EEOC Issues Final Rule on ADEA’s “Reasonable Factor Other than Age”

This morning, the EEOC published in the Federal Register its final rule on the ADEA standard for discriminating based on a “reasonable factor other than age” in 29 CFR 1625.7. “ADEA prohibits policies and practices that have the effect of harming older individuals more than younger individuals, unless the employer can show that the policy or practice is based on a reasonable factor other than age” (RFOA). The Rule addresses issues which arose after the Supreme Court ruled in 2008 “that disparate-impact claims are cognizable under the Age Discrimination in Employment Act (“ADEA”) but that liability is precluded when the impact is attributable to a reasonable factor other than age.” The new Rule takes effect on April 30, 2012.
Among the notable changes:

• The plaintiff bears the burden of isolating and identifying the employment practice that has an unlawful impact on individuals within the protected age group.


• The employer bears the burden of proof on the RFOA defense (i.e., it is an affirmative defense).


• A RFOA “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. Whether a differentiation is based on reasonable factors other than age must be decided on the basis of all the particular facts and circumstances surrounding each individual situation. To establish the RFOA defense, an employer must show that the employment practice was both reasonably designed to further or achieve a legitimate business purpose and administered in a way that reasonably achieves that purpose in light of the particular facts and circumstances that were known, or should have been known, to the employer.”


• The Rule provides a number of factors to consider.
  

The new Rule provides as follows:

(b) When an employment practice uses age as a limiting criterion, the defense that the practice is justified by a reasonable factor other than age is unavailable.
(c) Any 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 “reasonable factor other than age.” An individual challenging the allegedly unlawful practice is responsible for isolating and identifying the specific employment practice that allegedly causes any observed statistical disparities.
(d) Whenever the “reasonable factors other than age” defense is raised, the employer bears the burdens of production and persuasion to demonstrate the defense. The “reasonable factors other than age” provision is not available as a defense to a claim of disparate treatment.
(e)(1) 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. Whether a differentiation is based on reasonable factors other than age must be decided on the basis of all the particular facts and circumstances surrounding each individual situation. To establish the RFOA defense, an employer must show that the employment practice was both reasonably designed to further or achieve a legitimate business purpose and administered in a way that reasonably achieves that purpose in light of the particular facts and circumstances that were known, or should have been known, to the employer.
(2) Considerations that are relevant to whether a practice is based on a reasonable factor other than age include, but are not limited to:
(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.
(3) No specific consideration or combination of considerations need be present for a differentiation to be based on reasonable factors other than age. Nor does the
presence of one of these considerations automatically establish the defense.

The old rule provided only that:

(a) Section 4(f)(1) of the Act provides that * * * it shall not be unlawful for an employer, employment agency, or labor organization * * * to take any action otherwise prohibited under paragraphs (a), (b), (c), or (e) of this section * * * where the differentiation is based on reasonable factors other than age * * *.
(b) No precise and unequivocal determination can be made as to the scope of the phrase “differentiation based on reasonable factors other than age.” Whether such differentiations exist must be decided on the basis of all the particular facts and circumstances surrounding each individual situation.

(c) When an employment practice uses age as a limiting criterion, the defense that
the practice is justified by a reasonable factor other than age is unavailable.
(d) When an employment practice, including a test, is claimed as a basis for different treatment of employees or applicants for employment on the grounds that it is a “factor other than” age, and such a practice has an adverse impact on individuals within the protected age group, it can only be justified as a business necessity. Tests which are asserted as “reasonable factors other than age” will be scrutinized in accordance with the standards set forth at part 1607 of this title.
(e) When the exception of “a reasonable factor other than age” is raised against an individual claim of discriminatory treatment, the employer bears the burden of showing that the “reasonable factor other than age” exists factually.
(f) A differentiation based on the average cost of employing older employees as a group is unlawful except with respect to employee benefit plans which qualify for the section 4(f)(2) exception to the Act.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

EEOC Proposes New ADEA Rule to Address “Reasonable Factor Other Than Age”

Last week, the EEOC began soliciting comments on a proposed rule defining the “reasonable factor other than age” defense available to employers under the Age Discrimination in Employment Act. Both the ADEA and Title VII contain a “business necessity” defense, but only the ADEA also has a defense for RFOA. Interestingly, the Equal Pay Act also has a defense for “factor other than sex,” but does not limit the defense to “reasonable” factors. In addition, even though Congress narrowed the “business necessity” defense in Title VII in 1991 following the Wards Cove Packing v. Atonia, 490 U.S. 692 (1989) decision, it did not similarly amend the ADEA (probably because there had been an open question whether disparate impact liability even existed before 2005). The EEOC concluded that a new rule was necessary following the Supreme Court decision in Smith v. City of Jackson, 544 U.S. 228 (2005), which found that the scope of an employer’s potential “disparate-impact liability under the ADEA is narrower than under Title VII'' because of the additional RFOA defense. In particular, the Court found that the employer could legitimately adopt a pay plan which did not benefit older employees to the same extent as younger employees if the employer had a reasonable basis – such as recruitment and retention of employees -- for doing so which was not based on the age of the employees. Moreover, the Supreme Court also held that employers bear both the burden of production and persuasion under the RFOA affirmative defense. Meacham v. Knolls Atomic Power Lab, 128 S. Ct. 2395 (2008).

The new rule will be located at 29 CFR §1625.7(b) and will provide as follows:

Whether a differentiation is based on reasonable factors other than age (``RFOA'') must be decided on the basis of all the particular facts and circumstances surrounding each individual situation.
(1) Reasonable. A reasonable factor is one that is objectively reasonable when viewed from the position of a reasonable employer (i.e., a prudent employer mindful of its responsibilities under the ADEA) under like circumstances. To establish the RFOA defense, an employer must show that the employment practice was both reasonably designed to further or achieve a legitimate business purpose and administered in a way that reasonably achieves that purpose in light of the particular facts and circumstances that were known, or should have been known, to the employer. Factors relevant to determining whether an employment practice is reasonable include but are not limited to, the following:
(i) Whether the employment practice and the manner of its implementation are common business practices;
(ii) The extent to which the factor is related to the employer's stated business goal;
(iii) The extent to which the employer took steps to define the factor accurately and to apply the factor fairly and accurately (e.g., training, guidance, instruction of managers);
(iv) The extent to which the employer took steps to assess the adverse impact of its employment practice on older workers;
(v) The severity of the harm to individuals within the protected age group, in terms of both the degree of injury and the numbers of persons adversely affected, and the extent to which the employer took preventive or corrective steps to minimize the severity of the harm, in light of the burden of undertaking such steps; and
(vi) Whether other options were available and the reasons the employer selected the option it did.\1\
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\1\ This does not mean that an employer must adopt an employment practice that has the least severe impact on members of the protected age group. ``Unlike the business necessity test, which asks whether there are other ways for the employer to achieve its goals that do not result in a disparate impact on a protected class,
the reasonableness inquiry includes no such requirement.'' Smith v. City of Jackson, 544 U.S. 228, 243 (2005). Instead, this simply means that the availability of other options is one of the factors relevant to whether the practice was a reasonable one. ``If the actor can advance or protect his interest as adequately by other conduct which involves less risk of harm to others, the risk contained in his conduct is clearly unreasonable.'' Restatement (Second) of Torts 292, cmt. c (1965).
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(2) Factors Other Than Age. When an employment practice has a significant disparate impact on older individuals, the RFOA defense applies only if the practice is not based on age. In the typical disparate impact case, the practice is based on an objective non-age factor and the only question is whether the practice is reasonable. When disparate impact results from giving supervisors unchecked discretion to engage in subjective decision making, however, the impact may, in fact, be based on age because the supervisors to whom decision making was delegated may have acted on the bases of conscious or unconscious age-based stereotypes. Factors relevant to determining whether a factor is ``other than age'' include, but are not limited to, the following:
(i) The extent to which the employer gave supervisors unchecked discretion to assess employees subjectively;
(ii) The extent to which supervisors were asked to evaluate employees based on factors known to be subject to age-based stereotypes; and
(iii) The extent to which supervisors were given guidance or training about how to apply the factors and avoid discrimination.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.