2005-7

New Supreme Court ruling authorizes age bias claims for unintentional discrimination where the employee can prove that an employer policy has an adverse impact on older workers.

The United States Supreme Court has held that the Age Discrimination in Employment Act ("ADEA") permits an employee to proceed with, and recover under, a "disparate impact" theory of discrimination where the prohibited action is not predicated on "reasonable factors other than age." Smith v. City of Jackson, 2005 DJDAR 3713 (March 30, 2005) (published March 31, 2005).

The petitioners in this case were a group of police and public safety officers employed by the city of Jackson, Mississippi ("City"). In 1998, the City adopted a pay plan designed to "attract and retain qualified people, provide incentive for performance, maintain competitiveness with other public sector agencies and ensure equitable compensation to all employees regardless of age, sex, race and/or disability."

As part of this plan, the City granted raises to its police officers. Employees were classified into five ranks ? police officer, master police officer, police sergeant, police lieutenant, and deputy police chief. The officers in the three lowest ranks consisted of officers under age 40 and over age 40. However, all the officers in the two highest ranks (police lieutenant and deputy police chief) were over age 40. Each rank was assigned a pay range consisting of steps and half-steps, with employees assigned to the lowest step which would afford each employee at least a 2 percent pay raise.

Under this pay plan, officers with less than five years of tenure received a higher percentage raise than more senior officers. However, senior officers still received a greater dollar amount due to the fact that their salaries were significantly larger. Nonetheless, a group of officers over age 40 filed suit under the ADEA, alleging (1) that the City intentionally discriminated against them based on their age (disparate treatment), and (2) that they were adversely affected by the City's plan as a result of their age (disparate impact). The District Court for the District of Mississippi granted summary judgment in the City's favor on both of these claims.

On appeal to the Fifth Circuit, the grant of summary judgment was reversed as to petitioners' disparate treatment discrimination claim. However, the Fifth Circuit affirmed the dismissal of the officers' disparate impact claim, holding that such claims are not permissible under the provisions of the ADEA.

The Supreme Court disagreed with the Fifth Circuit, ruling that "disparate impact" claims are permissible under the provisions of the ADEA. In doing so, the Court relied heavily on its 1971 decision in Griggs v. Duke Power Co., 401 U.S. 424, where it determined that virtually identical text in Title VII of the Civil Rights Act of 1964 ("Title VII") allowed for disparate impact claims by a plaintiff. However, despite finding that the ADEA permits a party to proceed under a disparate impact theory, the Supreme Court affirmed the Fifth Circuit's decision to uphold the trial court's grant of summary judgment in the City's favor, concluding that petitioners failed to present sufficient facts to establish a valid disparate impact claim.

The ADEA provision at issue here, 29 U.S.C. ? 623(a)(2), provides that it shall be unlawful for an employer "to limit, segregate, or classify his employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual's age. . ." The only difference between this language and that of Title VII is that the word "age" is replaced with "race, color, religion, sex, or national origin." However, the ADEA also contains a caveat that otherwise prohibited actions are permissible where the differentiation is "based on reasonable factors other than age." ("RFOA provision")

The Court stated that it is appropriate to presume Congress intends the same meaning of statutory language where identical text exists in two distinct statutes which have similar purposes, such as Title VII and the ADEA. It then declared that the Title VII provision in Griggs and the comparable ADEA text do not simply proscribe actions which "limit, segregate, or classify" an individual; rather, the congruent statutes prohibit actions which "deprive any individual of employment opportunities or otherwise adversely affect his status as an employee" as a result of the protected classification. (emphasis added) Accordingly, the statutory text focuses on the effects of an action on an employee. Since this same language was interpreted by the Supreme Court in Griggs to permit a plaintiff to pursue disparate impact claims, the Court reasoned that Griggs "strongly suggests that a disparate impact theory should be cognizable under the ADEA."

The Court also opined that the existence of the RFOA provision in the ADEA statute supported this holding, since precludes liability where the impact is attributable to a "reasonable" factor unrelated to age. Further, the Court pointed out that the EEOC, which is charged with enforcing the ADEA, has "consistently interpreted the ADEA to authorize relief on a disparate impact theory."

Despite finding that the ADEA permits a party to proceed on a disparate impact theory, the Supreme Court held that petitioners failed to present sufficient facts to support their claims, and in fact did "little more than point out that the pay plan at issue is relatively less generous to older workers than younger workers." The sparse evidence offered by petitioners in support of their ADEA claim was that approximately two-thirds of the officers under age 40 received raises of 10% or more, while just 45% of officers over age 40 received a raise of 10% or more. On average, the older officers also received smaller increases when measured as a percentage of their salary. However, this was primarily attributable to the fact that more senior officers already earned a considerably larger salary.

The Court concluded that petitioners did not point to any particular aspect of the pay plan which had an adverse impact on older employees. In order to adequately state a claim, a party must isolate and identify the specific employment practice responsible for any manifest statistical disparities. Further, the City's basic explanation for the differential was that it felt it needed to raise the salaries of its more junior officers to a level comparable with that of similar positions in surrounding communities. The raises were based on seniority and officer rank and were part of a legitimate effort to retain police officers. Therefore, the City's decision to grant raises to its lower echelon employees was deemed to be the result of a "reasonable factor other than age."

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Employee who fails to timely request a jury trial in an ADA case is barred from having those claims heard by a jury.

The Ninth Circuit Court of Appeals has held that an employee who fails to timely seek a jury trial for claims under the Americans with Disabilities Act ("ADA") is barred from having the case heard by a jury. Lutz v. Glendale Union High School, District No. 205, 2005 DJDAR 4142 (April 8, 2005) (published April 11, 2005).

Plaintiff Claudette Lutz is a former teacher/assistant principal who sued the Glendale Union High School District ("Glendale"), claiming she was terminated in violation of the ADA. Glendale removed the matter to district court and brought a successful motion for summary judgment. The grant of summary judgment was later reversed and remanded by the Ninth Circuit.

Following remand, Plaintiff filed an amended complaint demanding a jury trial. Over Glendale's objections, all of Lutz' claims were tried before a jury on the basis of the amended pleading. The jury found for Lutz, and Glendale appealed on the grounds that Lutz had waived her right to a jury trial.

In federal court, a party can demand a jury trial at any time until ten (10) days after it is served with the answer. If a party fails to make such a demand, it waives its right to a jury trial. Here, Lutz did not demand a jury trial in federal court until she filed her amended pleading eleven months after Glendale answered her original complaint. The Ninth Circuit agreed with Glendale's argument that Lutz had waived her right to a jury trial, concluding that she had failed to make a timely demand.

Having determined that Plaintiff waived her right to demand a jury trial in federal court, the Court evaluated whether Lutz satisfied one of the two exceptions which would entitle her to a jury trial: (1) whether Lutz made a proper request for a jury trial under state law before the case was removed; or (2) whether Lutz' state complaint contained a jury demand that would satisfy the federal rules.

The Ninth Circuit stated that Plaintiff did not qualify for the first exception, because Arizona law mandates that a jury trial demand not be endorsed or combined with any other motion or pleading filed with the court, and Lutz had not filed any separate jury demand in state court. However, as to the latter exception, Lutz' initial state court complaint contained two references to a jury trial in its prayer for relief. Plaintiff's prayer sought "back pay and value of lost employment benefits as may be found by a jury," and compensatory damages for pain and suffering in "such amount as may be awarded by a jury."

The Court deemed these requests "hardly the ideal way to request a jury trial," and exhibited a preference for such a demand in either a "separate document or set off from the main body of the pleading" such that the demand is recognizable. Nevertheless, in "indulg[ing] every reasonable presumption against waiver," the Ninth Circuit stated that while Lutz' requests could have been clearer, they provided sufficient notice to the court and opposing counsel that Lutz was seeking a jury trial on the remedial issues of back pay and damages for pain and suffering.

The Court next addressed whether Lutz' demand for jury trial on two remedial issues was sufficient to invoke her right to a jury trial on all issues in the case, including liability. Rule 38(b) of the Federal Rules of Civil Procedure provides that "a party may specify the issues which the party wishes so tried; otherwise the party shall be deemed to have demanded trial by jury for all the issues so triable." The Court interpreted this use of the word "otherwise" to indicate that a general jury demand covers all issues, while a specific jury demand only encompasses those issues referenced therein. Accordingly, the Ninth Circuit held that Lutz' state complaint did not contain a jury demand on liability that would satisfy federal standards, and as such, the lower court erroneously submitted the matter of liability to the jury. The Ninth Circuit vacated and remanded the matter for either a new trial on the issue of liability or a judicial decision based on the record of the first trial, but stated that if the district court finds Glendale liable, it could accept the first jury's verdict as to the appropriate amount of damages for Lutz' pain and suffering.

On the issue of back pay, however, the Ninth Circuit concluded that the jury's verdict on that issue could not be reinstated if the district court found for Lutz on the issue of liability. The ADA expressly incorporates the remedies of Title VII of the Civil Rights Act, and under Title VII (and thus the ADA by incorporation), back pay is an equitable remedy. Therefore, any award of back pay to Lutz following remand is to be calculated by the trial court in its discretion.

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Once an employee participates in arbitration, the employee cannot later claim the arbitration agreement was unconscionable.

The California Court of Appeal has affirmed an arbitration award in favor of the employer on a former employee's wrongful discharge claims, holding that the former employee could not challenge the arbitration agreement as unconscionable after participating in the arbitral proceedings. Cummings v. Future Nissan, 2005 DJDAR 4163 (April 8, 2005) (published April 12, 2005).

Cummings worked in the finance department at Future Nissan for approximately sixteen months before her employment was terminated. She filed an action for wrongful discharge shortly thereafter, alleging that she was sexually harassed and retaliated against for complaining about harassment. She also contended that she was dismissed in retaliation for reporting unlawful financing conduct by a co-employee. Future Nissan answered the complaint and moved to compel arbitration pursuant to its employment agreement with Cummings. Over Cummings' objections, the Court granted Future Nissan's motion and the parties proceeded to arbitration.

In March 2002, Arbitrator Raul Ramirez found in favor of Cummings on her claim of retaliation for reporting fraudulent finance practices by a co-employee, and issued an award against Future Nissan in the amount of $159,000. The arbitrator rejected Plaintiff's sexual harassment claims.

Future Nissan sought second-level review of the arbitration procedure in accordance with the terms of its arbitration agreement. Cummings vigorously opposed further review and petitioned the trial court to confirm the initial award, asserting that the provision for second-level review was unconscionable and unenforceable. The trial court denied Plaintiff's motion and held that the provision was not unconscionable, so long as Defendant bore the costs and the second-level review was completed in an expedient fashion. The lower court also noted that Cummings had failed to raise this issue in her initial opposition to arbitration.

Subsequently, the parties stipulated to George Paras as the second-level arbitrator. While the matter was before Paras, Cummings moved for reconsideration of the trial court's denial of her motion to confirm the initial award. Her motion was summarily rejected as untimely and lacking any new facts.

In May 2003, Paras issued an award reversing the findings of Arbitrator Ramirez. Paras concluded that Cummings had failed to identify any public policy of general public importance to sustain her claims, and therefore, she was not entitled to damages for wrongful discharge in retaliation for reporting any violation. Future Nissan moved to confirm Paras' award, and Cummings moved to vacate. The Court granted Future Nissan's motion and denied that of Cummings. Plaintiff filed this appeal.

The California Court of Appeal held that Plaintiff forfeited her right to object to the second-level review mechanism in the arbitration agreement because she did not oppose arbitration on this basis prior to participating in the process. It rejected Plaintiff's claim that forfeiture did not apply because she only participated in arbitration under court order, stating that those who are aware of any basis for opposing the arbitration process must do so as soon as practical.

Plaintiff maintained that the second-level review aspect of the arbitration agreement was not an issue until after the initial award in her favor. The Court of Appeal stated that like pregnancy, Cummings' dispute with Future Nissan was not a "little bit" arbitrable. The Court reasoned that it was an "inevitable prospect" that a party would ultimately invoke second-level review, and Cummings should have challenged this step at the inception of litigation prior to proceeding with the arbitration.

The Court of Appeal similarly rejected as meritless Plaintiff's claims that the costs and time to complete the second-level arbitral review evidenced its unconscionability. The Court agreed with the trial court that virtually all of the associated delay was attributable to Plaintiff, and pointed out that all the costs of the second-level review were borne by Defendant. Lastly, Plaintiff's contention that the trial court erroneously confirmed Paras' award in favor of Future Nissan was rejected because Plaintiff failed to articulate any exception to the general rule that an arbitrator's decision cannot be reviewed for errors of law or fact.

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