Why it matters

The Eleventh Circuit Court of Appeals created a circuit split with a decision that the Age Discrimination in Employment Act (ADEA) allows disparate impact lawsuits by job applicants. Forty-nine-year-old Richard Villarreal applied for a position with R.J. Reynolds Tobacco Company but received no response. Approximately two years later, he filed a class action suit against the employer for allegedly violating the ADEA, claiming that R.J. Reynolds used unlawful age-related recruiting characteristics. A federal court judge dismissed Villarreal's disparate impact allegations, ruling that the ADEA permits such claims only from current employees. On appeal, a divided panel of the Eleventh Circuit reversed. Finding the language of the statute unclear, the majority deferred to the Equal Employment Opportunity Commission's (EEOC) interpretation of the law to hold the ADEA does allow disparate impact suits by applicants. The panel further ruled the plaintiff was entitled to equitable tolling of his claim because he hadn't learned about the age-related recruiting characteristics until after the statute of limitations had run. A dissenting opinion said the majority's decision "has the potential to create bad law in two important areas," noting that the majority reached a different conclusion than three other federal appellate courts to consider the issue.

Detailed discussion

In 2007, at the age of 49, Richard Villarreal applied for a Territory Manager position with R.J. Reynolds by submitting an online application. The company never responded. More than two years later, in May 2010, Villarreal filed a charge of unlawful discrimination with the EEOC alleging R.J. Reynolds had discriminated against him on the basis of age.

While his charge was pending, Villarreal applied for a Territory Manager position five more times and was rejected each time. He filed a federal class action lawsuit under the ADEA raising both disparate treatment and disparate impact claims.

For support, he pointed to "resume review guidelines" used to screen applicants to R.J. Reynolds, including an instruction for hiring managers to target candidates "2 to 3 years out of college" and another to "stay away from" candidates with 8 to 10 years of prior sales experience. Villarreal told the court he learned of these guidelines only one month prior to filing his EEOC charge and therefore the 180-day limitations period under the ADEA should be equitably tolled.

A federal district court judge dismissed the disparate impact claims entirely, finding that the ADEA allows such claims to be brought only by existing employees, and refused to toll the statute of limitations, dismissing the disparate treatment claims for any applications prior to 180 days before Villarreal filed his charge.

The plaintiff appealed to the Eleventh Circuit Court of Appeals and a majority of the panel reversed dismissal.

Section 4(a) of the ADEA makes it unlawful for an employer "(1) to fail or refuse to hire or to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's age" or "(2) 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."

In 2005 the U.S. Supreme Court considered the two provisions in Smith v. City of Jackson, Miss., with the justices concluding that the ADEA authorizes disparate impact claims for both applicants and employees under Section 4(a)(1). However, Villarreal brought his disparate impact claims under Section 4(a)(2) and the parties disagreed about whether that provision applies only to employees or also encompasses job applicants.

Villarreal argued that Section 4(a)(2) covered his allegations, as the defendant "limited" its employees because it deprived an individual like him of an employment opportunity. R.J. Reynolds countered that Section 4(a)(2)'s reference to "any individual" applies only to the employer's existing workers, following the provision's earlier use of the term "his employees."

The Eleventh Circuit found both readings of the statute reasonable and turned to other interpretations of the statute. Congress amended Title VII to add the words "or applicants for employment" to language that parallels that found in the ADEA's Section 4(a)(2), the court noted, but did not amend the ADEA in a similar fashion. The court also recognized that two concurring opinions in Smith referenced the fact that only Section 4(a)(1) protects applicants but characterized the justices' comments as dicta in nonbinding concurrences.

Finally, the majority considered whether the agency tasked with enforcement of the ADEA has provided a reasonable reading of the provision at issue. Deferring to the EEOC's views, the panel found that the agency's regulations do not distinguish between prospective and existing employees and extends disparate impact liability to all "individuals within the protected age group." The EEOC first stated this view in 1981, confirmed it in a 1995 brief to the U.S. Supreme Court, and reiterated this interpretation in its amicus brief in the case at hand, the panel said.

R.J. Reynolds countered that the regulation was not relevant to the instant litigation because it interpreted a separate provision of the ADEA and did not squarely address the question presented by Villarreal. But the majority rejected this position, as "we still owe deference to the EEOC's view because the agency has reasonably and consistently insisted on this view for decades."

With the disparate impact claims back on the table, the panel next found that equitable tolling should apply to the disparate treatment claims dismissed by the lower court. Only once Villarreal engaged legal counsel did he learn about R.J. Reynolds' resume review guidelines and hiring practices, the majority said, and he could not have known about the discrimination until he acquired that knowledge.

The standard of a "reasonably prudent" person in ADEA cases does not require misrepresentation by the employer, the court added. "[T]here are circumstances other than concealment and misrepresentation which place relevant facts beyond the reach of a reasonably prudent victim of discrimination," the panel wrote. "In these cases the ultimate question is not whether an employer deliberately hid facts. Rather, we ask whether reasonable prudence would have resulted in the plaintiff uncovering hidden facts earlier."

Villarreal's failure to ask R.J. Reynolds why he was not hired in 2007 did not doom his claim, the court said, and his "mere suspicion" of age discrimination, unsupported by personal knowledge, did not trigger the limitations period. Instead, the clock began to run when he had enough information to support his cause of action, which occurred shortly before he filed his federal complaint.

A dissenting opinion criticized the majority for being the only court ever to find that Section 4(a)(2) authorizes disparate impact claims brought by job applicants, citing the Smith concurrences and decisions from the Seventh, Eighth, and Tenth Circuits as well as federal district courts in Illinois and Missouri for support. The dissenting judge also found the equitable tolling of the statute of limitations "contrary to well established law," and lowered the standards of what was supposed to be an "extraordinary remedy."

The majority opinion "has the potential to create bad law in two important areas," the dissent argued.

To read the opinion in Villarreal v. R.J. Reynolds Tobacco Company, click here.