Reduction in Force Did Not Discriminate against Older Workers, District of Kansas Finds

In 2013, Spirit Aerosystems undertook a reduction in force at their Wichita, Kansas, manufacturing plant as part of a company-wide initiative to reduce labor costs. In the lead-up to the RIF, Spirit implemented a new performance evaluation system that employed a bell-curve distribution, to avoid over-inflation of performance ratings. Following performance evaluations, Spirit divided employees into 3 groups, A, B, and C, with group A the highest performing and group C the lowest. Spirit identified those in group C for the RIF.

Several plaintiffs who were terminated during the RIF filed class claims, alleging they were terminated due to their age and that Spirit’s true purpose in implementing the RIF was to reduce the older working population at the facility (and higher costs associated with those employees). Plaintiffs asserted theories of disparate impact and a pattern and practice of disparate treatment under the Age Discrimination in Employment Act. Some plaintiffs also asserted claims under the Americans with Disabilities Act and Family Medical Leave Act.

Class Certification

The district court granted plaintiffs’ motion for certification of their class action and denied Spirit’s motion to decertify. The court applied the framework for ADEA pattern-and-practice claims from Thiessen v. GE Capital Corp. in determining whether to certify the class. Early in the case, the court applied an “ad hoc” approach to determine whether class members were “similarly situated” and “victims of a single decision, policy, or plan” to certify the class on a conditional basis. Following discovery, the court applied a more rigorous framework, evaluating (1) disparate factual and employment settings of the individual plaintiffs; (2) the various defenses available to defendant which appear to be individual to each plaintiff; (3) fairness and procedural considerations; and (4) whether plaintiffs had exhausted administrative remedies.

The court found that while the plaintiffs held different positions in different departments with different managers, they shared similar characteristics (over 40 years old and salaried) and were affected by the same policies: the performance evaluation system, the retention ranking (being in the C group), and their subsequent termination in the same RIF. Spirit attempted decertification of the class, arguing that the employees’ positions were “vastly different” and that some plaintiffs had not exhausted their administrative remedies. The court rejected these arguments, finding that “highly individualized” defenses, such as exhaustion, were insufficient to defeat the plaintiffs’ class certification bid. Although not before the court, the court implied that the “piggybacking” doctrine would likely save these plaintiffs’ claims anyway.

Spirit’s Motion for Summary Judgment

Following discovery, Spirit moved for summary judgment on the class termination claims for disparate treatment and disparate impact. The court granted the motion, finding that the plaintiffs did not produce any evidence showing that Spirit intended to terminate older workers or that Spirit’s goal of cutting costs was a mere pretext for unlawfully targeting older workers. The court agreed that the RIF served Spirit’s legitimate financial interests. With regard to the disparate impact claims, under the ADEA, employers are only required to show that the employment practice at issue – here, the RIF – was based on “reasonable factors other than age.” The uncontroverted facts of the case showed that the new performance models were developed and enacted to ensure that the rankings were based on objective performance and not skewed by an employee’s seniority, so the court agreed the criteria were age-neutral. The court also agreed that the bell curve for performance rankings and the retention ranking system was a reasonable factor other than age in making decisions on whom to terminate. Spirit’s HR department also made clear to managers that age should not be considered in ranking or evaluating employees. Importantly, the court found that stray comments from managers about generally reducing costs were insufficient to create a factual issue about whether age was a motivating factor.

The court engaged in a lengthy and thorough examination of the testimony and reports of plaintiffs’ expert witnesses. Anyone dealing with expert witnesses in a discrimination case would be well-served in examining the court’s analysis closely. With regard to the disparate treatment claims, the court found that disparities in promotion rates between under-40 and over-40 workers did not rise to the level of a “gross disparity” sufficient to raise an inference of intentional discrimination. In the absence of other anecdotal evidence of age discrimination, such as prior instances of discrimination or a hostile working environment, plaintiffs could not create a genuine issue of fact.

With regard to disparate impact, the plaintiffs’ statistical expert failed to demonstrate that the bell curve and retention ratings actually caused the disparities in termination rates. Unless the statistical expert can isolate the employment practice at issue and show how that employment practice caused disparities, the testimony should be rejected and summary judgment granted in favor of the employer. Only an expert can perform the sophisticated statistical analysis necessary to make such a showing, and it is an essential element of any plaintiff’s case.

Key Takeaways

The court’s opinion illustrates several key points for consideration by employers and legal practitioners alike:

• Although Spirit prevailed on summary judgment, reductions in force are legal minefields. They require careful, considered judgment by management to avoid developing criteria that have a disparate impact on protected groups. Management and counsel should consider employing a statistical expert in developing criteria for RIFs to try and avoid discrimination claims.
• Courts and defense counsel should closely scrutinize expert reports and testimony, particularly on disparate impact claims. If a plaintiff does not designate a statistical expert witness, summary judgment should be granted, as a plaintiff generally cannot establish a “statistically significant” disparity or causation without utilizing properly performed regression analyses and other proven statistical methods.
• Courts are likely to certify classes of plaintiffs who are subject to the same RIF, even where they work in different positions or departments, where they are subject to the same retention criteria.