EEOC Publishes New ADEA Regulations for the “Reasonable Factors Other Than Age” Defense

The Equal Opportunity Commission (“EEOC”) today published its final regulations and commentary concerning the “reasonable factors other than age” provision of the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq. (“ADEA”), as that provision pertains to claims of disparate impact. A disparate impact claim is one that alleges that the implementation by an employer of a policy or practice, although non-discriminatory on its face, has had an adverse impact on a category of employees protected by the laws against discrimination in employment.

Although Congress in 1991 specifically amended Title VII of the Civil Rights Act to provide for disparate impact claims, 42 U.S.C. § 2000e -2(k), the ADEA has never expressly allowed such claims. Nevertheless, in Smith v. City of Jackson, 544 U.S. 228 (2005), the U.S. Supreme Court held disparate impact claims could be asserted under the ADEA. The Court ruled, however, that there is a significant distinction between disparate impact claims brought under Title VII (which prohibits discrimination based on race, color, religion, sex or national origin) and disparate impact claims under the ADEA (which prohibits discrimination based on age for employees 40 years of age and older). Under Title VII, once the plaintiff demonstrates that the employer’s policy or practice has had a statistically adverse impact on a protected group, the employer, to avoid liability, must demonstrate that the policy or practice “is job related for the position in question and consistent with business necessity.” Citing to the “reasonable factors other than age,” provision of the ADEA, the Court in Smith held that employers faced with an age discrimination disparate impact claim were not required to make a showing of “business necessity” but need only demonstrate that its policy or practice is “reasonable.” Thus, as the Court ruled, “disparate impact liability under the ADEA is narrower than under Title VII.”

The new regulations appear to be consistent with Supreme Court decisions setting forth the parameters of disparate impact claims in at least three respects. First, they provide that plaintiffs alleging that an age-neutral policy or practice has had a disparate impact on older workers have the burden to isolate and identify the specific policy or practice that allegedly caused the statistical disparities. 29 C.F.R. § 1625.7(c); Wards Cove Packing Co. v. Atonio, 490 U.S. 642 (1989). Second, if the employer asserts a “reasonable factors other than age” defense (referred to as the “RFOA defense”), it is the employer who bears the burden of production and persuasion to establish the defense. 29 C.F.R. § 1625.7(d); Meacham v. Knolls Atomic Power Lab., 554 U.S. 84 (2008). Third, the reasonable factors other than age provision is not available as a defense to a claim of disparate treatment (intentional discrimination). 29 C.F.R. § 1625.7(d); Smith v. City of Jackson, 544 U.S. at 238-39.

The major significance of the new regulations is found in their characterization of what is a “reasonable” policy or practice and in their elaboration of the criteria to be considered in analyzing an RFOA defense for “reasonableness.” Under the regulations, a reasonable factor other than age is one “that is objectively reasonable when viewed from the position of a prudent employer mindful of its responsibilities under the ADEA under like circumstances” to be determined “on the basis of all the particular facts and circumstances surrounding each individual situation.” The employer must demonstrate that the reasonable factor “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 ad circumstances that were known, or should have been known, to the employer.” 29 C.F.R. § 1625.7(e(1).

In its commentary, the EEOC expressly disavows that its characterization of “reasonableness” is akin to the “business necessity” defense applicable to Title VII disparate impact cases. Nevertheless, the EEOC cautions that employers must do more than merely demonstrate that the policy or practice in question is rational or non-arbitrary. Smith v. City of Jackson did not open the floodgates for ADEA disparate impact claims. Whether there will be any significant increase in ADEA disparate impact claims as a result of the new regulations interpreting the RFOA defense remains to be seen.

The regulations’ enumerated criteria for analyzing reasonableness are:

• The extent to which the employer’s practice is related to the employer’s stated business purpose;
• The extent to which the employer defined its practice accurately and applied it fairly and accurately, including the extent to which the employer provided supervisors with guidance or training about how to apply the practice 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; and
• The degree of the 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.

29 C.F.R. § 1625.7(e)(2). The regulations themselves and the commentary make clear that that additional criteria may be relevant and that the presence or absence of one or more of the enumerated considerations will not be dispositive on the “reasonableness” issue.

Obviously, the regulations do not provide a bright line test for “reasonableness.” At this point it is unknown to what extent the “prudent employer” standard announced in the regulations will be interpreted by courts as requiring affirmative steps by employers to guard against the adverse impact of its policies or practices on older workers. Employers will have to carefully consider the new regulations on a case-by-case basis, especially if the employer has reason to suspect that a given policy or practice is having an adverse impact on older workers.

Please feel free to contact any of the attorneys in the Gibbons Employment & Labor Law Department with any questions that you may have.