EEOC Issues Final Regulations Explaining “Reasonable Factors Other Than Age” Defense

“Equality,” I spoke the word
As if a wedding vow
Ah, but I was so much older then
I’m younger than that now

– “My Back Pages”, Bob Dylan

Yesterday, the EEOC published its “Final Regulation on Disparate Impact and Reasonable Factors Other than Age” as it relates to the Age Discrimination in Employment Act of 1967 (ADEA).  According to the EEOC’s press release, the final rule explains the meaning of the Reasonable Factor Other than Age (RFOA) defense and “strikes the appropriate balance between protecting older workers from discriminatory, unreasonable business decisions and preserving an employer’s ability to make reasonable business decisions.”

Pursuant to the ADEA, an employer with 20 or more employees cannot discriminate against any employee or applicant who is 40 years of age or older.  Although most people think of discrimination as an intentional act, discrimination can occur even when there is no intent to discriminate, such as when the employer has a policy or practice that has an unintended effect of harming older workers more so than younger workers.  In these instances, the policy or practice is said to have a “disparate impact” on the protected class of older workers and are prohibited by the ADEA, unless the employer can defend the practice by demonstrating that the disparate impact is based upon RFOAs.

In establishing the new regulations, the EEOC sought to make clear that the individual challenging the allegedly unlawful employment practice bears the burden of isolating and identifying the specific employment practice responsible for the adverse impact; however, once that burden is met, the employer has the burden of proof that a RFOA exists.  The Rules also make clear that a “reasonable” factor other than age is one that is objectively reasonable from the viewpoint of a prudent employer that is mindful of its responsibilities under the ADEA under similar circumstances.  This clarification in important, as it rejects the notion that a reasonableness standard can be determined from the  viewpoint of an employer that is not familiar with the ADEA.  According to the EEOC, a “reasonable” employer should know that the ADEA prohibits the use of neutral practices that cause a disparate impact on  older workers and, thus, a reasonable factor other than age is one that such an employer would use to avoid limiting the opportunities of older workers.

In order to be based “on a factor other than age,” the challenged practice must be designed and implemented to achieve a legitimate business purpose, which in the EEOC’s mind does not include cost cutting.  In summarizing the Rule, the EEOC notes that a reduction in force that had a disparate impact on older workers could not be justified solely by the fact that the cutting of costs saved money.  The Rule sets forth a list of factors that are relevant to whether an employment practice is reasonable and is based on factors other than age.  The list is inclusive, not exclusive, and not all factors have to be met in order to establish and prove an RFOA defense.   However all of the listed factors are relevant to the analysis.

Employer advocates have criticized the EEOC’s interpretation and construction of the RFOA defense, arguing that the EEOC’s framework will lead to unwarranted scrutiny and second-guessing of routine business decisions, as well as making it difficult for employers to obtain pre-trial dismissals of frivolous litigation.   The EEOC has defended the Rules by claiming that a disparate impact analysis necessarily requires some scrutiny of employment practices, and such scrutiny is consistent with prior Supreme Court holdings.   Critics take issue with the EEOC’s assertion that the Rules are consistent with the Supreme Court holding in Smith v. City of Jackson (2005) that differentiated a disparate impact claim under Title VII from an ADEA disparate impact claim.  In Smith, the Court stressed, that unlike with Title VII disparate impact claims, the employer defending an ADEA disparate impact claim did not need to proof that the challenged policy was a “business necessity.”  Rather, the practice need only be “reasonable.”  It remains to be seen whether the EEOC’s interpretation of the RFOA defense too closely mirror the burden required in Title VII cases, but we can expect that this issue will ultimately find its way to the federal appellate courts to determine whether the EEOC has gone too far.

The EEOC’s press release and a full copy of the final Rules can be found at the EEOC’s website, www.eeoc.gov.