Matter of Laverack & Haines, Inc. v. New York State Division of Human Rights, 88 N.Y.2d 734 (1996)

In age discrimination cases stemming from a company downsizing, an employer satisfies its burden of rebuttal by presenting a non-discriminatory, non-pretextual explanation, such as demonstrable economic hardship necessitating workforce reduction, and is not legally obligated to create new positions or displace other employees to accommodate the terminated employee.

Summary

Laverack & Haines, Inc. was found by the State Division of Human Rights (SDHR) to have discriminated against George Burns based on age when it eliminated his position as Claims Manager during a company-wide downsizing. The New York Court of Appeals reversed the SDHR’s determination, holding that while Burns established a prima facie case of age discrimination, Laverack successfully rebutted this presumption by demonstrating that the job elimination was due to genuine economic difficulties and was not a pretext for discrimination. The court emphasized that Laverack had no legal obligation to create a new position for Burns or displace other employees.

Facts

George Burns, in his early 60s, was the Claims Manager for Laverack & Haines’ Syracuse office. Due to economic downturns, Laverack began downsizing its operations, including eliminating senior-level positions. The Claims Manager position was eliminated company-wide, including Burns’ position in Syracuse and a similar position in Buffalo. Burns was offered a part-time, lower-paying consultant position, which he declined. Another Claims Manager in Albany accepted a similar readjustment. Later, a younger employee, Jack Syracuse, who had assisted Burns, was also terminated.

Procedural History

Burns filed a complaint with the SDHR, alleging age discrimination. An Administrative Law Judge (ALJ) initially found in favor of Burns. The SDHR Commissioner, however, ultimately adopted the ALJ’s report, finding unlawful discrimination. The Appellate Division agreed that a prima facie case was established but the Court of Appeals reversed, annulling the SDHR determination and dismissing the complaint.

Issue(s)

Whether an employer, in response to a prima facie case of age discrimination stemming from a company downsizing, adequately rebuts the presumption of discrimination by presenting evidence of economic hardship and eliminating the employee’s job title company-wide.

Holding

No, because the employer presented a legitimate, non-discriminatory reason (economic hardship leading to a company-wide downsizing that eliminated the position) for the termination and was not obligated to create a new position or displace another employee to accommodate the plaintiff.

Court’s Reasoning

The Court of Appeals relied on its precedent in Matter of Miller Brewing Co. v State Div. of Human Rights, 66 NY2d 937, which established that satisfying the prima facie component of an age discrimination case shifts the burden to the employer to rebut the presumption of discrimination by presenting legitimate, independent, and nondiscriminatory reasons. The court found that Laverack met this burden by demonstrating that the downsizing was due to business failings and economic setbacks. The court noted that Burns was not replaced by a younger employee, and the Claims Manager position was eliminated entirely across all branch offices. The court emphasized that the employer was “under no legal obligation to create a new or additional job or to bump or displace lower classified employees as a way to forestall or obviate an unlawful age discrimination complaint.” To require such actions would create a “Hobson’s choice for the employer.” The court distinguished the case from situations involving disparate treatment, finding no evidence that Burns was treated differently from similarly situated employees, especially considering the distinct operational circumstances of the Buffalo and Syracuse offices. The court further cited Kipper v Doron Precision Sys., 194 AD2d 855, noting that the fact that some of Burns’ responsibilities were assumed by a younger employee is insufficient to establish that Laverack’s proffered reason for terminating Burns’ employment was pretextual. The court reasoned that the company’s actions were a result of business distress, not age discrimination, highlighting that it was not “playing musical chairs” but struggling to survive. This aligns with the general principle that “the discharge of employees as a result of a city fiscal crisis does not constitute a discriminatory act” (Steele v Board of Educ., 40 NY2d 456). The court also drew support from U.S. Supreme Court precedents such as McDonnell Douglas Corp. v Green, 411 US 792; Texas Dept. of Community Affairs v Burdine, 450 US 248; and St. Mary’s Honor Ctr. v Hicks, 509 US 502.