Supreme Court Victory For Employers Will Be Short-Lived, Experts Predict

Mr. McCalmon said the political backlash is stronger than that following Ledbetter v. Goodyear Tire & Rubber Co., an employment case decided in favor of employers early in mid-2007.

The Ledbetter case, involving a 180-day limit for bringing employment actions over discriminatory pay decisions, prompted the first action by Congress after President Barack Obama was inaugurated, he noted. (The Lilly Ledbetter Fair Pay Act clarifies that discriminatory pay decisions occur each time compensation is paid–essentially, with every paycheck.)

Already, Sen. Patrick Leahy, D-Vt., issued a public statement expressing his displeasure with the Gross ruling along these lines. "The decision…reminds me of the court's wrong-headed ruling in Ledbetter. In fact, it was these same five justices who misconstrued an employment discrimination statute in that case," Sen. Leahy said.

Mr. McCalmon, who is also founder of The McCalmon Group–which works with carriers in the delivery of specialty risk control services–has little doubt that Congress will pass a law to address Gross. "I think it's going to happen," he said.

"There is so much political capital" to be won in promising to restore rights the court took away, he reasoned, noting that one outcome of the Gross decision that is likely to prompt legislative action is that it treats older workers differently than other protected classes that do not have a "but for" burden of proof in discrimination cases.

But as lawmakers react to the seeming unfairness of this different treatment when they pass a new law, he asked, "Are they going to restore things to normal"–in line with procedural rules of cases alleging race, age, religious or sex discrimination–"or are they going to send a very strong message to the Supreme Court…[to] make it easier to bring [ADEA] claims?"

"That is the real risk," he said. "I am very nervous about it."

Scott Macey, senior vice president of government affairs for Aon Consulting in Somerset, N.J., was less emphatic about potential congressional action, but he, too, said he foresees that possibility.

"It wouldn't surprise me to see those who believe employers should be more liable for mixed-motive type cases," including plaintiffs lawyers and associations that represent workers, going to Congress "to seek to overturn this decision," Mr. Macey said. "We may or may not have heard the final word on this issue."

The underlying case leading to the Supreme Court's ruling in Gross involved Jack Gross, an employee of FBL Financial, who was demoted from his position as a claims administration director in 2003. Mr. Gross was 54 at the time. He filed suit in a district court in April 2004, alleging that his reassignment to the position of claims project coordinator violated the ADEA.

While Mr. Gross presented evidence at trial to suggest that his demotion was based at least in part on his age, FBL defended its decision on the grounds that it was part of a corporate restructuring and that Mr. Gross' new position was better suited to his skills.

Writing for the majority in the Supreme Court ruling, Justice Thomas said: "The burden of persuasion does not shift to the employer to show that it would have taken the action regardless of age, even when a plaintiff has produced some evidence that age was one motivating factor."

Mr. McCalmon and Mr. Macey explained that the situation in the underlying case is referred to as a "mixed-motive" case, where unlawful discrimination is alleged, but there are also legitimate reasons for taking an employment action–such as poor job performance or failure to attend training.

They noted that in 1989, in Price Waterhouse v. Hopkins, the Supreme Court ruled on mixed-motive claims that include allegations of unlawful discrimination in violation of Title VII, reaching a very different conclusion.

Title VII of the Civil Rights Act of 1964 applies to cases of discrimination based on race, color, religion, sex or national origin, and in Price Waterhouse the court said the plaintiff has the burden of showing that Title VII discrimination was among the reasons for an adverse action like a termination.

"Then the employer is given the right to an affirmative defense, where they come forward and say, 'We would have terminated this person anyway even though there were some illegal reasons as part of it,'" Mr. McCalmon explained.

"The Supreme Court is now saying ADEA is ADEA, and Title VII is Title VII, and they are deserving of very separate interpretations," Mr. Macey added, noting that a few years after the Price Waterhouse decision, Congress clarified the 1964 Civil Rights Act to align the language of the statute with the outcome of the case.

Referencing that change, Justice Thomas wrote in Gross that "Congress neglected to add such a provision to the ADEA when it amended Title VII" in this regard, "even though it contemporaneously amended the ADEA in several ways."

"We cannot ignore Congress' decision to amend Title VII's relevant provisions but not make similar changes to the ADEA," he wrote. "When Congress amends one statutory provision but not another, it is presumed to have acted intentionally."

The timing of the Gross decision would appear to be beneficial to employers and their EPL insurers, who are currently facing a significant jump in age discrimination claims arising from a growing number of layoffs tied to the economic downturn.

Lawyers and insurance experts speaking to NU last month before the Supreme Court ruling noted that while there are some mitigating factors keeping a lid on the severity of EPL claims, frequencies are climbing. As evidence, they pointed to statistics for 2008 released by the U.S. Equal Employment Opportunity Commission earlier this year, which show that age discrimination charges grew more than any other category, jumping nearly 29 percent to over 24,000.

In contrast, the biggest category of employment discrimination charges, relating to race, grew only 11 percent.

"We call it 'the baby boomer generational issue' as we underwrite," said Cathy Padalino, vice president and EPL product manager for Chubb & Son in Warren, N.J., noting that a rise in claims from aging baby boomers would be a factor for EPL insurers to deal with, even absent current economic conditions.

Ms. Padalino, who spoke to NU in late May, added that in today's economy, "just simply based upon the demographic makeup of the baby boomer generation, the odds are higher and higher as the clock ticks that someone [losing his or her job] is going to be of [that] protected class."

Mr. McCalmon said employers are seeing more age discrimination claims because of the recession, "so in the short-term, the Gross decision helps because it requires employees to show direct evidence that they were terminated because of age. That's hard to prove."

For discrimination claims of all types, "you rarely find a smoking gun memo that says, 'fire this person because he's over the age of 40,'" he noted. "What plaintiffs have are strong beliefs that [discrimination is] the reason [and] circumstantial evidence"–perhaps they were part of a layoff that focused on high salaries, and all the high-salaried workers were over 40, or a manager told them verbally the company wanted "new blood" but later denies having said it.

"None of that is truly direct evidence," Mr. McCalmon said, adding that most cases are mixed-motive. "The decision says it doesn't matter if there are other motives. Age has to be the primary reason," he noted.

"That is really strong for employers," he said, adding that "the problem is it's not going to last very long," referring to likely Congressional action.

Sen. Leahy noted that Justice Stevens, in a dissenting opinion for the court, called the majority opinion "unnecessary lawmaking."

Justice Stevens, who was joined by Justices Souter, Ginsburg and Breyer, wrote that ADEA "makes it unlawful for an employer to discriminate against any employee 'because of' that individual's age," adding that the "most natural reading of this statutory text prohibits adverse employment actions motivated in whole or in part by the age of the employee."

Noting that the Supreme Court rejected the "but for" standard in Price Waterhouse, "a case construing identical language in Title VII," and Congress rejected it again when it amended Title VII two years later, Justice Stevens said: "Given this unambiguous history, it is particularly inappropriate for the court, on its own initiative, to adopt an interpretation of the causation requirement in the ADEA that differs from the established reading of Title VII."

"I disagree not only with the court's interpretation of the statute, but also with its decision to engage in unnecessary lawmaking," he wrote.

Justice Thomas has a different view on Price Waterhouse. "It is far from clear that the court would have the same approach were it to consider the same question today in the first instance," he wrote.

Mr. McCalmon said the Price Waterhouse standard is viewed as equitable to both employees and employers. By allowing employers to put forth affirmative defenses, it gives them a chance to get a case out on summary judgment before going to a trial, he explained.

"On age discrimination cases, you don't want to go to trial, because it's the one protected class that everyone identifies with–we're all going to get old," he said. "It plays universally."

Mr. Macey noted while the Gross decision as it stands helps employers facing individual cases alleging age discrimination, class actions alleging disparate impact arising from lawful activities are not impacted.

Essentially, these suits allege the employer did something for reasons other than discrimination–like making a change to a pension plan–that had a consequential adverse impact on older workers, he explained.

(For a related article, see "Pink Slips Won't Bury EPL Insurers, But Employment Exposures Still Growing.")