Originally published on the Employer's Law Blog
On March 29, 2012, the U.S. Equal Employment Opportunity Commission ("EEOC") issued its "Final Regulation on Disparate Impact and Reasonable Factors Other Than Age" ("Rule"). The Rule clarifies that the Age Discrimination in Employment Act of 1967 ("ADEA") prohibits policies and practices that have the effect of harming older individuals more than younger individuals, unless the employer can prove, in its defense, that the policy or practice is based on a reasonable factor other than age ("RFOA").
According to the Rule, 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." The Rule outlines a list of considerations that will be examined to determine whether an employer's practice is based on a reasonable factor other than age. Considerations include the extent to which the factor is related to the employer's stated business purpose, the extent to which the employer defined the factor accurately and applied it fairly, the extent to which the employer assessed the adverse impact of its employment practice on older workers, and how much the employer limited supervisors' discretion to assess employees subjectively. The list of considerations is non-exhaustive and no single consideration is meant to be dispositive.
The Rule attempts to bring EEOC regulations in line with U.S. Supreme Court rulings, but could ultimately make it much more difficult for employers to defend disparate impact age discrimination claims. Specifically, employers' decision-making processes will now be subject to scrutiny under a reasonableness standard. Until case law articulates what exactly "reasonable" means in this context, as a practical matter, it could be more difficult for employers to obtain summary judgment based on a RFOA defense. Also, because the Rule may make it easier to challenge an employer's decision-making process, the Rule may lead to an increased volume of ADEA litigation.
Going forward, employers should be mindful that their employment practices and policies will be analyzed under a reasonableness standard. Accordingly, employers should be careful to take appropriate steps to avoid creating a disparate impact based on age and should document their decision-making processes fully.
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