The EEOC’s long-awaited final rule amending its Age Discrimination in Employment (ADEA) regulations, concerning disparate-impact claims, goes into effect on April 30, 2012. Critics argue that this new rule, which sets forth standards for the reasonable factors other than age defense (RFOA), will lead to unwarranted scrutiny of business decisions and make it more difficult for employers to defend against frivolous litigation.

The ADEA prohibits employers from discriminating against individuals on the basis of age (over 40). It is well established that Title VII prohibits both intentional discrimination (disparate-treatment) and unintentional discrimination (disparate-impact); that is, neutral policies which have an adverse impact on individuals within a protected classification. It was not until 2005, however, that the Supreme Court held that disparate-impact claims could be filed under the ADEA.

In the context of a Title VII disparate-impact case, employers can defend the challenged neutral policy on the basis that the policy is job related and consistent with “business necessity.” In 2008, the Supreme Court clarified the burden of proof standard in age cases, making it clear that ADEA cases are fundamentally different from Title VII cases. The Court held: (1) the business necessity defense has no place in ADEA disparate-impact cases; (2) however, employers can defend a policy that has an adverse impact on older workers on the basis that they utilized reasonable factors other than age; and, (3) while this RFOA defense is less stringent than the business necessities test, the RFOA is an affirmative defense where the burden of persuasion rests with the employer. The Supreme Court did not articulate how to determine whether a factor is reasonable.

The new EEOC rule fills this gap by setting forth relevant considerations in determining whether a practice is reasonable. Borrowing the concept of a “reasonable person” from the tort arena, the EEOC has announced an evidence paradigm which is fact specific: “A reasonable factor other than age is one that an employer exercising reasonable care would use to avoid limiting the opportunities of older workers, in light of all the surrounding facts and circumstances.” These surrounding facts and circumstances include the extent to which the factor is related to the employer’s business purpose and the fairness and accuracy of the employer’s application of the factor, including the extent to which supervisors are given guidance and training about how to apply the factor in order to avoid discrimination. Because the test is fact-intensive, it will likely make it more difficult for employers to win disparate-impact cases at the summary judgment stage.

Employers should carefully review their policies regarding hiring, promotion, and discipline, and should be particularly diligent in implementing selection procedures in any reductions in workforce. Dykema can help in such a review, as well as provide assistance in training management to apply these policies so as not to discriminate.