Eeoc Issues Final Rule On ?Reasonable Factors Other Than Age? Defense Under the

Posted by BairdQuinn on July 21st, 2012

On March 29, 2012, the U.S. Equal Employment Opportunity Commission (EEOC) issued the “Final Regulation on Disparate Impact and Reasonable Factors Other than Age (“RFOA”) under the Age Discrimination in Employment Act of 1967 (ADEA). The new regulation went into effect on April 30, 2012.

The ADEA prohibits discrimination against individuals age 40 and over.  Age discrimination claims are typically classified as either “disparate treatment” or “disparate impact.”  Disparate impact claims involve a policy that, while neutral on its face, adversely affects a traditionally disadvantaged group (here, older individuals) on a statistically significant basis. When an employee claims disparate impact, the employer may refute the charge by showing that the practice was based on “reasonable factors other than age” (RFOA). The Final Rule applies only to disparate im­­pact claims and the RFOA defense.

The Final Rule clarifies that the ADEA prohibits policies and practices that have the effect of harming older individual’s more than younger individuals, unless the employer can show that the policy or practice is based on a reasonable factor other than age. The rule is intended to explain the meaning of the RFOA defense and make the EEOC’s regulations consistent with Supreme Court case law.  According to the EEOC, the Final Rule strikes the appropriate balance between protecting older workers from discriminatory, unreasonable business decisions and preserving an employer’s ability to make reasonable business decisions.

The Final Rule confirms that: (1) the plaintiff bears the burden of "isolating and identifying the specific employment practice" that allegedly causes any observed statistical disparities, and (2) the employer bears the burdens of production and persuasion to demonstrate the RFOA defense. The Final Rule provides that an RFOA is “a non-age factor that is objectively reasonable when viewed from the position of a prudent employer mindful of its responsibilities under the ADEA under like circumstances.”  According to the EEOC, "To establish the RFOA defense, an employer must 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 Final Rule identifies five (5) non-exhaustive factors in determining whether a practice is based on an RFOA:

  • The extent to which the factor is related to the employer’s business purpose;
  • The extent to which the employer accurately defined the factor and applied it fairly and accurately, including whether managers were given guidance or training on how to apply the factor and avoid discrimination;
  • The extent to which the employer limited supervisors’ discretion to assess employees subjectively;
  • The extent to which the employer assessed the adverse impact of its employment practices on older workers; and
  • The degree of harm to individuals within the protected age group, and the extent to which the employer took steps to reduce the harm. Further, the employer bears the burden of producing evidence, and the burden of proof, to demonstrate the RFOA defense. 

The EEOC’s Final Rule raises new questions and arguably makes it more difficult for employers to establish the RFOA defense to a disparate impact claim.  The EEOC defines a RFOA as one established by a “prudent employer,” which is only loosely defined as one that is “mindful of its responsibilities under the ADEA.”  This definition is simply inadequate to provide meaningful guidance to employers.  The Final Rule also suggests that courts evaluate the extent to which the employer took steps to reduce harm to older individuals caused by a neutral factor in a policy.  As a result, in asserting disparate impact claims, plaintiffs will likely argue that employers were required to adopt a less burdensome alternative – even though this is contrary to Supreme Court precedent, Meacham v. Knolls Atomic Power Lab, 544 U.S. 84, 97 (2008).  In addition, the EEOC’s “non-exhaustive factors” directs the courts, among other things, to evaluate the extent to which the employer policy at issue limits subjectivity in the decision-making process.  Plaintiff’s attorneys have long contended that subjective decision-making can be challenged on a class basis as discriminatory – and will certainly use this factor as supporting new attacks on policies based on criteria that, even if they are subjective, are reasonable from a business perspective.  Finally, the Final Rule suggests that courts evaluate the extent to which employers give guidance or training to management in evaluating the reasonableness of the policy.  This is something that rarely occurs at most employers and will likely require a change in practice in most workplaces.

With these caveats in mind, employers should carefully consider the EEOC’s Final Rule in developing policies that could potentially have an adverse effect on individuals in the protected age group.  They can also take the advice from employment lawyer or employment discrimination lawyer regarding Final Rule. For example, an employer should consider defining and documenting the business purpose for a policy.  Employers should also consider alternative policies that might achieve the same business objective, with less of an adverse impact on older workers.  Employers are strongly encouraged to provide training to management to apply policy in a manner to avoid any discriminatory impact.  Finally, employers should consider the extent to which policies require or authorize subjective decision-making by management and carefully evaluate whether this is necessary to achieve the employer’s business objectives in adopting the policy.

While the Final Rule regarding the RFOA defense provides some guidance, it also raises new questions and complicates an employer’s decision-making process in developing and implementing policies that could potentially have a disparate impact on older workers. Employers should carefully evaluate the Final Rule as they develop and implement new policies to minimize the risks associated with potential disparate impact litigation under the ADEA.


Author Bio:

J. Mark Baird and Beth Doherty Quinn, the employment law attorneys at Baird Quinn, LLC have practiced law for more than 25 years and 15 years, respectively, with an emphasis on employment law and labor-management.  They have extensive experience litigating employment law matters,  including discrimination, harassment, unlawful termination, wage and hour, retaliation, unfair labor practice, non-compete/employee loyalty, and breach of contract.  They also litigate commercial fraud matters.  Not only have they represented clients before a variety of administrative agencies and courts, Mr. Baird and Ms. Doherty Quinn have conducted numerous seminars, such as seminars on ADA compliance, and in-house training for clients regarding sexual harassment and other Title VII discrimination issues as well.

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