Changes in Age Discrimination Regulations and the RFOA Defense

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November 29, 2011

On November 16, the EEOC approved a draft final rule to amend the Commission’s existing Age Discrimination in Employment Act (ADEA) regulations to reflect two recent U.S. Supreme Court decisions regarding ADEA disparate impact claims and the “reasonable factor other than age” (RFOA) defense. The draft regulation will now go to the White House Office of Management and Budget for a review period that usually takes about 90 days. If approved, the draft final regulations would return to EEOC for a final vote before taking effect.
What is the current law?
 
Currently, the ADEA prohibits employers from using neutral tests or selection procedures that have a discriminatory impact on persons based on age (40 or older), unless the challenged employment action is based on a reasonable factor other than age. Smith v. City of Jackson, 544 U.S. 228 (2005). Thus, if a test or other selection procedure has a disparate impact based on age, the employer must show that the test or device chosen was a reasonable one.
This RFOA defense has been interpreted as a burden on employers to show that the business decision was reasonable. The burden has been recognized to be more onerous than the Equal Pay Act’s provision that precludes recovery when the decision was based on “any other factor other than sex,” but that employers need not prove the decision was of “business necessity.”
What are the proposed changes to the law?
 
The Commission proposed to revise a portion of the ADEA to clarify the scope of the RFOA defense. The proposed revision explains that “whether a particular employment practice is based on reasonable factors other than age turns on the facts and circumstances of each particular situation and whether the employer acted prudently in light of those facts.” In defining what factors are reasonable, the commission would look to tort law. For example, the new rule explains that:
 

“A reasonable factor is one that is objectively reasonable when viewed from the position of a reasonable employer under like circumstances. It is one that would be used in a like manner by a prudent employer mindful of its responsibilities under the ADEA.”

 
Further, the RFOA defense would now require evidence that the challenged practice was reasonably designed to further or achieve a legitimate business purpose and was reasonably administered to achieve that purpose.
These are just a few examples of the many factors courts may look to when using tort law definitions of “reasonable” with respect to the RFOA defense. Opposing commissioners contend that the EEOC lacks any statutory basis under the ADEA for using tort law principles to define the RFOA defense. “The legal basis simply is not there,” said Commissioner Barker, who added that she is concerned that EEOC is imposing a “more restrictive” and “more difficult standard” for businesses to apply, particularly small businesses.
Commissioner Lipnic, who also opposed the rule, said the draft final rule’s use of “tort standards of reasonableness” under the ADEA is “not appropriate or legally justified here.” She said under the draft final rule, EEOC would examine an employer’s “entire decision-making process” rather than the specific “factor” relied upon, a result that Lipnic said misinterprets the ADEA’s intent. She believes that the “business necessity” defense under Title VII “should have no place in ADEA disparate impact cases,” but EEOC’s draft rule “as a practical matter” would hold employers to a business necessity test under the ADEA.
What should employers do? The new rules will require employers to provide much more evidence that “reasonable steps” were taken when: (1) choosing which procedures to implement; (2) drafting those procedures; and (3) implementing those procedures to assure that they do not have a disparate impact on older employees. Employers must review selection tests and procedures with human resource specialists and legal counsel to assure that the practice does not violate the ADEA in light of these proposed rule changes. If you have questions regarding the above, please contact any of the attorneys in the Employment, Benefits & Labor Relations Practice Group of Ruder Ware.

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