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EEOC Issues Proposed Rules on "Reasonable Factors Other Than Age" Defense

    Client Alerts
  • February 26, 2010

In 2005, the U.S. Supreme Court concluded that plaintiffs may pursue "disparate impact" claims under the Age Discrimination in Employment Act.  Disparate impact claims involve facially neutral policies that, through their application, have a statistically significant negative impact on a protected group.  These claims have long been recognized under Title VII.  For example, a minimum lifting requirement is gender neutral on its face, but may have a disparate impact based on gender.

Unlike Title VII, ADEA allows policies that have a disparate impact on older workers if they are based on "reasonable factors other than age" (RFOA).  In 2008, the Supreme Court concluded that employers bear the burden of proving the RFOA defense.  This means that even if an employer's policy negatively impacts older workers, it does not violate ADEA if the employer can prove there was a reasonable business justification for the decision.

Last Thursday, the Equal Employment Opportunity Commission issued proposed rules attempting to explain what reasonable means.  First, the EEOC said that the employer's burden is less than that for the business necessity defense to disparate impact claims under Title VII.  Employers do not have to prove that there were no less discriminatory options, only that the one chosen was reasonable under the circumstances.

The EEOC defines reasonable as a policy that would be used by a prudent employer.  If a chosen policy is a common business practice, this is evidence of reasonableness.  In order for an employer to show that it exercised reasonable care, the EEOC says that it should consider the impact of a decision on older employees.  An employer cannot plead ignorance if a given policy has a disproportionate impact on its older employees.

The proposed rules define other relevant factors to include the severity of the impact on older employees.  A statistically significant impact may still be reasonable if the actual burden on older workers is low.  The EEOC also looks to whether the employer tried to mitigate the effects of the policy on older workers.  While it does not have to choose the least discriminatory option, the employer should demonstrate that it gave consideration to other choices.

The employer also needs to demonstrate the business criteria used other than age.  For example, in a layoff context, were the skills sets and performance evaluations used to make decisions tied to true job requirements?  The EEOC specifically cautions against vesting supervisors with unchecked authority to make subjective decisions regarding employees' comparative value.

Disparate impact claims under ADEA mostly arise in two circumstances.  First, the employer adopts a policy that provides richer wages or benefits to less senior employees.  Second, the employer uses layoff criteria that disproportionately affect older employees.  In either circumstance, the employer should take careful steps when adopting such polices to document the development process, its impact on employees in a protected category,  the business reasons for the decisions, and the other alternatives considered.

The EEOC is accepting comments on the proposed rules through April 19.  The final regulations should be issued later this year.