EEOC v. Allstate Insurance Company, No. 07-1559 (8th Cir. June 10, 2008)

| Jun 9, 2008 | Daily Developments in EEO Law |

The last of the U.S. Supreme Court’s decisions of the term concerning employment law, Meacham v. Knolls Atomic Power Lab, which will decide what role the “reasonable factors other than age” defense plays in an ADEA disparate impact case. (I co-authored the civil-rights organizations’ amicus brief in this case.) The Eighth Circuit, in the meanwhile, addresses another open issue in this field: what kinds of “employment practices” are open to challenge as having a disparate age impact. The happy surprise here is that the EEOC wins this time out.

EEOC v. Allstate Insurance Company, No. 07-1559 (8th Cir. June 10, 2008):  In 1990, Allstate stopped hiring employee-agents to sell property and casualty insurance, but by June 2000, the company still employed approximately 6,300 of them.  So Allstate abolished the entire category and agreed to reabsorb the same individuals as independent contractors, or else pay them severance.  The mass layoff is already the subject of other litigation on a disparate treatment theory.

The EEOC challenged a corresponding policy in 2000 to prevent those terminated under this policy to return to full-time employment “(1) one year from their termination date; or (2) the length of time the former agents received severance benefits from Allstate, whichever was longer.”  This policy went by the cumbersome title, “Preparing for the Future Reorganization Program (Clarification Of Re-Hire Policy).”  (As the majority notes, there was never a prior “re-hire policy,” so this caption was a neat bit of double-speak.)

In the district court, and on interlocutory appeal, Allstate argued that the “rehire policy” (1) was not an “employment practice,” or (2) did not have “a disparate-impact on job applicants over the age of forty because, as a matter of law, the proper way to determine whether a hiring policy has a disparate-impact is to determine the policy’s impact on the applicant pool.”  (The RFOA defense was not on appeal.) The district court denied Allstate summary judgment, granted partial summary judgment for the agency, and certified an appeal.

The Eighth Circuit, 2-1, affirmed.  The first argument — that there was no “employment practice” — stems from the holding in Smith v. City of Jackson, 544 U.S. 228, 236 n.6 (2005), that hiring practices may not be challenged for age impact.  “In a footnote, the Court explained that disparate-impact claims are not available to challenge hiring and termination practices prohibited under § 623(a)(1). Id. at 236 n.6. In concluding that disparate-impact is not available to challenge hiring and termination practices under § 623(a)(1), the Supreme Court focused on the textual differences between sections (a)(1) and (a)(2). Id. The text of section (a)(1) focuses on the effect of the ’employer’s actions with respect to the targeted individual,’ which gives rise to a disparate-treatment claim but not a disparate-impact claim. Id. (emphasis added). On the other hand, the text of section (a)(2) focuses on the effect of an employer’s practices on employees generally, which, unlike section (a)(1), gives rise to a disparate-impact claim. Id. (emphasis added).”

The panel majority finds that the EEOC case proceeds correctly under subsection (a)(2):

“We agree with the district court that Allstate’s rehire policy falls within the meaning of § 623(a)(2) as an employment policy. First, the rehire policy was inextricably linked to and implemented as part of an employment policy, i.e., the Reorganization Program. And second, the rehire policy served to deprive a specific group of Allstate employees of employment opportunities with Allstate, a practice § 623(a)(2) specifically proscribes.”

The determining factor is that the policy applied to one, discrete group of former employees:

“As its title suggests, the rehire policy only applied to employee-agents discharged as a result of the Reorganization Program, a fact which Allstate does not dispute. Moreover, the reasons Allstate offered for implementing the rehire policy further supports the conclusion that the rehire policy was part of the Reorganization Program. Karleen Zuzich, the drafter of Allstate’s rehire policy, testified at her deposition that in implementing the rehire policy, Allstate sought to encourage employee-agents ‘to be part of the exclusive agent program.'”

The court also applied Connecticut v. Teal, 457 U.S. 440, 451 (1982), to hold that the EEOC’s statistical analyses established a prima facie case of age disparate impact:

“The EEOC offered evidence that 90.3% of employee-agents barred from rehire were ages forty and older, while only 9.7% of employee-agents barred from rehire were under forty. Viewed from a different perspective, the EEOC offered evidence that employee-agents ages forty and older, subject to the rehire policy, represented 23% of Allstate’s overall workforce, while the employee-agents under forty, also subject to the rehire policy, represented only 2.7% of Allstate’s overall workforce. These substantial statistical disparities demonstrate that the rehire policy denied more older workers than younger workers employment opportunities with Allstate, therefore raising an inference of causation sufficient to establish a prima facie case of disparate-impact.”

The dissent (by Judge Shepherd) would have held that “the EEOC’s challenge to the rehire policy falls under section 29 U.S.C. § 623(a)(1), not (a)(2), and is, therefore, not susceptible to a disparate impact claim.”

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