On Feb. 18, 2010, the Equal Employment Opportunity Commission (EEOC) issued a Notice of Proposed Rulemaking (NPRM) to more clearly define the meaning of the “reasonable factors other than age” (RFOA) defense under the Age Discrimination in Employment Act (ADEA). The RFOA defense is an affirmative defense asserted by the employer in order to demonstrate that its challenged policy or action was based on "reasonable factors other than age.” This particular NPRM follows two United States Supreme Court cases addressing the RFOA defense: Smith v. City of Jackson and Meacham v. Knolls Atomic Power Laboratories.

In Smith, the court authorized recovery for disparate impact claims of discrimination holding that the RFOA test, rather than the business-necessity test, is the appropriate standard for determining the lawfulness of a practice that disproportionately affects older individuals. Subsequently, in Meacham, the Supreme Court held that an employer bears both the burdens of production and persuasion for a RFOA defense in an ADEA disparate-impact claim.

The EEOC proposes to clarify the scope of the RFOA defense. Consistent with Smith and Meacham, the proposed revision provides guidance on determining whether a particular employment practice is based on reasonable factors other than age. The inquiry turns on the facts and circumstances of each particular situation and whether the employer acted prudently in light of those facts. This standard is lower than Title VII’s business-necessity test, but higher than the Equal Pay Act’s “any other factor” test.

In defining what factors are “reasonable,” the EEOC turns to tort law, which contains the most extensive definition of reasonableness. According to the revisions, a reasonable factor is one that would be used in a similar manner by a prudent employer aware of its obligations under the ADEA. These factors include, but are not limited to:

  1. Whether the practice and its implementation are common business practices;
  2. the extent to which the factors are related to the employer’s stated business goals;
  3. the extent to which the employer took steps to define the factors accurately;
  4. the steps the employer took to apply the factors fairly and accurately;
  5. the severity of the practice’s impact on individuals within the protected age group (and the employer’s efforts to investigate and mitigate the impact); and
  6. consideration of whether other options were available and the reasons the employer selected the option it did.

The revisions also make clear that the RFOA defense is only available when the challenged employment action is based on a non-age factor. Objectively measurable factors such as salary and seniority are non-age factors. Although these factors sometimes correlate with age, they are both analytically and factually distinct from age.

But unchecked use of subjective criteria that are subject to age-based stereotypes may not be distinct from age. For example, an employer that is downsizing may want to retain individuals with the ability to learn new computer skills. If the employer gives managers unchecked discretion to determine whom to retain, age based stereotypes might affect the decision making process. In this situation, employers that give their supervisors unchecked discretion to make subjective decisions may expose themselves to liability on this basis.

To aid in assessing whether an employment practice is based on a non-age factor, the proposed revisions set forth a non-exhaustive list of factors that are relevant to the RFOA defense. These factors include: 1) the extent to which the employer gave supervisors unchecked discretion to assess employees subjectively; 2) the extent to which supervisors were asked to evaluate employees based on factors known to be subject to age-based stereotypes; and 3) the extent to which supervisors were given guidance or training about how to apply the factors and avoid discrimination.

The NPRM is published in the Federal Register and gives 60 days for public comment from any interested party. Even though EEOC is still in the early stages of its rulemaking process, this NPRM underscores the importance of staying on top of any potential changes in an employer’s obligations under the ADEA.