Seyfarth Synopsis: The Third Circuit has shaken up long-standing precedent and created a split among the circuits, such that now employers should not only evaluate its employment decisions for the effect on individuals over forty and under forty, but within subgroups of those over forty as well.

Last week, in Karlo v. Pittsburgh Glass Works, No. 15-3435, the Third Circuit extended protections under the Age Discrimination in Employment Act (ADEA) to include discrimination based on age, regardless of whether the employees alleged to have been favored were also over forty.

The court's precedential opinion held that a "subgroup" of employees over fifty had a cognizable claim under ADEA because the statute prohibits disparate impact based on age, and not whether the plaintiffs and comparators were just over forty. The court looked to the language in the statute, which "makes it unlawful for an employer to adversely affect an employee's status . . . because of such individual's age."

The court examined the Supreme Court's opinion in O'Connor v. Consolidated Coin Caterers Corp., 517 U.S. 308 (1996), which held that the ADEA proscribes age discrimination, not forty-and-over discrimination. Applying this interpretation to ADEA's disparate impact provision, court held that it is "utterly irrelevant that the beneficiary of age discrimination was also over the age of forty." The court further held "the appropriate disparate impact statistics should be guided by the trait protected by the statute, not the population of employees inside or outside the statute's general scope."

The court noted that statistical evidence is not at risk of manipulation when used in the context of subgroups. So long as evidence is reliable under Daubert and can survive summary judgment if it indicates a "significant disparity," as in any other disparate impact case, claims under ADEA will be upheld in accordance with the statute. Furthermore, employers have a defense in that the employment decision was due to a "reasonable factor other than age."

In so holding, the court created a circuit split, as its holding was contrary to decisions in the Second (Lowe v. Commack Union Free Sch. Dist., 886 F.2d 1364 (2d Cir. 1989)), Sixth (Smith v. Tenn. Valley Auth., 924 F.2d 1059 (6th Cir. 1991)), and Eighth (EEOC v. McDonnell Douglas Corp., 191 F.3d 948 (8th Cir. 1999)) Circuits. In Karlo, the court held that these decisions were based on policy considerations, rather than the plain meaning of the statute.

Despite its precedential holding, the court affirmed the district court's decision to decertify the collective action because the plaintiffs failed to show they were sufficiently "similarly situated" to be appropriate for class treatment.

The Third Circuit has shaken up long-standing precedent and created a split among the circuits, such that now employers should not only evaluate its employment decisions for the effect on individuals over forty and under forty, but within subgroups of those over forty as well. Now, in the Third Circuit, simply showing that employees over forty were not subject to the allegedly adverse action may not be sufficient to defeat a disparate impact claim.