Third Circuit Allows “Subgroup” Disparate-Impact Claims to Proceed Under The ADEA

Employers are well aware of the federal Age Discrimination in Employment Act (“ADEA”), which protects individuals over the age of forty, as well as its disparate-impact provision, which makes it unlawful for an employer to adopt a facially-neutral policy that adversely affects an individual employee’s status “because of such individual’s age.” However, in a precedential opinion filed on January 10, 2017, the U.S. Court of Appeals for the Third Circuit held that the ADEA allows plaintiffs to proceed with a disparate-impact claim whereby only a “subgroup” or segment of employees over the age of forty are alleged to have been disfavored relative to younger employees.

In Karlo v. Pittsburgh Glass Works, LLC, No. 15-3435, the defendant-employer underwent several reductions in force (“RIFs”) to offset disappointing sales during the height of the recession. Several employees who were terminated in one particular RIF, all of whom were over fifty years old, brought a putative ADEA collective action against the employer asserting, among other things, a disparate-impact claim. The district court thereafter decertified the plaintiffs’ collective action, which was “to be comprised of employees terminated by the RIF who were at least fifty years old at the time.” Additionally, the district court granted the defendant-employer’s motion for summary judgment as to the disparate-impact claim, holding that plaintiffs’ “fifty-and-older” disparate-impact claim was not permitted under the ADEA.

On appeal, the Third Circuit reversed the district court’s grant of summary judgment as to the disparate-impact claim. The court noted that disparate-impact claims may proceed under the ADEA “when a plaintiff offers evidence that a specific, facially neutral employment practice caused a significantly disproportionate adverse impact based on age.” In Karlo, the plaintiff alleged that the specific RIF disproportionately impacted only a portion of the forty-and-older employee population: employees older than fifty. The Third Circuit found that this claim was cognizable, holding that plaintiffs may demonstrate the impact of facially-neutral policy “with various forms of evidence, including forty-and-older comparisons, subgroup comparisons, or more sophisticated statistical modeling, so long as that evidence meets the usual standards for admissibility.”

The court heavily relied upon the Supreme Court’s decision in O’Connor v. Consolidated Coin Caterers Corp., which held that the ADEA “does not ban discrimination against employees because they are aged 40 or older; it bans discrimination against employees because of their age, but limits the protected class to those who are 40 or older.” Thus, the court held that ADEA claims by subgroups of those aged forty or older are cognizable because “evidence that a policy disfavors employees” of such a subgroup “is probative of the relevant statutory question: whether the policy creates a disparate impact ‘because of such individual[‘s] age” under the plain language of the ADEA. The court found that it is “utterly irrelevant” whether the employer’s policy benefits younger members of those employees over forty, so long as an employee can show that his or her subgroup was adversely affected.

Following Karlo, employers should review their policies to confirm that they are in compliance with the ADEA and do not unintentionally discriminate against employees who are in “subgroups” over forty years old. For more information on the implications of the Karlo decision, please contact John C. Petrella, Esq., Chair of the firm’s Employment Litigation Practice Group, at, or Dina M. Mastellone, Esq., Chair of the firm’s Human Resources Practice Group, at, or 973-533-0777.

Appeals Court Nixes President’s Recess Appointments to NLRB Raising Question Whether Any NLRB Decisions Since 2011 Are Enforceable

In a 3-0 decision on January 25, the D.C. Circuit Court of Appeals held that a Board decision issued on February 8, 2012 was invalid because the Board failed to consist of a quorum of three validly appointed members. In February 2012 the Board had five members – Pearce and Hayes, who the Court found were validly appointed and confirmed by the Senate, and Block, Flynn and Griffin, who were appointed by President Obama in January 2012 as “recess” appointments. The Court held that the three recess appointments were constitutionally invalid, the Board lacked a quorum, and therefore the Board’s decision under review was invalid and unenforceable. Canning v. NLRB, No. 12-1115 (U.S. Ct. App. D.C.Cir. 2013).

The key underpinning to this holding was the status of the U.S. Senate’s operations during the 2011 holiday season when the President made the contested appointments. The Court found that the Senate’s actions of passing an extension of the payroll tax on December 23, 2011 and then convening the second session of the 112th Congress on January 3, 2012, taken together dictated the conclusion that the Senate was not in recess on January 4, 2012 when the President made the recess appointments. The Court held that a valid recess appointment is limited to an intersession appointment – that is, an appointment between sessions of Congress. The NLRB conceded that the appointments were not made during an intersession recess and accordingly, the Court vacated the Board’s underlying decision.

The Administration is sure to appeal the Court’s decision. Board Chairman Pearce has stated that he disagrees with the Court’s decision, the Board will continue to issue decisions, and anyway the decision is limited to one Board decision and order. In fact, the number of Board decisions whose validity is now in question is 219, since the Board failed to have a quorum of three Senate-confirmed members throughout 2012. The Board presently consists of three members, since Member Flynn resigned in 2012 and Member Hayes’ term expired last month. Two of the three current Board Members are recess appointees.

For more information on the practical implications of the Court’s decision and strategy recommendations in view of the Board’s precarious situation, please contact Patrick McGovern, Esq., in the Labor Law Practice Group.