Late last year, the Equal Employment Opportunity Commission (EEOC) approved a draft final regulation which everyone in the employer community should know about.

Specifically, the EEOC defined the scope of the “reasonable factors other than age” (RFOA) defense under the Age Discrimination and Employment Act (ADEA).  Believe it or not, a revision of this regulation – found at 29 CFR § 1625.7 – has been in the works since 2008.

Initially, on March 31, 2008, the EEOC issued a notice of proposed rulemaking (NPRM) to amend § 1625.7 primarily in response to the Supreme Court’s decision in Smith v. City of Jackson, 544 U.S. 228 (2005).  In Smith, the Supreme Court held that the ADEA authorizes recovery for disparate-impact claims of age discrimination.  In other words, in addition to protecting workers against individualized age discrimination (i.e., disparate treatment), the Act also prohibits employers from implementing seemingly age-neutral employment practices that disproportionately affect workers 40 and over.   The Court in Smith also determined that an employer may escape liability in a disparate impact claim if it can be shown that the employment practice at issue was based on “reasonable factors other than age” (RFOA).

The U.S. Supreme Court’s reliance in Smith on the “reasonable factors other than age” test was a significant change in the law.   Previously, the more difficult “business necessity” test was used to determine the lawfulness of a neutral employment practice that disproportionately impacted older workers, as it was and still is with Title VII claims for disparate impact discrimination based on race, gender, etc.  Therefore, at the time of its initial proposed rulemaking in 2008, the EEOC looked to clarify the applicability of the RFOA standard, and clarify the fact that it would be an affirmative defense the employer must prove.  In the process of that rulemaking, however, the EEOC determined that it should provide further guidance on the meaning of the RFOA defense.  Accordingly, the EEOC issued a second NPRM on February 18, 2010 for that purpose.

By the time November, 2011 rolled around, the EEOC finally finished its work on this, and its proposed regulation included several noteworthy provisions.  First, it emphasized the need for an individualized, case-by-case approach to determining whether an employment practice is based on “reasonable factors other an age”.  It also set forth a non-exhaustive list of factors relevant to determining whether an employment practice is “reasonable,” including whether the practice is a common business practice, the extent to which the employer took steps to assess and ameliorate the adverse impact on older workers, and the availability of other ways for the employer to achieve its goals that involve less of a disparate impact on older workers.

Additionally, the proposed regulation provided a list of factors relevant to determining whether an employment practice is based on a factor “other than age,” including the extent to which the employer gave supervisors unchecked discretion to assess employees subjectively, the extent to which supervisors were asked to evaluate employees based on factors known to be subject to age-based stereotypes, and the extent to which supervisors were given guidance or training about how to apply the factors to avoid discrimination.

However, perhaps the most important part of the proposed rule for employers to be aware of is how the EEOC defines “reasonable.”  Interestingly, the EEOC turned to tort law, explaining that a “reasonable factor” is one is that is objectively reasonable when viewed from the position of a prudent employer mindful of its responsibilities under the ADEA under like circumstances.  The EEOC instructs in its proposed rule that the determination of reasonableness requires considerations of what an employer knew or should have known about an employment practice’s impact on older workers.  According to the EEOC, an employer cannot escape liability in a disparate impact claim simply by claiming that it lacked knowledge about the impact of its policy on older workers.

In effect, this proposed new rule imposes a duty on employers to assess and measure the impact of employment practices on older workers before implementing them.  Employers should keep this obligation in mind, especially when implementing practices and policies that harm significant numbers of employees, such as workforce reductions.

Before the rule takes effect, it must first be reviewed by the Office of Management and Budget (OMB) – an agency within the Executive Office of the President – and that is currently ongoing.  If the OMB approves the rule, the EEOC then must pass the final version of the regulation before it becomes effective.  That is likely to happen sometime in 2012.  Stay tuned.

Julie Moore is a Member in the firm’s Morgantown office. Julie focuses her practice primarily in labor and employment law. She regularly advises and counsels employers – both private and public – on various aspects of employment law, ranging from wage and hour compliance, to employee discipline and termination issues, to disability accommodation requests.
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