NYCHRL Disparate Impact after Allen v. City of New York: “Significant Business Objective” Defense Prevails Absent Substantial Evidence of Less Discriminatory Alternatives

NYCHRL Disparate Impact after Allen v. City of New York: “Significant Business Objective” Defense Prevails Absent Substantial Evidence of Less Discriminatory Alternatives

Court: U.S. Court of Appeals for the Second Circuit (Summary Order – non‑precedential)

Date: November 12, 2025

Caption: Allen et al. v. City of New York, New York City Health and Hospitals Corporation

Introduction

In Allen v. City of New York, a group of eleven former employees of Jacobi Medical Center challenged two rounds of workforce reductions undertaken in 2017 as part of the New York City Health and Hospitals Corporation’s (“H&H”) “Managerial Efficiency Improvement Initiatives” (MEIIs). The layoffs eliminated 45 positions, 25 of which were held by non‑White employees and 43 by employees over age 40. Plaintiffs asserted a battery of federal and local discrimination claims sounding in disparate impact and disparate treatment.

The district court granted summary judgment to H&H on all federal claims (Title VII, ADEA, and § 1983), and on three state and city law claims (NYSHRL disparate impact, NYCHRL disparate impact, and NYSHRL disparate treatment). It declined supplemental jurisdiction over the remaining NYCHRL disparate treatment claim, dismissing it without prejudice. On appeal, Plaintiffs abandoned their federal claims and argued the district court abused its discretion by exercising supplemental jurisdiction over the three state/city claims it decided, and erred on the merits of those claims.

The Second Circuit affirmed. While the order is non‑precedential, it offers clear guidance on: (1) when district courts may retain supplemental jurisdiction after dismissing federal claims at summary judgment; (2) what plaintiffs must show to sustain disparate impact under pre‑2019 NYSHRL and under the NYCHRL’s more liberal framework; and (3) how budget‑driven workforce reductions can defeat NYCHRL disparate impact claims through the “significant business objective” defense when plaintiffs cannot proffer viable, less discriminatory alternatives.

Summary of the Opinion

  • Supplemental Jurisdiction: No abuse of discretion in retaining NYSHRL disparate impact, NYCHRL disparate impact, and NYSHRL disparate treatment claims after the federal claims were dismissed at summary judgment. Proceedings were advanced and the state and city standards at issue largely mirrored federal law, minimizing comity concerns.
  • NYSHRL Disparate Impact (pre‑2019 standards): Affirmed summary judgment. Plaintiffs failed to isolate a specific employment practice within the MEIIs that caused the alleged racial or age disparities, as required by federal‑parallel standards.
  • NYCHRL Disparate Impact: Without deciding whether plaintiffs identified a qualifying “policy or practice” (or group thereof), the court held H&H proved a “significant business objective” (massive budget shortfall requiring managerial consolidation) and Plaintiffs failed to produce substantial evidence of a less discriminatory alternative that would serve H&H as well.
  • NYSHRL Disparate Treatment: Affirmed summary judgment. Plaintiffs offered no comparators, admissions, or other admissible evidence from which a jury could infer discriminatory intent, and did not rebut H&H’s budgetary rationale as pretext.
  • Abandonment of Federal Claims: Plaintiffs did not brief their federal claims on appeal; those claims were deemed abandoned.

Analysis

Precedents Cited and How They Shaped the Decision

  • Supplemental Jurisdiction:
    • Carnegie‑Mellon Univ. v. Cohill, 484 U.S. 343, 350 n.7 (1988), abrogated on other grounds by Royal Canin U.S.A., Inc. v. Wullschleger, 604 U.S. 22, 39–41 (2025): Articulates the factors—judicial economy, convenience, fairness, and comity—governing whether to retain pendent state claims after federal claims drop out.
    • Tops Markets, Inc. v. Quality Markets, Inc., 142 F.3d 90, 103 (2d Cir. 1998): Generally counsels dismissal of state claims at early stages, but leaves room to retain them later in the case.
    • Raucci v. Town of Rotterdam, 902 F.2d 1050, 1054–55 (2d Cir. 1990) and Nowak v. Ironworkers Local 6 Pension Fund, 81 F.3d 1182, 1191–92 (2d Cir. 1996): Uphold retention where federal claims fall after substantial proceedings and state issues are settled.
    • Kolari v. New York‑Presbyterian Hosp., 455 F.3d 118, 122 (2d Cir. 2006) and Delaney v. Bank of America Corp., 766 F.3d 163, 170 (2d Cir. 2014): Confirm abuse‑of‑discretion review and highlight considerations of judicial economy.
  • Abandonment on Appeal:
    • LoSacco v. City of Middletown, 71 F.3d 88, 92 (2d Cir. 1995): Issues not briefed are abandoned; applied to Plaintiffs’ federal claims here.
  • Disparate Impact (federal‑parallel and pre‑2019 NYSHRL):
    • Chin v. Port Authority, 685 F.3d 135, 151, 154 (2d Cir. 2012): Requires identification of a specific employment practice causing the disparity.
    • Geller v. Markham, 635 F.2d 1027, 1032 (2d Cir. 1980): ADEA disparate impact framework.
    • Watson v. Fort Worth Bank & Trust, 487 U.S. 977, 994–998 (1988): Plaintiffs must isolate a specific practice; outlines the business necessity defense and alternative practices burden‑shifting.
    • Smith v. City of Jackson, 544 U.S. 228, 241 (2005): It is not enough to point to a generalized policy; specificity is required for disparate impact.
    • Gulino v. N.Y. State Educ. Dep’t, 460 F.3d 361, 382 (2d Cir. 2006): Emphasizes the role of expert/statistical evidence in proving disparate impact.
    • Patane v. Clark, 508 F.3d 106, 113 (2d Cir. 2007); Abdu‑Brisson v. Delta Air Lines, 239 F.3d 456, 466 (2d Cir. 2001): Pre‑2019 NYSHRL claims are analyzed under the same framework as their federal analogues.
    • Alshami v. City Univ. of New York, 162 N.Y.S.3d 720, 720 n.1 (1st Dep’t 2022): NYSHRL’s 2019 amendments are not retroactive.
    • Wright v. White Plains Hosp. Med. Ctr., 232 N.Y.S.3d 594, 595–96 (2d Dep’t 2025): Interprets the 2019 NYSHRL amendments to align prospectively with NYCHRL’s more lenient standards.
  • NYCHRL Disparate Impact:
    • NYC Admin. Code § 8‑107(17): Disparate impact can be shown for a “policy or practice” or a “group of policies or practices”; employers may defend by proving a “significant relationship to a significant business objective,” and plaintiffs may rebut with “substantial evidence” of less discriminatory alternatives that would serve the employer as well.
    • Mihalik v. Credit Agricole Cheuvreux N.A., 715 F.3d 102, 109 (2d Cir. 2013): NYCHRL must be construed independently and more liberally than federal or state counterparts.
    • Burns v. Quinones, 68 N.Y.2d 719, 721 (1986): New York Court of Appeals held that certain managerial employees (“Group 11”) of H&H are not subject to Civil Service Law requirements—relevant to plaintiffs’ argument that civil service violations precluded H&H’s defense.
  • Disparate Treatment (NYSHRL/federal parallel):
    • McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802–04 (1973): Three‑step burden‑shifting framework.
    • Tolbert v. Smith, 790 F.3d 427, 434 (2d Cir. 2015) and McPherson v. N.Y.C. Dep’t of Educ., 457 F.3d 211, 215 (2d Cir. 2006): Describe the prima facie case, employer’s nondiscriminatory reason, and plaintiff’s pretext burden.
    • Woroski v. Nashua Corp., 31 F.3d 105, 109–10 (2d Cir. 1994), abrogated on other grounds by Schnabel v. Abramson, 232 F.3d 83, 90–91 (2d Cir. 2000): “Some evidence” of bias is insufficient to defeat a properly supported summary judgment motion.

Legal Reasoning

1) Supplemental jurisdiction. The district court kept three state/city claims (NYSHRL disparate impact; NYCHRL disparate impact; NYSHRL disparate treatment) after disposing of the federal claims at summary judgment. Applying the Cohill factors, the Second Circuit emphasized two considerations:

  • Judicial economy and convenience: The case was already five years old with discovery complete, favoring retention.
  • Comity: The pertinent state/city standards either mirrored or substantially overlapped with federal law (particularly pre‑2019 NYSHRL), presenting no novel issues.

The court therefore found no abuse of discretion in retaining and deciding those claims. By contrast, the district court had declined jurisdiction over the remaining NYCHRL disparate treatment claim, which was not at issue on appeal.

2) NYSHRL disparate impact (pre‑2019 standards paralleling federal law). To establish a prima facie disparate impact case, plaintiffs must identify a specific employment practice responsible for the disparity and show causation. Plaintiffs challenged two distinct MEIIs, implemented differently across departments and rounds, and failed to isolate the particular step, criterion, or component of the process that produced the observed age and race disparities. Their additional theory—an alleged practice of excluding “Group 12” employees from layoffs—lacked supporting expert/statistical evidence linking that exclusion to a protected‑class disparity. Because plaintiffs did not clear the prima facie threshold, summary judgment was proper.

3) NYCHRL disparate impact. The NYCHRL is more liberal and allows plaintiffs to proceed against a “policy or practice” or a “group of policies or practices,” without having to specify which component within the group causes the impact. The Second Circuit did not resolve whether plaintiffs had adequately identified a qualifying policy or group. Instead, it affirmed on the ground that H&H established a “significant relationship to a significant business objective,” and plaintiffs failed to offer “substantial evidence” of a less discriminatory alternative that would serve H&H as well.

  • Employer’s defense: H&H faced a looming $1.8 billion operating loss by FY2020 and targeted $55 million in savings through workforce reductions focusing on consolidating managerial positions. This satisfied the “significant business objective” standard.
  • Civil Service Law argument rejected: Plaintiffs argued H&H could not assert the defense because the layoffs allegedly violated Civil Service Law. The record did not show the affected jobs were civil service positions; H&H presented contrary evidence, and Burns v. Quinones excludes H&H’s managerial “Group 11” employees from Civil Service Law requirements. With the premise unproven, the attack on the defense failed.
  • No viable alternatives shown: Plaintiffs offered no “substantial evidence” of feasible alternatives with less disparate impact that would serve H&H’s objectives equally well. Without that showing, summary judgment followed.

4) NYSHRL disparate treatment. Applying the McDonnell Douglas framework, plaintiffs did not marshal evidence sufficient to raise a triable inference of discriminatory intent. Beyond raw counts of ages and races of those whose positions were eliminated, they offered no comparator analysis, no admissible biased statements, and no competent proof that H&H’s stated budgetary rationale was pretextual. Summary judgment was therefore affirmed.

Impact and Practical Implications

  • Supplemental jurisdiction posture: In the Second Circuit, district courts may retain state/city discrimination claims after dismissing federal claims at the summary judgment stage where proceedings are advanced and the surviving claims reflect settled principles. Litigants should anticipate that courts may resolve state and NYCHRL issues on the merits in this posture.
  • NYSHRL pre‑2019 claims track federal law: For claims accruing before the 2019 amendments, plaintiffs must meet the federal‑parallel disparate impact requirements. Identifying a generalized reduction‑in‑force or a broad policy like “efficiency initiatives” is insufficient; the specific criterion causing the disparity must be isolated and supported with competent evidence, often expert analysis.
  • NYCHRL’s “significant business objective” defense remains robust: Even under NYCHRL’s more liberal disparate impact scheme, employers can prevail at summary judgment by proving their policies significantly relate to a significant business aim, especially in fiscal crisis contexts. Plaintiffs must come forward with substantial evidence of comparably effective, less discriminatory alternatives; mere disagreement with the employer’s chosen approach will not suffice.
  • Budgetary layoffs and civil service considerations: Plaintiffs asserting civil service violations to undermine an employer’s business objective defense must substantiate that the positions are subject to the Civil Service Law. For H&H, Burns v. Quinones confirms that certain managerial employees are exempt, blunting such challenges.
  • Disparate treatment proofs: Raw demographics of those terminated, without comparators, discriminatory statements, process irregularities, or other indicia of bias, rarely carry a plaintiff’s burden—particularly where the employer’s budgetary rationale is well‑documented.
  • Appellate preservation matters: Abandonment rules are unforgiving. Failure to brief federal claims on appeal forfeits them, narrowing the appellate court’s review and potentially foreclosing arguments that might otherwise shape the analysis of analogous state/city claims.

Complex Concepts Simplified

  • Supplemental jurisdiction: When a federal court has dismissed all federal claims, it must decide whether to keep related state/local claims. It balances judicial economy, convenience, fairness, and respect for state courts. Advanced cases with settled state‑law issues often remain in federal court for resolution.
  • Disparate impact vs. disparate treatment:
    • Disparate impact challenges facially neutral policies that disproportionately harm protected groups. Intent to discriminate is not required; causation and statistical proof linking the policy to the disparity are key.
    • Disparate treatment alleges intentional discrimination. Under McDonnell Douglas, the plaintiff must show a prima facie case; the employer then offers a legitimate reason; the plaintiff must prove that reason is a pretext for discrimination.
  • Identifying a specific practice (disparate impact): Plaintiffs must pinpoint the particular decision rule, criterion, or step within a broader policy that yields the disparity. Merely pointing to a reduction‑in‑force or general “efficiency” is too vague.
  • NYCHRL’s “group of policies or practices” approach: Unlike federal law, NYCHRL allows plaintiffs to attack the combined effect of multiple policies and does not require isolating which specific policy within the group causes the disparity. But the employer can still defend, and plaintiffs still must present substantial evidence of alternatives.
  • Business necessity vs. significant business objective: Federal disparate impact law recognizes a “business necessity” defense. NYCHRL uses a similar but not identical standard: the employer must “plead and prove” that each policy bears a significant relationship to a significant business objective. Plaintiffs can overcome the defense by proving an equally effective, less discriminatory alternative.
  • Comparator evidence: In disparate treatment cases, identifying similarly situated employees outside the plaintiff’s protected class who were treated better is powerful evidence of discriminatory intent.
  • Abandonment on appeal: If an appellant does not brief an issue, the appellate court treats it as abandoned and will not address it.
  • Pre‑ vs. post‑2019 NYSHRL standards: Claims accruing before the 2019 amendments are generally evaluated under federal‑parallel standards. The 2019 amendments, which call for liberal construction, apply prospectively and align NYSHRL more closely with NYCHRL.

Conclusion

The Second Circuit’s summary affirmance in Allen underscores several practical and doctrinal points. First, district courts in this Circuit have latitude to retain and resolve state and city discrimination claims after federal claims fall out at summary judgment—particularly where proceedings are mature and controlling standards largely mirror federal law. Second, for pre‑2019 NYSHRL disparate impact claims, plaintiffs must do the hard work of isolating a specific policy element and marshaling competent causation evidence; generalized challenges to a complex reduction‑in‑force will not survive. Third, even under the NYCHRL’s more liberal disparate impact framework, the “significant business objective” defense is potent where the employer demonstrates serious fiscal pressures and managerial consolidation goals, and plaintiffs lack substantial evidence of equally effective, less discriminatory alternatives. Finally, in disparate treatment claims, raw demographics and conclusory assertions cannot substitute for comparators, direct or circumstantial evidence of bias, or proof of pretext in the face of a documented budgetary justification.

Although issued as a non‑precedential summary order, Allen offers a clear roadmap for litigants navigating disparate impact and treatment claims under NYSHRL and NYCHRL in the context of public‑sector budget reductions. It highlights the evidentiary rigor required of plaintiffs and the strategic importance of developing both causation and alternative‑policy evidence early—while reminding appellants that unbriefed issues are lost on appeal.

Case Details

Year: 2025
Court: Court of Appeals for the Second Circuit

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