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.