The Equal Employment Opportunity Commission (EEOC) has recently amended its Age Discrimination in Employment Act (ADEA) regulations. These amendments are aimed at regulations pertaining to disparate impact claims and the reasonable factors other than age (RFOA) defense. The revised regulations appear to define the RFOA much more narrowly than under existing law, potentially making it more difficult for employers to mount a defense to age discrimination claims.
The ADEA prohibits both intentional discrimination (disparate treatment) against employees over the age of 40, and the application of neutral policies that adversely affect older workers (disparate impact). In Smith v. City of Jackson, 544 U.S. 228 (2005), the Supreme Court recognized that an employee could bring a disparate impact claim under both Title VII and the ADEA, but it clarified that the scope of disparate impact liability under the ADEA was more narrow. To defend against such claims under Title VII, an employer must show a “business necessity.” However, the Supreme Court held that under the ADEA, an employer need only show that it relied upon a “non-age factor that was ‘reasonable.’” The employer is not required to consider alternative polices that would have a lesser impact on older workers, as with the “business necessity” defense.
The new EEOC regulations appear to undercut the Supreme Court’s rulings by imposing a more rigorous standard on employers asserting an RFOA defense. The regulations now require that the employer show that its practice was “objectively reasonable when viewed from the position of the prudent employer mindful of its responsibilities under the ADEA under like circumstances” (emphasis added). The “prudent employer” standard is rooted in tort law, which imposes a duty to avoid harm. Thus, under the new regulations, a reasonable factor other than age is “one that an employer exercising reasonable care would use to avoid limiting the opportunities of older workers, in light of all surrounding facts and circumstances.”
In creating a “prudent employer” standard, the EEOC brings the RFOA defense much closer to the required “business necessity” showing under Title VII by requiring employers to consider the potential impact that policies and practices may have on older workers prior to implementing them.
Practical Considerations for Employers
These new regulations are bound to spur an onslaught of new litigation and investigations by the EEOC. The EEOC and/or private counsel will be focused on the following issues:
- The business purpose for the practice and how closely related the practice is to the stated business goal
- Whether alternatives to the practice were available and the rationale behind choosing the practice in question
- Steps taken by the employer to mitigate the impact of the decision on older workers
- Whether the employer considered the fact that the criteria used for hiring, firing and/or promoting may involve age-based stereotypes
To avoid potential litigation, employers should discuss and document the rationale behind each decision and ensure that managers and supervisors are cognizant of the potential adverse impact certain practices may have on older workers. Further, all management personnel should undergo anti-discrimination training that focuses specifically on age discrimination. Finally, employers should carefully examine all business decisions with an eye toward avoiding adverse impact on older workers, and, if necessary, consider alternatives that will avoid potential discrimination.