Recently, the U.S. Court of Appeals for the Second Circuit considered whether a trial court had properly granted summary judgment in favor of an employer. The court’s decision in Friedman v. Swiss Re America Holding Corp. is instructive for employers that must conduct reductions in force without triggering lawsuits under the Age Discrimination in Employment Act (ADEA).

MAKING A CASE

When he was terminated, the 50-year-old employee claimed that he was discriminated against because of his age and religion. The employer argued that his discharge was part of a reduction in force. The trial court granted summary judgment in favor of the employer on both claims, but the appellate court reversed as to the plaintif’s age claim.

To establish a prima facie case of discrimination, plaintiffs must provide that:

• They belong to a protected class,
• They are qualifed for the position,
• They suffered an adverse employment action,
• The adverse employment action occurred under circumstances giving rise to an inference of discrimination.

In this case the plaintiff argued, as evidence of age discrimination, that he was terminated and replaced by someone who was in his thirties. Of the 37 people who were laid of, 31 were older than 40. Before the termination, the employee’s pay increases had dwindled. Also, at a meeting a year before the reduction in force, his supervisor asked everyone how old they were and told the employee that his “hair and teeth would be falling out soon.”

COURT REVIEWS EVIDENCE

The appellate court held that the employee established a prima facie case of age discrimination because he was over 40 years old, was qualifed for his position, was fired and was allegedly replaced by a younger, less qualifed employee. But the court also found that the employer had set forth a legitimate nondiscriminatory reason for the employee’s termination — a reduction in force. Thus, the burden shifted back to the employee to prove that his employer’s reduction in force was pretext for age discrimination.

The appellate court further held that the trial court had erred when deciding that the employee couldn’t establish pretext. The lower court had determined that certain ageist comments made by the employee’s supervisor were impermissible hearsay. However, the appellate court decided that they weren’t hearsay because the employee was introducing them to show bias on his supervisor’s part, not for the truth of the comments.

In addition, the appellate court found that the trial court had looked at all of the employee’s evidence in isolation, rather than considering the record as a whole, to determine whether a jury could reasonably fnd pretext on the employer’s part. For example, the trial court had disregarded the employee’s allegation that his employer had replaced him with a younger employee, fnding that replacement by a younger employee itself doesn’t prove discrimination.

The appellate court stated that the employee didn’t make his allegation in isolation but provided additional evidence consisting of comments from his supervisor, declines in his compensation and data regarding the reduction in force. Combined, these facts could establish pretext. Therefore, the court held that the plaintiff had created material issues of fact making summary judgment improper.

OBJECTIVE REASONS

Even if you’re terminating employees as part of a reduction in force, your organization could face unlawful discrimination claims if the reduction disparately impacts one class of employees. Ensure that you’re choosing the employees for termination based on objective reasons, such as job seniority.