What Is Disparate Impact?

Simply put, disparate impact occurs when a policy or practice, although applied evenly to all parties, has a disproportionate effect on a particular protected class. The classic example is a requirement that police officers be at least 5'10" or taller. That kind of policy is likely to result in a relatively higher proportion of women than men being rejected. Even though the height requirement is applied to all applicants equally without intention to discriminate, it will probably create disparate impact against women. Under other discrimination laws, such as the Civil Rights Act of 1964, the concept of disparate impact has been applied to a wide range of HR decisions, including hiring, firing, and promotions. As you will read next, the disparate impact concept has been applied to pay raise decisions as well.

What Were the Circumstances in Smith v. City of Jackson?

In Smith v. City of Jackson, the city implemented a salary policy for police officers and dispatchers that provided higher raises to employees who had less tenure (i.e., less than five years of service) and lower raises to employees who had more seniority (i.e., more than five years of service). The city's rationale for this program was that in order to attract and retain qualified employees, they had to offer a better pay program to newer police officers and dispatchers.

It probably won't surprise you, however, that because employee age and length of service are often correlated (i.e., older employees, on average, have longer tenure than younger employees), under the City of Jackson's plan, older officers tended to receive lower raises than younger officers. The older employees initiated a lawsuit on this basis, claiming among other things, that they were the victims of disparate impact. The Supreme Court ruled that ADEA did permit a claim of disparate impact. Depending on which circuit the case is decided in, then, this is either a change favoring plaintiffs, or merely a continuation of existing precedent.

The case didn't end there, however. Even if it is demonstrated by the plaintiffs that there is disparate impact, the organization has the opportunity to defend its use of the particular policy or practice. This time, the Supreme Court ruled that the organization may have an easier time defending itself under the ADEA as compared to other laws (e.g., a case brought under the Civil Rights Act of 1964). For example, the ADEA allows for a "reasonable factors other than age" (RFOA) defense, wherein an organization demonstrates that the policy or practice is based on legitimate factors, not age. Second, the Supreme Court argued that the plaintiffs must show the specific employment practice or requirement that created the disparate impact. Ultimately, the Supreme Court ruled that the City of Jackson was able to successfully reject the plaintiffs' arguments at this stage and ruled in favor of the city's policy.

What Are the Implications for Employers?

The Supreme Court decision in Smith v. City of Jackson has a number of implications for employers:

1. The number of ADEA claims is likely to increase. With the ability to make disparate impact claims, more age discrimination charges are likely to be filed in the future. This is particularly true in light of the increasing number of aging baby boomers who may be faced with job loss as the U.S. workplace continues to shift and downsize.
2. Employers need to be more proactive and savvy in HR decisions. As HR decisions become more standardized through electronic technologies, plaintiffs will make more claims of disparate impact, especially when filing class action suits. Employers should conduct statistical analyses prior to making key HR decisions, such as terminations and pay raises, to assess whether disparate impact will result, based on protected class (e.g., age). Ongoing HR decisions (e.g., promotions) should be periodically monitored to determine whether there is disparate impact against protected classes.
3. Employers should design appropriate HR procedures and systems. Organizations should create and implement appropriate (i.e., valid, non-discriminatory) procedures and systems for making HR decisions (e.g., promotions, terminations, pay raises, etc.). Proper documentation is also important in being able to defend against disparate impact claims.

In sum, the Supreme Court's decision in Smith v. City of Jackson does not really change the legal landscape. It does, however, provide another point of attack by plaintiffs. Organizations should carefully review and monitor their HR policies and programs to ensure that they are not vulnerable to disparate impact claims made on the basis of age discrimination.