In the wake of two recent US Supreme Court decisions, the Equal Employment Opportunity Commission (EEOC) has proposed regulations to address the scope of the “reasonable factors other than age” (RFOA) defense available to employers under the Age Discrimination in Employment Act (ADEA).

Under the ADEA, employers may legally “take any action” that the ADEA would otherwise prohibit if “the differentiation is based on reasonable factors other than age.” In Smith v. Jackson and Meacham v. Knolls Atomic Power Lab., the Supreme Court held that that the RFOA defense acts as a complete bar to disparate impact liability where an employer demonstrates that its facially neutral policy or practice, which had a disparate impact older workers, was based on a reasonable factor other than age. The EEOC’s proposed regulations?published in the February 18, 2010 Federal Register?aim to clarify what “reasonable” means for purposes of asserting that defense.

Looking to tort law for guidance, the proposed regulations explain that “a reasonable factor is one that is objectively reasonable when viewed from the position of a reasonable employer (i.e., a prudent employer mindful of its responsibilities under the ADEA) under like circumstances.” Thus, “a reasonable factor is one that an employer exercising reasonable care to avoid limiting the employment opportunities of older persons would use.”

To establish the RFOA defense, an employer would need to show that the employment practice was both (1) reasonably designed to further or achieve a legitimate business purpose; and (2) administered in a manner that reasonably achieves that purpose in light of the particular facts and circumstances that were known, or that should have been known, to the employer at the time. The EEOC’s proposed regulations include six nonexhaustive factors that should be considered in determining whether an employment practice is reasonable:

  • Whether the employment practice and the manner of its implementation are common business practices;  
  • The extent to which the factor is related to the employer’s stated business goal;  
  • The extent to which the employer took steps to defi ne the factor accurately and to apply the factor fairly and accurately (e.g., training, guidance, instruction of managers);  
  • The extent to which the employer took steps to assess the adverse impact of its employment practice on older workers;  
  • The severity of the harm to individuals within the protected age group, in terms of both the degree of injury and the numbers of persons adversely affected, and the extent to which the employer took preventive or corrective steps to minimize the severity of the harm, in light of the burden of undertaking such steps; and  
  • Whether other options were available and the reasons the employer selected the option it did.

In a section of the proposed regulations that may prove to be the most practically signifi cant, the EEOC cautions employers against giving supervisors “unchecked discretion to engage in subjective decision making,” since disparate impact may result if supervisors act on the basis of conscious or unconscious age-based stereotypes in making personnel decisions. In determining whether a criterion or practice is age-related or not, the EEOC says in the proposed regulations that it will look at the extent to which supervisors are:  

  • Given unchecked discretion to assess employees subjectively;  
  • Asked to evaluate employees based on factors known to be subject to age-based stereotypes; and  
  • Given guidance or training about how to apply the factors and avoid discrimination.

While the proposed regulations are not final, it is unlikely that significant changes will be made before the EEOC adopts final regulations. Prudent employers can act now to ensure that their current practices will pass muster under the proposed RFOA test. Employers may want to give extra attention to any formulaic procedures or systems for testing, hiring, determining compensation and promotions, and conducting reductions in force. Employers should take steps now to (i) clarify subjective criteria; (ii) train supervisors on avoiding age-based stereotyping when they make personnel decisions; and (iii) ensure that signifi cant decisions are properly reviewed.