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Kleber v. Carefusion Corporation

United States Court of Appeals, Seventh Circuit

April 26, 2018

Dale E. Kleber, Plaintiff-Appellant,
CareFusion Corporation, Defendant-Appellee.

          Argued October 23, 2017

          Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 15-cv-01994 - Sharon Johnson Coleman, Judge.

          Before Bauer and Hamilton, Circuit Judges, and Darrow, District Judge. [*]


         The key provision of the Age Discrimination in Employment Act of 1967 prohibits employment practices that discriminate intentionally against older workers, and prohibits employment practices that have a disparate impact on older workers. 29 U.S.C. § 623(a)(1), (a)(2); Smith v. City of Jackson, 544 U.S. 228 (2005). The central issue in this appeal is whether the disparate impact provision, § 623(a)(2), protects only current employees or whether it protects current employees and outside job applicants. We hold that § 623(a)(2) protects both outside job applicants and current employees. That is the better reading of the statutory text. It is also more consistent with the purpose of the Act and nearly fifty years of case law interpreting the ADEA and similar language in other employment discrimination statutes.

         In fact, our reading tracks the Supreme Court's reading of virtually identical statutory language in Title VII of the Civil Rights Act of 1964 in Griggs v. Duke Power Co., 401 U.S. 424, 426 n.1, 431 (1971), which found that this text protects "the job-seeker." In holding that the ADEA covers disparate impact claims, the Supreme Court identified Griggs as "a precedent of compelling importance" in interpreting § 623(a)(2), Smith, 544 U.S. at 234, so we apply it here. Moreover, we have not been presented with, and could not imagine on our own, a plausible policy reason why Congress might have chosen to allow disparate impact claims by current employees, including internal job applicants, while excluding outside job applicants.

         We therefore reverse the district court's Rule 12(b)(6) dismissal of plaintiff Dale Kleber's disparate impact claim and remand for further proceedings. Given the stage of the case, we do not address possible affirmative defenses under § 623(f)(1), including the defense that the challenged practice was "based on reasonable factors other than age."

         Part I provides the factual and procedural background for the issue. Part II examines the text, purpose, and origins of § 623(a)(2), as well as the practical consequences of the interpretations advanced by the parties. Part III addresses the unusually wide array of arguments, rebuttals, and sur- rebuttals marshaled by the parties to support their competing interpretations § 623(a)(2). Part IV explains why the plaintiff did not fail to exhaust his administrative remedies.

         I. Factual Background and Procedural History

         In reviewing a dismissal for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), we treat as true the factual allegations in the complaint without vouching ourselves for their truth. Bonnstetter v. City of Chicago, 811 F.3d 969, 973 (7th Cir. 2016). Plaintiff Dale Kleber is an attorney with extensive legal and business experience, including private law practice in Chicago, work as a general counsel for a major national company, and leadership of a national trade association, a real estate development company, and a medical device company. After his employment ended in July 2011, Kleber began applying for other legal jobs, primarily those in corporate legal departments. Kleber sent out more than 150 applications in total, without success, including applications for less senior positions. In 2014, Kleber was 58 years old and searching actively for a full-time position.

         On March 5, 2014, Kleber applied for a position as "Senior Counsel, Procedural Solutions" with defendant CareFusion Corporation, a healthcare products company. The job posting called for "a business person's lawyer" with the ability "to assume complex projects, " which we must assume would be well-suited to Kleber's skills and experience. The job posting also said, however, that applicants must have "3 to 7 years (no more than 7 years) of relevant legal experience." CareFusion received Kleber's application but did not select him for an interview. The company eventually filled the position with a 29-year-old applicant.

         The seven-year experience cap is at the heart of this lawsuit. In this appeal from a Rule 12(b)(6) dismissal, we must assume that the company did not select Kleber because he had more than seven years of relevant legal experience. Because of the experience cap, Kleber filed a charge of age discrimination with the Equal Employment Opportunity Commission. CareFusion responded in a letter to the EEOC saying its maximum experience cap in the job posting was an "objective criterion based on the reasonable concern that an individual with many more years of experience would not be satisfied with less complex duties … which could lead to issues with retention."

         After the EEOC issued Kleber a right-to-sue letter in December 2014, he filed this suit alleging claims for both disparate treatment and disparate impact under the relevant clauses of section 4 of the ADEA, 29 U.S.C. § 623(a)(1) & (a)(2). Kleber alleged that the maximum experience cap was "based on unfounded stereotypes and assumptions about older workers, deters older workers from applying for positions … and has a disparate impact on qualified applicants over the age of 40."

         CareFusion moved to dismiss both claims. The district court dismissed the disparate impact claim under Rule 12(b)(6), relying on our decision in E.E.O.C. v. Francis W. Parker School, 41 F.3d 1073 (7th Cir. 1994), to hold that the ADEA's disparate impact provision does not cover job applicants who are not already employed by the defendant. The court denied dismissal on the disparate treatment claim. Kleber later dismissed the disparate treatment claim voluntarily. The district court entered final judgment for CareFusion. Kleber then appealed, challenging only the district court's dismissal of his § 623(a)(2) disparate impact claim.

         II. The Scope of Disparate Impact Protection

         A. The Text of the ADEA

         1. Dissecting § 623(a)(2)

         This appeal from a Rule 12(b)(6) dismissal presents a legal issue that we review de novo: whether § 623(a)(2) protects outside job applicants from employment practices that have a disparate impact on older applicants. See Bell v. City of Chicago, 835 F.3d 736, 738 (7th Cir. 2016). We begin with the statutory language, of course. We analyze the specific words and phrases Congress used, though we cannot lose sight of their "place in the overall statutory scheme, " since we "construe statutes, not isolated provisions." King v. Burwell, 135 S.Ct. 2480, 2489 (2015), quoting FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133 (2000), and Graham County Soil and Water Conservation Dist. v. United States ex rel. Wilson, 559 U.S. 280, 290 (2010).

         The key provision of the ADEA, 29 U.S.C. § 623(a), reads:

It shall be unlawful for an employer-
(1) to fail or refuse to hire or to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's age;
(2) to limit, segregate, or classify his employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual's age; or
(3) to reduce the wage rate of any employee in order to comply with this chapter.

         The disparate treatment provision, paragraph (a)(1), does not refer to job applicants, but it clearly applies to them by making it unlawful for the employer "to fail or refuse to hire … any individual … because of such individual's age." The disparate impact provision, paragraph (a)(2), also does not refer specifically to applicants or hiring decisions, but its broad language easily reaches employment practices that hurt older job applicants as well as current employees.

         Despite the length of this opinion, resulting from the unusually deep layers of arguments about this language, we can explain our basic textual reading in this and the following three paragraphs. We start with the critical statutory language, "to limit, segregate, or classify" employees. If an employer classifies a position as one that must be filled by someone with certain minimum or maximum experience requirements, it is classifying its employees. If the classification "would deprive or tend to deprive any individual of employment opportunities, " paragraph (a)(2) can reach that classification. The broad phrase "any individual" reaches job applicants, so the focus turns to the employer's action and its effects on the individuals impacted by it-i.e., whether the employer has classified jobs in a way that tends to limit any individual's employment opportunities. See Smith v. City of Jackson, 544 U.S. 228, 234, 235-38 (2005) (plurality) (explaining that this "text focuses on the effects of the action" and not the employer's motive); id. at 243 (Scalia, J., concurring).[1]

         To oppose this conclusion, the defendant emphasizes the phrase "or otherwise adversely affect his status as an employee." § 623(a)(2). The antecedent of "his" is "any individual, " and "otherwise adversely affect" is broader than "deprive or tend to deprive any individual of employment opportunities." If "any individual" is not already employed by the employer in question, reasons the defendant, the individual does not yet have "status as an employee" and so is not protected from policies or practices that have disparate impacts because of age. The defendant thus concludes that a person's status as an employee cannot be affected unless the person is already an employee, so paragraph (a)(2) implicitly limits its protections from disparate impacts to people who already possess "status as an employee" with the defendant- employer.

         Looking only at the language of paragraph (a)(2) in isolation, the defense argument has some plausibility, but we reject it for several reasons we explain in detail below. At the most basic textual level, there are two fundamental problems. First, the defense argument assumes that "status as an employee" limits the already broad phrase, "deprive or tend to deprive any individual of employment opportunities." It is not self-evident-as a matter of plain meaning-that the last "status" phrase must be read as a limitation. A list culminating in an "or otherwise" term could instead direct the reader to consider the last phrase alternatively, "in addition to" what came before. For example, an employer could violate the ADEA by adversely affecting the status of its employees (e.g., by unreasonably giving bigger raises to junior employees, as alleged in Smith, 544 U.S. at 231) without depriving an individual of employment opportunities, i.e., better jobs and promotions. In this sense, paragraph (a)(2) "enumerates various factual means of committing a single element"- imposing employment policies that have disparate impacts on older workers. See Mathis v. United States, 136 S.Ct. 2243, 2249 (2016) (discussing various ways to write an "alternatively phrased law").

         Second, even if "status as an employee" must be affected to state a claim under (a)(2), the defense argument depends entirely on the notion that "status as an employee" is not affected when a person is denied the opportunity to become an employee in the first place. That limiting assumption is clever, but we believe it is incorrect. Deciding whether a person becomes an employee or not has the most dramatic possible effect on "status as an employee." Courts often speak of "denying status" of one sort or another.[2] And the word "status" is not necessarily limited to status as of any particular moment. See Pub. L. No. 82-248, § 1, 65 Stat. 710 (1951), codified at 1 U.S.C. § 1 (Dictionary Act providing that unless the context indicates otherwise, "words used in the present tense include the future as well as the present"). Thus, if Congress really meant to outlaw employment practices that tend to deprive older workers of employment opportunities, which it did, but at the same time deliberately chose to leave a wide array of discriminatory hiring practices untouched, its use of the phrase "status as an employee" would have been a remarkably indirect and even backhanded way to express that meaning.

         Looking beyond the text of paragraph (a)(2) at the larger context of the ADEA as a whole, as well as the Supreme Court's interpretation of identical language in Title VII of the Civil Rights Act of 1964 in Griggs v. Duke Power Co., 401 U.S. 424, 430-31 (1971) (disparate impact provision applies to both job-seekers and employees seeking promotions), we reject the defendant's unduly narrow reading of paragraph (a)(2). See Smith, 544 U.S. at 233-38 (applying Griggs to § 623(a)(2) in ADEA); Texas Dep't of Housing and Community Affairs v. Inclusive Communities Project, Inc., 135 S.Ct. 2507, 2518 (2015) ("antidiscrimination laws must be construed to encompass disparate-impact claims when their text refers to the consequences of actions and not just to the mindset of actors, and where that interpretation is consistent with statutory purpose").

         The parties here and other courts addressing this problem under § 623(a)(2) have laid out an unusually large variety of textual arguments. Most are spelled out well on both sides of the debate in the several opinions in the Eleventh Circuit's en banc decision, Villarreal v. R.J. Reynolds Tobacco Co., 839 F.3d 958 (11th Cir. 2016), where the majority concluded that outside job applicants could not bring disparate impact claims under the ADEA. See also Rabin v. PricewaterhouseCoopers LLP, 236 F.Supp.3d 1126 (N.D. Calif. 2017) (agreeing with Villarreal dissent and denying judgment on pleadings on disparate impact claim by putative class of outside job applicants).

         2. Considering Consequences of the Interpretations

         In the following pages, we dive more deeply into the layers of the textual arguments offered in this appeal. Before we do, it is useful to pause to consider the practical consequences of the parties' readings of paragraph (a)(2). See, e.g., Graham County, 559 U.S. at 299-301 (considering practical consequences of parties' interpretations when determining better reading of statute); Dewsnup v. Timm, 502 U.S. 410, 416- 20 (1992) (same).

         Suppose the defendant is correct that paragraph (a)(2) applies only to current employees. Imagine two applicants for the defendant's senior counsel position: both are in their fifties, and both have significantly more than seven years of relevant legal experience. One is Kleber, who does not currently have a job with the defendant. The other already has a job with the defendant but wants a transfer or promotion to the senior counsel position. Both are turned down because they have more than the maximum seven years of experience. According to the defendant's interpretation of paragraph (a)(2), the internal applicant can sue for a disparate impact violation, but the external one cannot.

         That result would be arbitrary and even baffling, especially under a statute with the stated purpose "to prohibit arbitrary age discrimination in employment." 29 U.S.C. § 621(b). And this view depends entirely on the assumption that the statutory phrase "otherwise adversely affect his status as an employee" cannot possibly be applied to someone who is, because of the challenged employment practice, completely denied any status as an employee. We doubt that when the ADEA was enacted, "a reasonable person conversant with applicable social conventions would have understood" the ADEA as drawing the line the defendant proposes here. See John F. Manning, What Divides Textualists from Purposivists?, 106 Colum. L. Rev. 70, 77 (2006); accord In re Sinclair, 870 F.2d 1340, 1342 (7th Cir. 1989).

         The problems with the defendant's interpretation do not end there. If the statute actually drew this arbitrary line between inside and outside applicants, still further arbitrary line-drawing would be needed. Suppose the applicant is currently employed by a sister subsidiary of the employer. Does she have "status as an employee" so that she could assert a disparate impact claim? Or suppose the applicant was recently laid off by the employer and challenges its failure to recall her. Or suppose the applicant currently has a temporary position as an independent contractor through a temporary employment agency. We see no arguable policy reason to exclude any of these applicants from the disparate impact protection of paragraph (a)(2).

         The defendant and other proponents of the no-outside- applicants interpretation of paragraph (a)(2) have not offered a reason why Congress might have chosen to allow the inside applicant but not the outside applicant to assert a disparate impact claim.[3] We have tried, too, but cannot imagine a plausible policy reason for drawing that arbitrary line. We recognize, of course, that Congress can and often does draw arbitrary lines when it wants to do so. When it does, we enforce those lines, absent constitutional problems. See, e.g., Stephens v. Heckler, 766 F.2d 284, 286 (7th Cir. 1985) (Congress can dictate outcomes even though "there is no shortage of arbitrariness in disability cases"); First Chicago NBD Corp. v. Comm'r of Internal Revenue, 135 F.3d 457, 460 (7th Cir. 1998) ("arbitrariness is everywhere in the tax code, so that an approach to interpretation that sought to purge the arbitrary from the code would be quixotic").

         But when courts interpret statutory language that is less than crystalline, it is worth keeping in mind the practical consequences of the argued interpretations. See, e.g., Graham County, 559 U.S. at 283, 299-301 (False Claims Act); Gustafson v. Alloyd Co., Inc., 513 U.S. 561, 564, 578 (1995) (Securities Act of 1933); see also, e.g., Kennedy v. Chemical Waste Mgmt., Inc., 79 F.3d 49, 51 (7th Cir. 1996) (Americans with Disabilities Act); Martin v. Luther, 689 F.2d 109, 114 (7th Cir. 1982) (reaching conclusion about parole revocation "supported by common sense and an assessment of the practical consequences, which naturally guide our interpretation of legislative enactments").

         B. Assumptions of the ...

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