On January 10, 2017, the United States Court of Appeals for the Third Circuit held that “sub-group” disparate-impact claims are cognizable under the Age Discrimination in Employment Act (ADEA). Karlo v. Pittsburg Glass Works, LLC, 2017 WL 83385 (3d Cir. 2017). Specifically, the Court ruled that a group of workers aged 50 and older could bring disparate-impact claims alleging that a reduction in force (RIF) by Pittsburg Glass Works, LLC hit them harder than coworkers in their 40s.

Plaintiffs in the Karlo case claimed to have identified a policy that disproportionately impacted employees older than 50, a subgroup of the protected class. The Third Circuit concluded that the plaintiffs stated a viable claim under the ADEA.

As the Third Circuit explained, “[d]isparate impact claims in ADEA cases ordinarily evaluate the effect of a facially neutral policy on all employees who are at least forty years old – that is, all employees covered by the ADEA.” Therefore, “the ADEA ‘does not permit the victim of a facially neutral discriminatory policy to be told that he has not been wronged because other persons aged forty or older were preferred.”

The Court went on to hold that an ADEA disparate-impact claim may be demonstrated with various forms of evidence, including 40 and older comparisons, subgroup comparisons, or more sophisticated statistical modeling, so long as that evidence meets the usual standards of admissibility. The Court reasoned that not recognizing subgroups above age 40 would ignore significant age-based disparities.

The Third Circuit’s decision creates a split among the federal appeals courts on whether the ADEA permits disparate impact claims by “subgroups” of workers within the “40 and over” class protected by the law. The Third Circuit examined conflicting decisions from the Second, Sixth and Eighth Circuits, but concluded those decisions “primarily relied on policy considerations that [it] did not find persuasive.”

The decision will likely complicate employers’ ability to effectuate workforce reductions. Now, at least within the Third Circuit, rather than looking at the effects on all 40 and older workers collectively, employers will need to check for and avoid age-based impacts across narrower age sub-groups. Fortunately, however, even if a plaintiff can establish a prima facie case of disparate treatment, an employer can still defend the claim by proving that the challenged practice was based on reasonable factors other than age.