United States: New EEOC Rule Significantly Increases Employer Burdens In ADEA Disparate Impact Cases

Last Updated: June 7 2012
Article by Stephen D. Erf and Heather Egan Sussman

The Equal Employment Opportunity Commission (EEOC) recently amended its regulations under the Age Discrimination in Employment Act (ADEA) concerning disparate impact claims. The final rule, which became effective on April 30, 2012, is likely to impose significant administrative burdens on employers as well as increase potential litigation exposure and costs of ADEA claims.

The Equal Employment Opportunity Commission (EEOC) issued a final rule on March 30, 2012, to amend its regulations under the Age Discrimination in Employment Act (ADEA) concerning disparate impact claims. The final rule, which became effective on April 30, 2012, is likely to impose significant administrative burdens on those employers aware of its existence, increase the exposure of employers not aware of its existence, increase the potential volume of litigation and litigation costs overall of both "aware" and "unaware" employers, and leave both sets of employers vulnerable to being second-guessed by the administrative and judicial systems.

Historical Context

Title VII of the Civil Rights Act of 1964 (Title VII) prohibits discrimination based on race, color, religion, national origin, or sex. An employer may violate Title VII by "disparate treatment" (i.e., intentionally treating people differently based on a protected classification) or by causing a "disparate impact" (i.e., using a facially neutral policy that adversely affects people within a protected classification).

Under Title VII, in a disparate treatment case, the plaintiff retains the burden of proof and may either use direct evidence of discrimination or circumstantial evidence. In a disparate treatment case involving circumstantial evidence, the plaintiff basically must show that the employer treated similarly situated people differently. The employer may then articulate (but need not prove) the existence of a legitimate, non-discriminatory reason for its treatment and, if it does, the plaintiff must show that the proffered reason is a pretext for discrimination.

In contrast, in a disparate impact case under Title VII, if a plaintiff shows that the employer's facially neutral practice adversely affects a protected classification, the employer must prove that its practice is justified by business necessity (i.e., necessary for the safe and efficient operation of the business). However, if the plaintiff can show that a less discriminatory alternative was available, the employer would lose the case.

While the courts have always held that the disparate treatment theory is available to plaintiffs under the ADEA, there had been some dispute since at least the early 1990s as to the availability of the disparate impact theory under the ADEA. The EEOC long had taken the position in its ADEA regulations that the disparate impact theory is available under the ADEA and that an employer could only defend such a claim based on business necessity, as under Title VII.

In 2005 and 2008, the United States Supreme Court issued two decisions (Smith v. City of Jackson and Meacham v. Knolls Atomic Power Lab) holding that the disparate impact theory is available under the ADEA, but to defeat a claim the employer need only meet its burden of proving that the challenged policy or practice was based on a reasonable factor other than age (RFOA) (not business necessity).

After taking four years (and issuing two prior notices of proposed rulemaking on different aspects of the regulations) to correct a glaring error in its regulations, the EEOC elected to do so in a particularly grudging fashion. While the EEOC acknowledged that the business necessity defense requirement was rejected by the Supreme Court, the EEOC has established requirements for the RFOA defense in a manner that appear to be as close to the business necessity defense as possible. For employers who are interested in the practical impact of legal requirements, as opposed to fine theoretical distinctions, the difference between the business necessity defense and the EEOC's articulation of the RFOA defense is akin to the difference between glossy black paint and matte black paint. The fact that the final rule was adopted on a 3-2 vote along the party lines of the political affiliations of the EEOC Commissioners further invites skepticism regarding the legitimacy of the final rule and challenges to the degree of deference the courts may give the EEOC's new regulation.

The Amended RFOA Regulation

The amended regulation continues to make it clear that the RFOA defense is not available to defend an employment practice that uses age as a limiting criterion or a claim of disparate treatment. (29 C.F.R. §1625.7(b) and (d)). An individual challenging an employer's practice on a disparate impact theory is responsible for isolating and identifying the specific practice allegedly causing the observed statistical disparities (29 C.F.R. §1625.7(c)), and the employer has the burden of proving the applicability of the RFOA defense in the course of a "fact intensive inquiry" (29 C.F.R. §1625.7(d)). (77 F.R. 19082, Mar. 30, 2012).

An RFOA is defined as "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" and is "decided on the basis of all the particular facts and circumstances surrounding each individual situation" (29 C.F.R. §1625.7(e)(1)). The employer will be required to "show that the employment practice was both reasonably designed to further or achieve a legitimate 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. (Id.).

The EEOC identified considerations that are relevant, but not required or sufficient, to whether a practice is based on an RFOA, including the extent to which the following apply:

  • The factor is related to the employer's stated business purpose.
  • 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.
  • The employer limited supervisors' discretion to assess employees subjectively, particularly where the criteria that the supervisors were asked to evaluate were known to be subject to negative age-based stereotypes.
  • The employer assessed the adverse impact of its employment practice on older workers.

(29 C.F.R. §1625.7(e)(2)(i)-(iv) and (e)(3)).

The amended EEOC regulation also identifies as a relevant consideration the degree of the harm to individuals within the protected age group, in terms of both the extent of the 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 taking such steps. (29 C.F.R. §1625.7(e)(2)(v)).

The supplementary comment to the amended regulation candidly acknowledges that the EEOC has borrowed from tort law (which historically has governed personal injury and similar claims) to guide its definition of "reasonableness". (77 F.R. 19083-86, Mar. 30, 2012). The EEOC's analysis focuses on both the reasonableness of the employer's design of its policies and practices and the reasonableness of the manner in which it implements and applies the claimed age-unrelated factor.

Issues with the EEOC Approach

In some respects, the well-counseled and sophisticated employer's day-to-day business practices may not be significantly impacted because those employers likely have been proactively assessing the potential adverse impact of their employment practices on the protected age group, in addition to the classifications protected under Title VII. Such employers also are likely to have been taking steps either to diminish the potential adverse impact or verifying that the impact was susceptible to justification based on factors other than age. However, for less-sophisticated employers or those that lack ready and consistent access to employment counsel, it is possible that they may have adopted or perpetuated employment practices without engaging in the a priori analyses implicitly, if not explicitly, required by the EEOC's treatment of the RFOA defense. For either employer, the risks and the expense of litigation significantly increased with the adoption of the amended regulation.

One of the problems with the EEOC's approach is that it projects onto all employers a philosophy or style of management that is not required by the language of the statutes and that an employer may or may not wish to adopt. For example, in another context, the language of Title VII and the ADEA do not require an employer to create documentation of performance deficiencies or to use progressive discipline. However, an employer would be reckless to terminate an employee without some form of documentation or warning because the failure to do so would leave the employer more vulnerable than necessary to a claim of discrimination. In the context under discussion in this On The Subject, the amended regulation effectively forces an employer to monitor and evaluate its employment policies and practices to identify those that may have a disparate impact and to engage in advance the analysis that the EEOC states "will carry more weight than mere self-serving statements or after-the-fact rationales." (77 F.R. 19086, Mar. 30, 2012).

Similarly, while the EEOC states that an employer is not required to train its managers or supervisors, the EEOC's amended regulations clearly put employers on notice that there is a premium on providing guidance and training to managers and supervisors, particularly in connection with any criteria that are subjective in nature, and which may elevate the risk of age-based stereotyping. The EEOC supplementary commentary refers to rating criteria such as flexibility, willingness to learn and technological skills as being particularly susceptible to such stereotyping. (77 F.R. 19088, Mar. 30, 2012). While the individual bears the burden of isolating and identifying the specific employment practice that causes the adverse impact, the EEOC notes that the courts have held that a plaintiff may challenge an overall decision-making process "if the employer utilizes an 'undisciplined system of subjective decision making.'" (Id.). At that point, failure to have provided guidance and training to remove the risk that age-based stereotyping may have infected the evaluation could prove fatal to the employer's defense of a claim of disparate impact.

Practical Implications

In light of the final rule, an employer should work with its counsel to accomplish the following:

  • Identify any practices or policies that may be having a disparate or adverse impact on members of a protected classification.
  • Identify the cause(s) of any such disparate impact.
  • Either eliminate the cause(s) of such disparate impact or establish the existence of a reasonable factor other than age based on the "considerations" identified by the final rule as relevant.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions