Show No Disparity When Dealing with an Aging Workforce

When employers think diversity, most think in terms of sociological factors such race or religion. But there is another type of diversity that’s becoming increasingly more prevalent in today’s workforce and that is age diversity. As Baby Boomers continue to work well past normal retirement age, the phenomenon will become more widespread.

Having the wisdom and experience of a graying workforce population comes with a price. Under the ADEA, it is unlawful to discriminate against a person because of age with regard to any term, condition, or privilege of employment, including, but not limited to, hiring, firing, promotion, layoff, compensation, benefits, job assignments, and training.

This aging law was given a new lease on life with a recent Supreme Court decision. In the landmark case of Smith et al. v. City of Jackson, Mississippi, No. 03-1160, a divided Court, by 5-to-3, held that the ADEA authorizes disparate impact claims. The doctrine of disparate impact means that even where an employer is not motivated by discriminatory intent, Title VII prohibits an employer from using a seemingly neutral employment practice that has an unjustified adverse impact on members of a protected class. Of course, employees 40 and older are a protected class. The real Pandora’s Box that was opened by this decision actually lies in the nature of the disparate impact suit itself because unlike disparate treatment claims, disparate impact claims don’t require proof of discriminatory intent. Their emphasis is on whether or not a company’s policies and practices adversely affect a protected group. The claimants must have substantive proof that the disparate impact exists; they cannot just allege that there is the possibility that there may be a disparate impact resulting from the policy or practice. The downside here is that even though there may have been no discriminatory intent on the employer’s part, the fact that the disparate impact exists makes that employer legally liable.

What should employers be doing as a result of this heightened employment practices liability? The first response should be to review benefits, compensation and employment policies and practices to determine if there is any disparate impact on older workers. You will also need to perform a statistical analysis to prove the inaccuracies in the data of any potential claimant. A current statistical analysis will also evaluate whether there is the potential for disparate impact on older workers from a particular workplace policy or procedure in the future.

The next step you need to take is to talk to your agent about Employment Practices Liability Insurance (EPLI). Most comprehensive general liability policies exclude employment-related claims. Although a directors and officer’s policy may offer some form of protection, it won’t cover the business entity itself. Other forms of insurance, such as fiduciary liability coverage, usually want cover these types of claims either.

What an EPLI policy does is provide coverage for the cost of defending against and/or settling various types of claims, including discrimination, sexual harassment and wrongful termination. The majority of EPLI policies require the insurer to defend an employer against covered claims. The insurance company usually has the right to select the defense counsel. EPLI insurers typically have pre-approved, panel counsel hired to defend their clients. The cost of defense lessens the amount for settlement, so having an EPLI policy will actually encourage out of court settlements.