Published May 2005

Supreme Court tweaks
workplace rule book

Being a good manager today isn’t easy. Among other things, it means keeping up with changes — and not just in technology, even though that can sometimes seem like a full-time job in itself.

But like coaches in sports, we also have to be aware of changes in the rules of the game. Sometimes these changes affect accounting, taxation or operational matters such as shipping or waste disposal. At other times, changes in the law affect the work environment itself by reshaping the relationship between management and workers.

A recent decision by the U.S. Supreme Court, for example, will affect how older workers are treated in the workplace. In the case of Smith v. City of Jackson, Miss., the court both clarified the existing law — the Age Discrimination in Employment Act of 1967 (ADEA) — and expanded its scope. There is still room for some uncertainty as to how these legal shifts will play out in the workplace, but managers should be aware that the rules have changed.

The two key elements of this case are math and motivation. It seems that the city of Jackson, believing that its starting salaries for police officers were not competitive with those offered in surrounding communities, implemented a pay raise to attract more candidates.

The raise was structured so that every police officer received a raise, and the more senior officers received larger raises in terms of dollar amounts. Because the entry-level and junior officers had lower salaries to begin with, though, their raises were a higher proportion of their previous pay.

The senior police officers believed that this was unfair because it altered the relative wage structure in a way that an across-the-board raise of some percentage would not. Because they preserve the “relative pay status,” across-the-board pay raises are very common in workplace situations, particularly those involving unionized workers, where seniority issues are paramount in human resource decisions. Quite honestly, management often uses across-the-board pay increases precisely to avoid just the kind of discontent and dispute that the city of Jackson found itself in.

Still, even in today’s often contentious world, not every workplace disagreement about what is fair ends up before the U.S. Supreme Court. This one ended up there because of the particular legal argument made about how the pay raise affected older workers.

The senior police officers sued under the ADEA, claiming, according to the court, “… That they were adversely affected by the plan because of their age.” They lost their case in district court and again in federal appellate court. The Circuit Court of Appeals, though, even though it ruled against the senior police officers’ argument, did so in a way that opened the door to similar cases.

The ADEA, which covers workers over 40, clearly prohibits age discrimination in the form of what is called “disparate treatment,” which means setting up hiring policies or workplace rules, etc., that intentionally treat older workers differently. If you decide that your business wants to establish compulsory retirement at age 45, for example, you had best have a mighty good reason or be prepared to defend yourself in court.

The important legal issue that was being argued in Smith v. City of Jackson, though, was whether or not the ADEA allowed what are called “disparate impact” claims. In workplace situations, these arise when a policy adversely affects a group of people — and it doesn’t matter whether the employer meant to do so or not. Motivation is not an issue; only effect, or impact.

The U.S. Supreme Court has now clarified that issue by ruling that age-related disparate-impact cases can be filed under the ADEA, much as they are filed for race, color, religion, sex or national origin reasons under civil rights laws.

But while that expanded the scope of the ADEA, the court also ruled that the narrower language of the ADEA still applies to such cases. Unlike the civil rights laws, the ADEA specifically allows “otherwise prohibited action where the differentiation is based on ‘reasonable factors other than age’” (RFOA in lawyer shorthand).

As if to make its point that it isn’t as easy to prove disparate-impact in age-discrimination cases, the Supreme Court ruled — as had the appeals court — that while the Jackson police officers had the right to file their case under the ADEA, their argument didn’t meet the tougher standard in that law. So the court ruled against them, and they ended up with nothing other than the satisfaction of opening the door for others to file claims.

What we should take away from this Supreme Court decision is that before we announce a new workplace policy decision, we should consider how it will affect our workers. And if it affects older workers more than the others, we should be aware that it could open us up to lawsuits and be careful to document just how we came to the decision, and why we felt it was necessary. There is no such thing as total insulation from lawsuits, but doing things right is a big help.

James McCusker, a Bothell economist, educator and small-business consultant, writes “Your Business” in The Herald each Sunday. He can be reached by sending e-mail to otisrep@aol.com.

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