A proposed new EEOC regulation seeking to define “reasonable factors other than age” (RFOA) under the Age Discrimination in Employment Act (ADEA) threatens to make it much more difficult for employers to defend successfully against claims that their decisions, policies, or procedures had an illegal, disparate impact against age-protected workers. The proposed regulation currently is subject to a 60-day comment period that ends this month and might become effective soon thereafter.
In recent years the United States Supreme Court confirmed that the ADEA, like Title VII, prohibits employer practices and procedures that have a disparate impact on persons in the protected class, even if there were no intent to discriminate. The Court acknowledged, however, that the scope of such disparate impact liability was narrower under ADEA than under Title VII, and it provided employers with the RFOA defense. Under this defense, an employer will not have liability for a decision, policy, or procedure that has a disparate impact on the employees older than 40 years if that decision, policy, or procedure was based on any reasonable factor other than age.
The EEOC’s proposed rule seeks to expand on this in a way that only a law professor might love. In short, the proposed regulation seeks to impose on employers the duty to reasonably avoid discrimination, and it shifts the focus from the reasonableness of the factor (other than age) relied on by the employer to the reasonableness of the employer’s decision-making in adopting that factor. It essentially would require employers not only to rely on an RFOA, but also to show that the employer analyzed and selected an RFOA that would minimize the disparate impact on the older workers. In other words, employers would have to undertake studies and analyses to determine what is the least impactful RFOA that could be used to implement the business’s objectives.
An example cited by the EEOC demonstrates the practical effect of this proposed rule. It references a typical reduction-in-force among sales people. The neutral criterion cited by the employer for its selections of employees to release is the individual’s salary level because the employer seeks to meet its payroll reduction goals by laying off the fewest number of people. This criterion would typically be an RFOA because it represents a reasonable business objective. However, the EEOC says that this approach might have a disparate impact on older workers who may have obtained higher salary levels. Under these circumstances, the EEOC could determine that the employer’s selection criterion violates the ADEA because it results in a disparate impact. The EEOC’s proposed rule would require the employer to do more. For example, the EEOC states that
“the employer could mitigate the harm by also considering the sales revenues that the affected individuals generated.”
This one simple example demonstrates that the EEOC’s proposed rule would require employers to do much more than simply select and rely on an RFOA if they hope to avoid liability for a decision, policy, or procedure shown to have a disparate impact. The EEOC and plaintiffs’ lawyers suing on ADEA claims will be able to second-guess decisions over and over, looking for an RFOA with less impact on workers 40 years or older that theoretically could have been used by the employer. This is a very real concern for employers because it is more and more common as a statistical matter with an ever-aging workforce to have a policy that has a disparate impact on workers 40 years and older.