The Equal Employment Opportunity Commission (EEOC) has released its final rule (pdf) amending its Age Discrimination in Employment Act (ADEA) regulations to clarify the reasonable factors other than age (RFOA) defense in disparate impact cases. The changes were spurred by the 2005 U.S. Supreme Court decision Smith v. City of Jackson, in which the Court held that disparate impact claims are cognizable under the ADEA and that an employer could use RFOA as a defense against such a claim. Three years later in Meacham v. Knolls Atomic Power Lab the Court held that the employer bears the burden of production and persuasion when using a RFOA defense in an ADEA case. The final rule seeks to clarify the scope of the RFOA defense in this context.

Generally, the rule explains that an employment practice that adversely affects individuals within the protected age group on the basis of older age is discriminatory unless the practice is justified by a RFOA. The individual challenging the allegedly unlawful employment practice bears the burden of isolating and identifying the specific employment practice responsible for the adverse impact. The rule clarifies that this affirmative defense is unavailable in disparate treatment cases.

In presenting an RFOA defense, the employer bears the burdens of production and persuasion. This differs slightly from the proposed rule, which stated that the employer had the burden of showing that a RFOA “exists factually.” According to the Commission, that phrase was removed to avoid confusion.

Like the proposed rule, the final rule emphasizes that the RFOA determination is a fact-specific inquiry. Under the final rule, a “reasonable factor other than age” 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 Commission, the phrase “non-age factor” recognizes that “other than age” is an express part of the statutory RFOA defense. The proposed rule provided non-exhaustive lists of factors relevant to whether an employment practice is reasonable and whether a factor is “other than age.” The final rule revises the list of factors relevant to whether an employment practice is reasonable and whether a factor is “other than age” into a single, non-exhaustive description of considerations relevant to the RFOA defense. According to the Commission, these factors are “not required elements or duties, but considerations that are manifestly relevant to determining whether an employer demonstrates the RFOA defense.” These considerations include:

(i) The extent to which the factor is related to the employer’s stated business purpose;
(ii) The extent to which the employer defined the factor accurately and applied the factor fairly and accurately, including the extent to which managers and supervisors were given guidance or training about how to apply the factor and avoid discrimination;
(iii) 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;
(iv) The extent to which the employer assessed the adverse impact of its employment practice on older workers; and
(v) 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.

As for what constitutes a “prudent employer,” the Commission explains that such an employer is “mindful” of its ADEA responsibilities and:

should know that the law prohibits the use of neutral practices that disproportionately affect older workers and are not based on reasonable factors other than age. A reasonable factor other than age is one that an employer exercising reasonable care would use to avoid limiting the opportunities of older workers, in light of all the surrounding facts and circumstances.

RFOA v. Business Necessity Standard

Just how onerous a test would be applied to the RFOA defense has been a matter of concern for the business community, as the standard set forth in the proposed rule appeared to be unclear and inconsistent with the Supreme Court direction that the “business necessity” standard would not apply in ADEA disparate impact cases. In the final rule, the EEOC states that it “continues to believe that the RFOA defense is more stringent than a rational-basis or non-arbitrary standard.”

An employer seeking to use the RFOA defense must make more than a mere showing that its action was not irrational or not arbitrary.

To address concerns that the proposed rule implied that an employer would have to consider and use the least discriminatory alternative to the contested practice, the EEOC responds that the final rule omits the factor that discussed the availability of options to the employer. That said, the EEOC has taken the position that the deletion of this factor “does not mean that the availability of measures to reduce harm is irrelevant to reasonableness.” For example, the EEOC states that there might be some circumstances where a less discriminatory alternative is obvious, and therefore the employer’s failure to use this alternative would be taken into consideration in making the reasonableness assessment.

Although the final rule did make changes to the proposal, it still appears that employers will find it more difficult to defend against disparate impact age discrimination claims. The provisions of this rule take effect 30 days after it is published in the Federal Register, which is scheduled for March 30.

For more information on this rule, see Littler's ASAP: The EEOC Misses the Mark with New Rule on the ADEA's Reasonable Factors Other Than Age Defense by Edward Ellis and Amy Wentz.

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