Unfortunately, far too many employers are having to become familiar with practices and procedures surrounding a reduction in force (RIF). A recent Supreme Court holding in Meacham v. Knolls Atomic Power Laboratory examined issues surrounding the burdens of proof in a RIF case and, more specifically, whether an employer who asserts that employment decisions were based upon “reasonable factors other than age” bears the burden of proving the defense or whether a plaintiff has the burden of proving the factors used were invalid.
Knolls, the employer in that case, was faced with a downswing in business. In order to select employees for layoff, it told its managers to score their subordinates on three scales, including “performance,” “flexibility,” and “critical skills.” The scores were totaled along with points for years of service, and these totals determined which employees should be let go.
Of the 31 salaried employees laid off, 30 were in the protected age group (over 40 years old). Twenty-eight of them sued, claiming, in part, that the layoff had a “discriminatory impact” on age-protected employees. To establish that impact, they relied upon statistical experts who testified that the use of “flexibility” and “criticality” to rate employees had a disparate impact on older workers. The employer argued that the factors of “flexibility” and “criticality” were reasonable factors other than age and thus, a permissible basis for the decision. The U.S. Supreme Court was asked to resolve the issue of who bears the burden of persuasion in a disparate impact case when the employer claims that the decision was based on reasonable factors other than age.
The Supreme Court pointed out that, first, a plaintiff is obliged to isolate and identify the specific employment practices that allegedly were responsible for any statistical disparities. This holding, of course, prevents an employee from simply pointing to general practices and claiming discrimination. Second, the Court found that if a plaintiff does identify a factor which had an inappropriate impact on employees in the protected age group, the burden is on the employer to persuade the fact-finder that its “reasonable factor” defense has merit.
Meacham alerts employers that they will have a heavy burden to prove that the factors they relied upon during a RIF were reasonable. After Meacham, once a plaintiff identifies the specific employment practice that creates the disparate impact, the employer must prove, not just articulate, the reasonableness of the factors that were considered. The fact that this burden has been squarely placed upon employers sends a signal that defending RIF discrimination cases is likely to be more difficult and costly for employers.
The lesson is clear: a good deal of thought should be put in on the front end of the process of selecting the factors to be used for making choices during a RIF. An employer would be well-advised to statistically test those outcomes before finalizing the selection process and putting a RIF into motion. If a statistical examination shows an impact against employees in the protected age group, an employer should rethink the criteria it used. Employers should consult with their counsel before finalizing decisions during a RIF.