the 2004 EEOC rule. In March 2005, a federal district court in Pennsylvania held the rule to be unlawful. In September 2005, however, the district court reversed itself and upheld the EEOC rule based on a June 2005 U.S. Supreme Court decision Brand X. AARP has appealed this ruling and the district court has ordered that EEOC’s new rule not go into effect as long as this court battle is under way. Hence, EEOC’s prior rule, which is consistent with the Erie County decision, remains in effect. AARP believes that unless and until the district court’s second decision is sustained by the courts, employers should follow the Erie decision.
Disparate Impact Historically, most age discrimination cases have been decided based on evidence—such as verbal or written statements—that the employer intentionally created or implement- ed discriminatory policies.
For decades, however, some age bias cases have raised the issue whether certain employ- er policies may be determined to be discrimi- natory, even if there is no evidence that the discrimination was intentional. These cases usually involve large numbers of employees, and contentions that the impact of an employ- er policy—neutral on the surface in regard to age—falls more heavily on older workers than on younger ones without a sound business rationale.
In one major case (under Michigan anti-dis- crimination law), employees of the Ford Motor Company alleged that the company’s system of ranking employees in their performance review system made workers over 40 years old much more vulnerable than their younger colleagues to being terminated or not get
salary increases. Ford ended up paying $10.6 million in a settlement with older workers who had brought the suit.
In another recent disparate impact case, brought under the federal ADEA, Smith v. City of Jackson, officers and dispatchers of the Jackson, Mississippi police department, all 40 years and older, challenged a city pay system that granted higher percentage salary increas- es to workers with five or fewer years on the job. Nearly all the workers who qualified for the larger increases were under the age of 40.
In March 2005, the U.S. Supreme Court ruled that workers over 40 years old could sue under the ADEA when an employer’s action has a “disparate impact” on their age group and the employer’s action was not “reason- able.” The decision means that even if there is no “smoking gun” such as discriminatory statements by an employer, employees may pursue legal action by using statistics and other evidence to show that a broad policy— such as layoffs—has an unfair discriminatory impact on workers who are 40 or older. (The Court accepted the city’s argument that the salary policy was legal because it was “reason- able” for the city to offer larger percentage raises to workers with less seniority in order to compete with the salaries offered to such workers by other nearby jurisdictions. Employers can expect future litigation to better define the term “reasonable” in “disparate impact” cases now moving through the courts.)
Cash Balance Plans In recent years, many employers have discon- tinued their traditional “defined benefit” pension plans, which provided employees with a predictable, regular retirement income