EEOC’s Final Rule on Disparate Impact and “Reasonable Factors Other Than Age” Under the Age Discrimination in Employment Act

On March 30, 2012 the EEOC’s Final Rule on Disparate Impact and “Reasonable Factors Other Than Age” under the Age Discrimination in Employment Act of 1967 was published on the Federal Register. The changes to the rule accomplishes two things. First, it makes the existing ADEA regulation consistent with the Supreme Court’s holding that the defense to an ADEA disparate impact claim is RFOA, and not business necessity. And second, it explains the meaning of the RFOA defense to employees, employers, and those who enforce and implement the ADEA.

“The purpose of the ADEA is to prohibit employment discrimination against people who are 40 years of age or older. Congress enacted the ADEA in 1967 because of its concern that older workers were disadvantaged in retaining and regaining employment. The ADEA also addressed concerns that older workers were barred from employment by some common employment practices that were not intended to exclude older workers, but that had the effect of doing so and were unrelated to job performance.

The ADEA prohibits discrimination against workers because of their older age with respect to any aspect of employment.  In addition to prohibiting intentional discrimination against older workers (known as “disparate treatment”), the ADEA prohibits practices that, although facially neutral with regard to age, have the effect of harming older workers more than younger workers (known as “disparate impact”), unless the employer can show that the practice is based on an RFOA.  This rule concerns only disparate impact discrimination and the Reasonable Factors Other than Age defense to such claims.

The rule responds to two Supreme Court decisions in which the Court criticized one part of the Commission’s existing ADEA regulations. The Court upheld EEOC’s longstanding position that the ADEA prohibits policies and practices that have the effect of harming older individuals more than younger individuals, even if the harm was not intentional. However, it disagreed with the part of the regulations which said that, if an employee proved in court that an employment practice disproportionately harmed older workers, the employer had to justify it as a “business necessity.” The Court said that, in an ADEA disparate impact case, the employer did not have to prove business necessity; it need only prove that the practice was based on an RFOA. The Court also said that the RFOA defense is easier to prove than the business necessity defense but did not otherwise explain RFOA.

RFOA is the standard defense to ADEA impact claims. The final rule revises section 1625.7 of the regulations, which only addresses the RFOA defense, and does not change other regulatory sections that apply to the ADEA’s other affirmative defenses. However, the rule does not preclude an employer from asserting another statutory provision in response to a particular claim. For example, if an employee alleged that a practice required by a seniority system had a disparate impact, the employer could defend the claim by relying on section 4(f)(2) of the ADEA, which precludes using disparate impact analysis to challenge the provisions of a seniority system.

The rule emphasizes the need for an individualized consideration of the facts and circumstances surrounding the particular situation.  It includes the following list of considerations relevant to assessing reasonableness:

• the extent to which the factor is related to the employer’s stated business purpose;
• 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;
• 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.”

The preceding was provided by the EEOC’s FAQ’s on the ADEA changes. More FAQ’s about the final rule can be found here:  http://www.eeoc.gov/laws/regulations/adea_rfoa_qa_final_rule.cfm

To read the final rule in its entirety, including open comments and responses, click here:
Disparate Impact and Reasonable Factors Other Than Age Under the Age Discrimination in Employment Act