On April 30, 2012, the EEOC’s final rule amending its regulations to the Age Discrimination in Employment Act (ADEA) will go into effect.  The new regulation modifies the Commission’s interpretation of the “reasonable factors other than age” defense to disparate impact claims brought under the ADEA.

Background

The ADEA prohibits employers from discriminating against employees and job applicants who are age 40 or older because of their age.  In addition to claims for intentional discrimination (disparate treatment), the Supreme Court has held that the ADEA permits claims based on facially neutral employment decisions and practices that disproportionately affect employees who are 40 or older (disparate impact).  The Supreme Court has further held that an employer can avoid liability in a disparate impact case if the employer can prove that the decision or practice at issue was based on “reasonable factors other than age” (RFOA).  In establishing the RFOA affirmative defense, the Court has rejected portions of the ADEA regulations that required employers to prove “business necessity,” i.e., that the decision or practice was the least discriminatory alternative, in order to maintain the defense.

New Rule

Most significantly, the new regulations attempt to clarify the agency’s interpretation of the RFOA defense.  The EEOC interprets a RFOA to be a factor “that is objectively reasonable when viewed from the position of a prudent employer mindful of its responsibilities under the ADEA under like circumstances.”  29 C.F.R. § 1625.7(e)(1).  To establish the RFOA defense, the new rule requires employers to “show that the employment practice was both reasonably designed to further or achieve a legitimate business purpose and administered in a way that reasonably achieves that purpose in light of the particular facts and circumstances that were known, or should have been known to the employer.”

The new regulations further provide the following non-exhaustive list of considerations to determine whether an employment practice is based on a RFOA:

  • The extent to which the factor is related to the employer’s stated business purpose
  • The extent to which the employer defined the factor accurately and applied the factor fairly and accurately, including the extent to which managers and supervisors were given guidance or training about how to apply the factor and avoid discrimination
  • The extent to which the employer limited supervisors’ discretion to assess employees subjectively, particularly where the criteria that the supervisors were asked to evaluate are known to be subject to negative age-based stereotypes
  • The extent to which the employer assessed the adverse impact of its employment practice on older workers
  • The degree of harm to individuals within the protected age group, in terms of both the extent of injury and the numbers of persons adversely affected, and the extent to which the employer took steps to reduce the harm in light of the burden of undertaking such steps

The EEOC makes clear that none of these factors of consideration is controlling or dispositive.

Insights for Employers

The EEOC’s new interpretation of the RFOA defense provides little actual guidance for employers seeking to defend their non-discriminatory employment practices.  Many of the new provisions are vague and ambiguous and will therefore require further interpretation and guidance from the courts and the EEOC.  Furthermore, these new standards will undoubtedly make it harder for employers to prove the affirmative defense in ADEA cases.  At a minimum, the EEOC’s emphasis on fact-intensive, case-by-case inquiries is likely to preclude resolution of the defense on summary judgment.

The new rules will have the greatest impact on employers conducting layoffs or other workplace reorganizations.  Employers planning such events will need to keep the new regulations in mind when evaluating the legal implications of their decisions.  Employers can expect that the EEOC’s investigations in disparate impact cases will focus primarily on the factors identified in the regulations.

The new regulations arguably go well beyond existing law, and appear to impose a more rigorous burden on employers than what the Supreme Court has prescribed.  For now, employers must assume that the courts will give deference to the EEOC’s interpretation of the RFOA defense and act accordingly.