The Third Circuit Court of Appeals (“Third Circuit”) recently held that the Age Discrimination in Employment Act (“ADEA”) permits plaintiffs within a subgroup of the protected class to bring a disparate-impact claim. The Third Circuit decision is the first to recognize such a claim, and creates a split within the federal appellate courts. This article analyzes ADEA disparate-impact claims and the Third Circuit decision creating the circuit split, and provides practical takeaways for employers.
ADEA Disparate-Impact Claims
The ADEA provides employees who are at least forty (40) years of age workplace protections against discrimination on the basis of their age. Under the ADEA, a plaintiff can proceed with a claim under a disparate-impact theory, which, unlike a disparate treatment claim, does not require the plaintiff to prove discriminatory intent. Rather, in a disparate-impact case, the plaintiff can rely on statistical evidence to show that an employer’s policy, while facially neutral, is “discriminatory in operation” because it has a greater impact on members of a protected class.
To state a prima facie case for a disparate-impact claim under the ADEA, a plaintiff must: (1) identify a specific, facially neutral policy, and (2) set forth statistical evidence that the policy caused a significant age-based disparity. If the plaintiff states a prima facie case, the burden then falls to the employer to show that the challenged policy or practice was based on “reasonable factors other than age” defense (known as an “RFOA” defense).
Third Circuit Decision Creates Circuit Split
In Karlo v. Pittsburgh Glass Works, LLC, a group of plaintiffs over the age of fifty (50) claimed their former employer’s reduction-in-force (“RIF”) had a disparate impact on them based on their age. The plaintiffs relied upon statistical evidence showing that the subgroup of employees aged fifty (50) or older were disparately impacted by the RIF. The the employer moved for summary judgment arguing that using subgroups within the protected class was not appropriate under the ADEA. Indeed, when using statistical evidence including all employees age forty (40) or older, the employer showed that such employees were not disparately impacted by the RIF. The District Court granted the employer’s motion for summary judgment, holding that the ADEA did not permit plaintiffs to use a subgroup of employees covered by the Act to show a significant age-based disparity. The District Court’s ruling aligned with each of the federal appellate courts to have reviewed the issue: the Second Circuit Court of Appeals (“Second Circuit”), the Sixth Circuit Court of Appeals (“Sixth Circuit”), and the Eighth Circuit Court of Appeals (“Eighth Circuit”).
The group of plaintiffs in Karlo appealed to the Third Circuit, which reversed the District Court’s decision and held that the ADEA permits plaintiffs to use a subgroup of employees covered by the ADEA to show a significant age-based disparity. The Third Circuit recognized its decision created a circuit split, but reasoned that because the ADEA’s focus is to protect individual employees based on their age, not necessarily solely because the employee is forty (40) and over, the ADEA must permit subgroups of employees to show statistical evidence based on their particular age. The Third Circuit predominately relied upon the United States Supreme Court’s opinion in O’Connor v. Consolidated Coin Caterers Corp., which held that an ADEA plaintiff could show disparate treatment where an employee is replaced with a significantly younger worker, but who is still over the age of forty.
Practical Takeaways for Employers
Karlo has an immediate impact on employers in the Third Circuit as it relates to age discrimination claims. Employers in the Third Circuit should carefully design disparate impact analyses on their policies and practices to account for subgroups of employees based on age.
It is unclear at this point whether Karlo will apply outside of the ADEA context. The decision may indicate a willingness of courts, particularly those in the Third Circuit, to recognize disparate-impact claims using subgroup statistical evidence of other protected classes covered under other statutes (such as race, color, religion, sex, or national origin classes protected by Title VII). As a result, employers in the Third Circuit should further consider designing disparate impact analyses on their policies and practices to account for subgroups of protected classes under other statutes.
Employers outside the Third Circuit who are considering conducting a RIF or implementing other policies or practices should consult with their labor and employment counsel to determine whether the proposed action may disparately impact a protected class of employees.
Campbell Litigation will continue to follow this development and report back when further updates are available.
 The Third Circuit hears appeals from federal district courts in Delaware, New Jersey, Pennsylvania, and the U.S. Virgin Islands.
 Karlo v. Pittsburgh Glass Works, LLC, No. 15-3435, 2017 WL 83385 (3d Cir. Jan. 10, 2017).
 See 29 U.S.C. § 621, et seq.
 See Griggs v. Duke Power Co., 401 U.S. 424 (1971).
 Id. at 431.
 Karlo, 2017 WL 83385, at *4.
 See 29 U.S.C. § 623(f)(1); see also 29 C.F.R. § 1625.7. This is similar to, but less demanding than, the employer’s burden under Title VII of the Civil Rights Act of 1964 (“Title VII”), which requires the employer to show the policy or practice is a “business necessity.” Smith v. City of Jackson, 544 U.S. 228, 240 (2005).
 Karlo, 2017 WL 83385, at *1-2.
 See Karlo v. Pittsburgh Glass Works, LLC, No. 2-10-cv-01283, 2015 WL 5156913 (W.D. Pa. Sept. 2, 2015).
 See Lowe v. Commack Union Free Sch. Dist., 866 F.2d 1364 (2d Cir. 1989). The Second Circuit hears appeals from federal district courts in Connecticut, Massachusetts, New Hampshire, Rhode Island, and Vermont.
 See Smith v. Tenn. Valley Auth., 924 F.2d 1059 (6th Cir. 1991). The Sixth Circuit hears appeals from federal district courts in Kentucky, Michigan, Ohio, and Tennessee.
 See EEOC v. McDonnell Douglas Corp., 191 F.3d 948 (8th Cir. 1999). The Eighth Circuit hears appeals from federal district courts in Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota.
 Karlo, 2017 WL 83385, at *1-2.
 Id. at 5-9.
 See O’Connor v. Consolidated Coin Caterers Corp., 517 U.S. 308 (1996). In O’Connor, a fifty-six-year-old employee was replaced by a significantly younger worker over the age of forty. Notably, O’Connor involves a disparate-treatment claim, which requires a showing of discriminatory intent. As discussed above, disparate-impact claims require no such showing.