City of Austin v. Chandler, 2014 Tex. App. LEXIS 4235

Background

City of Austin consolidated its non–civil-service Public Safety Emergency Management (PSEM) into the civil-service Austin Police Department (APD) effective Jan. 4, 2009, under a negotiated Consolidation Agreement.
The Agreement limited transferees to APD officer rank, capped base salary at the APD officer with 16 years’ experience, and allowed at most 3 years of PSEM service to count as APD service.
PSEM employees lost most pay stipends; the City paid lump-sum amounts to prevent base-pay reductions for two years.
Thirty-three former PSEM officers over 40 sued for age-based disparate-impact discrimination, alleging the Agreement disproportionately reduced older employees’ credited years of service (and thus pay/promotional prospects).
A jury found for the plaintiffs, concluding the policy had a significantly adverse effect on persons 40+ and was not based on a reasonable factor other than age; the court awarded back pay (including overtime) and ordering adjustment on the APD pay scale.
On appeal the City raised five issues: lack of jurisdiction (failure to exhaust EEOC claims), legal and factual insufficiency (prima facie disparate impact; reasonable-factor defense; overtime damages), and refusal to give a jury instruction on causation. The court affirmed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Jurisdiction — exhaustion of administrative remedies	Plaintiffs’ EEOC "letter complaints" described the consolidation, loss of seniority/years, and that younger officers gained pay; that reasonably put EEOC on notice of a disparate‑impact claim.	City: EEOC letters did not expressly plead a disparate‑impact claim, so plaintiffs failed to exhaust administrative remedies.	Held: Plaintiffs’ letters adequately identified a facially neutral policy and adverse effects; EEOC investigation could reasonably include disparate‑impact theory. Jurisdiction proper.
Prima facie disparate‑impact (specific practice, statistical disparity, causation)	The specific practice challenged is stripping PSEM years of service; expert statistics showed older employees received materially smaller raises (Corn: ~15.6% vs 5.68%; City expert conceded ~9.9% gap).	City: plaintiffs failed to identify a specific practice; statistics flawed (outliers, omitted benefits); years‑of‑service ≠ age so claim fails.	Held: Specific practice sufficiently identified; statistical evidence (even accepting City expert) could support an inference of causation. Evidence legally and factually sufficient for prima facie case.
Reasonable‑factor‑other‑than‑age (employer burden)	Plaintiffs: City did not prove the decision to strip years of service was reasonable or logically tied to preserving pay.	City: Goal of ensuring no one lost base pay (lump sums) renders its placement decisions reasonable.	Held: Under Meacham the employer bears burden to prove the defense; lump‑sum payments did not logically explain stripping seniority. Jury’s adverse finding sustained.
Damages — overtime award	Plaintiffs: Damages (including overtime) were proved at a bench damages hearing; City’s own expert prepared the damage estimates.	City: Plaintiffs offered no overtime evidence during liability phase, so overtime should not be awarded.	Held: No rule required damages be proved to the jury when damages were reserved for the court; damage exhibit (City’s expert) was competent and award is supported.
Jury instruction on causation	Plaintiffs: Pattern charge adequately stated disparate‑impact elements; no separate causation instruction required.	City: Requested instruction equating "significantly adverse" with "statistical significance" was required.	Held: City’s proposed instruction misstated law and failed to preserve error; trial court did not abuse discretion.

Key Cases Cited

Pacheco v. Mineta, 448 F.3d 783 (5th Cir. 2006) (distinguishes disparate‑impact and disparate‑treatment theories and scope of EEOC charge)
Smith v. City of Jackson, 544 U.S. 228 (U.S. 2005) (recognizes disparate‑impact liability under the ADEA)
Meacham v. Knolls Atomic Power Lab., 554 U.S. 84 (U.S. 2008) (employer bears burden to show a reasonable factor other than age)
Watson v. Fort Worth Bank & Trust, 487 U.S. 977 (U.S. 1988) (causation standard for disparate‑impact claims; no rigid statistical formula)
Bazemore v. Friday, 478 U.S. 385 (U.S. 1986) (plaintiff need only prove causation by preponderance; omissions in regression affect probative value)
Hazen Paper Co. v. Biggins, 507 U.S. 604 (U.S. 1993) (discusses limits of years‑of‑service analysis in disparate‑treatment context)
City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (standards for appellate review of factual and legal sufficiency)
University of Tex. v. Poindexter, 306 S.W.3d 798 (Tex. App.—Austin 2009) (exhaustion and jurisdictional‑fact framework)