreme Court, in its holding in Smith v. City of Jackson, 544 U.S. 228 (2005), found that ADEA authorizes recovery under a disparate impact theory of age discrimination as well. This ruling now allows plaintiffs to make a case for age discrimination not only when discrimination is intentional, as in the example above, but also when older employees are impacted disproportionately by a certain policy. This case allows a claimant (or claimants) to recover if it can be shown that an employer used a neutral business practice (not motivated by discriminatory intent) that had an adverse impact on people age 40 and over. An example of an employment policy that has a “disparate impact” on older employees is the one alleged in the Circuit City case, where the employer fires employees once they make too much.

The dilemma for employers is that in an employment situation where salary is based on seniority, those employees who have been there longest will be the ones who earn the most. Generally, those employees will be older than the employees who make less than them. Because of the Supreme Court ruling in Smith, employers are now subject to a litany of age bias claims under the federal ADEA that they were not open to previously. In fact, many employment lawyers have noted a trend in filing of age-bias disparate impact claims following the Smith decision.

California Highly Protective of Older Workers

In California, however, employers have been open to these kinds “disparate impact” claims all along. That is because California’s fair employment law, the Fair Employment and Housing Act, or “FEHA” for short, has long provided more protection for employees age 40 and over than the federal ADEA and is considered to be on the cutting edge of providing greater protections to older workers.

For example, in 2002, FEHA was amended to clarify that the use of salary as the basis for termination may constitute age discrimination if older employees are disproportionately impacted. FEHA was amended effective January 1, 2003 to state that it is unlawful in California for an employer to discriminate on the basis of age when making decisions as to whether to grant an employee certain compensation, benefits and privileges.

The amendment was in direct response to a California Supreme Court case, Esberg v. Union Oil Co. (2002) 28 Cal.4th 262 which held that FEHA did not prohibit employers from considering age in determining whether to furnish employee benefits or privileges to an employee. FEHA allows employees to bring claims based on the theory of disparate impacts as well as a theory of intentional discrimination.

Thus, the Smith decision, while significant for employers in states where the state fair employment law mirrors federal law, was less important in California because our state law has long allowed for a claim on this theory. Nonetheless, Smith did open employers up to these kinds of claims under the federal ADEA, where previously, employees in California were limited to bringing a disparate impact case under FEHA, the California law.

Potential Impacts of the Circuit City Case

Interestingly, to my knowledge, there is no California case on record in which an employee has used the theory of disparate impact to allege age discrimination under FEHA. While these case may currently be proceeding in trial courts in California, there are no cases that have resulted in a published decision at this time.

Luckily, or not so luckily, we will soon find out how open California courts really are to this type of claim when the Circuit City case is finally heard. Based on the plain language of FEHA, it would appear that if the plaintiffs in the Circuit City case can provide statistical information demonstrating that those who lost jobs in the recent round of layoffs were disproportionately older employees, they will have viable claims for recovery under FEHA.

The Circuit City case is very important for employers to watch, because it may have a serious impact for employers in California no matter how it is decided. If the plaintiffs are successful, it will be the first case under FEHA where plaintiffs were able to recover on an age discrimination claim using a theory of disparate impact. Perhaps more importantly, if the plaintiffs are not successful in using this theory, in light of Smith, we may see employees bringing their disparate impact claims under the federal ADEA and dragging employers into federal court to allege age discrimination. We will be paying careful attention to the Circuit City case as it moves through the court so be sure to check back on our website for updates!

What Should Employers Do?

While the impact of the Circuit City case will not be known for some time, employers wishing to avoid potential age bias claims from employees should consider the following:

• Review policies on disciplinary practices, pay and benefits to determine whether they may have a disparate negative impact on older employees.
• Provide all employees with information on their right to work beyond compulsory retirement age, where applicable.
• Before making layoffs, determine whether a disproportionate number of those terminated will be age 40 or over.
• In making layoffs, consider the potential impact that the negative publicity of a discrimination claim may have on your business.
• Embrace older employees, especially those who have been employed for a considerable amount of time – they have cultivated valuable skills and demonstrated loyalty.