By Gerald L. Maatman, Jr., Michael L. DeMarino, and Rebecca S. Bjork

Seyfarth Synopsis: Although back pay has been awarded in Age Discrimination in Employment Act (ADEA) cases for quite some time, few courts have specifically addressed whether these damages are discretionary or mandatory.  In EEOC v. Baltimore County., No. 16-2216, 2018 WL 4472062, at *1 (4th Cir. Sept. 19, 2018), the Fourth Circuit answered this straightforward question and held that retroactive monetary awards, such as back pay, are mandatory legal remedies under the ADEA. Because the ADEA incorporates the provisions of the Fair Labor Standards Act (FLSA) that make back pay mandatory, the Fourth Circuit concluded that district courts lack discretion to deny back pay once ADEA liability is established. The key takeaway from this decision is that now more than ever, employers should take steps to minimize exposure to ADEA violations and, if ADEA liability is established, to explore available set offs to back pay awards.

Background

In EEOC v. Baltimore County, the EEOC brought a lawsuit on behalf of two retired corrections officers and a group of similarly-situated employees at least 40 years of age. The EEOC alleged that the County’s pension plan, known as the Employee Retirement System (“ERS”), required older employees to pay more toward their retirement than younger employees, for the same retirement benefits.

The district court granted summary judgment in favor of the EEOC, finding that because the different contribution rates charged to different employees is explained by age rather than pension status, age is the “but-for” cause of the disparate treatment, and the ERS violated the ADEA. On appeal, the Fourth Circuit affirmed and remanded the case to the district court for consideration of damages. We previously blogged about the district court’s decision here and the Fourth Circuit’s decision here.

On remand, the district court considered the EEOC’s claims for retroactive monetary relief –  which was in the form of back pay. Ultimately, the district court rejected the EEOC’s bid for these damages, concluding that it had the discretion under the enforcement provision of the ADEA, 29 U.S.C. § 626(b), to wholly deny back pay. Thereafter, the EEOC appealed.

The Fourth Circuit’s  Decision

On appeal, the County argued that the district court properly exercised its discretion under the ADEA, 28 U.S.C. § 626(b), to deny the EEOC an award of back pay. The Fourth Circuit rejected this contention. Instead, the Fourth Circuit agreed with the EEOC that because back pay is a mandatory legal remedy under the FLSA, and because the ADEA incorporates the FLSA’s liability provisions, the district court lacked the discretion to decline to award back pay.

Specifically, the Fourth Circuit reasoned that “[b]ecause Congress adopted the enforcement procedures and remedies of the FLSA into the ADEA, we construe the ADEA consistent with the cited statutory language in and judicial interpretations of the FLSA.” Id. at *3.  “Back pay,” the Fourth Circuit continued, “is, and was at the time Congress passed the ADEA, a mandatory legal remedy under the FLSA.” Id. The Fourth Circuit reinforced this conclusion, noting that the ADEA’s “legislative history further suggests that Congress consciously chose to incorporate the powers, remedies, and procedures of the FLSA into the ADEA.” Id.

Implication For Employers:

This long-running case demonstrates the complexities and potential pitfalls employers face while trying to navigate the ADEA. Employers should take care to review and consider their justifications for retirement plans that have variable contribution rates for employees based on age.  More broadly, this decision demonstrates that damages for ADEA violations can quickly add up if back pay awards are permanently on the table.

By Paul Galligan and Meredith-Anne Berger

Seyfarth Synopsis: The Third Circuit has shaken up long-standing precedent and created a split among the circuits, such that now employers should not only evaluate its employment decisions for the effect on individuals over forty and under forty, but within subgroups of those over forty as well.

Last week, in Karlo v. Pittsburgh Glass Works, No. 15-3435, the Third Circuit extended protections under the Age Discrimination in Employment Act (ADEA) to include discrimination based on age, regardless of whether the employees alleged to have been favored were also over forty.

The court’s precedential opinion held that a “subgroup” of employees over fifty had a cognizable claim under ADEA because the statute prohibits disparate impact based on age, and not whether the plaintiffs and comparators were just over forty. The court looked to the language in the statute, which “makes it unlawful for an employer to adversely affect an employee’s status . . . because of such individual’s age.”

The court examined the Supreme Court’s opinion in O’Connor v. Consolidated Coin Caterers Corp., 517 U.S. 308 (1996), which held that the ADEA proscribes age discrimination, not forty-and-over discrimination.  Applying this interpretation to ADEA’s disparate impact provision, court held that it is “utterly irrelevant that the beneficiary of age discrimination was also over the age of forty.”  The court further held “the appropriate disparate impact statistics should be guided by the trait protected by the statute, not the population of employees inside or outside the statute’s general scope.”

The court noted that statistical evidence is not at risk of manipulation when used in the context of subgroups. So long as evidence is reliable under Daubert and can survive summary judgment if it indicates a “significant disparity,” as in any other disparate impact case, claims under ADEA will be upheld in accordance with the statute.  Furthermore, employers have a defense in that the employment decision was due to a “reasonable factor other than age.”

In so holding, the court created a circuit split, as its holding was contrary to decisions in the Second (Lowe v. Commack Union Free Sch. Dist., 886 F.2d 1364 (2d Cir. 1989)), Sixth (Smith v. Tenn. Valley Auth., 924 F.2d 1059 (6th Cir. 1991)), and Eighth (EEOC v. McDonnell Douglas Corp., 191 F.3d 948 (8th Cir. 1999)) Circuits.  In Karlo, the court held that these decisions were based on policy considerations, rather than the plain meaning of the statute.

Despite its precedential holding, the court affirmed the district court’s decision to decertify the collective action because the plaintiffs failed to show they were sufficiently “similarly situated” to be appropriate for class treatment.

The Third Circuit has shaken up long-standing precedent and created a split among the circuits, such that now employers should not only evaluate its employment decisions for the effect on individuals over forty and under forty, but within subgroups of those over forty as well. Now, in the Third Circuit, simply showing that employees over forty were not subject to the allegedly adverse action may not be sufficient to defeat a disparate impact claim.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Workplace Counseling & Solutions Team or Workplace Policies and Handbooks Team.