eLABORate: EEOC Issues Final Rule on "Reasonable Factor Other Than Age" Defense to ADEA Claims

April 02, 2012

Last week, the Equal Employment Opportunity Commission issued its final rule on the "reasonable factor other than age" defense in disparate impact cases under the Age Discrimination in Employment Act (ADEA).

The reasonable factor other than age (RFOA) defense—which has been a feature in EEOC's regulations since the Commission issued its regulations interpreting the ADEA after taking jurisdiction over the ADEA from the Department of Labor—gained particular notoriety when it was analyzed in the U.S. Supreme Court's 2005 decision in Smith v. City of Jackson. In Smith, the Court extended plaintiffs' ability to bring disparate impact claims under the Age Discrimination in Employment Act (ADEA). First recognized in the context of Title VII claims, which govern claims of race, color, religion, national origin, and sex discrimination, and codified in the Civil Rights Act of 1991, disparate impact claims allege that certain employment practices, while neutral on their face, nonetheless have a significant adverse impact on a protected group. The Court held, however, that in defending such claims under the ADEA, employers need not demonstrate that the practice was job related and consistent with business necessity, as under Title VII, but instead that employers may defend against liability by showing that the employment practice was based on a "reasonable factor other than age."
The final rule clarifies EEOC's interpretation of the RFOA defense, including the respective burdens of the plaintiff and the employer, as well as the factors considered in determining whether the defense applies. The rule and its preamble require careful analysis, but among other things, the rule provides that:
  • The person challenging the employment practice has the burden of isolating and identifying the specific employment practice responsible for the adverse impact. For example, a plaintiff cannot rely on the mere fact that fewer older employees are hired by the company. He or she must isolate the practice that allegedly causes the disparity. However, EEOC emphasized in the preamble that it believes, under the Supreme Court's decision in Watson v. Fort Worth Bank & Trust, that a policy of unrestricted subjective decision making could in the right circumstances qualify as a practice to be challenged as causing disparate impact age discrimination.
  • Once the practice is identified and a disparate impact is demonstrated, the employer has the burden of proving the RFOA defense. Generally, a "reasonable factor other than age" means a factor that is "objectively reasonable" when viewed from the perspective of a "prudent employer mindful of its responsibilities under the ADEA."
  • More specifically, under the final rule, the employer bears the initial burden of producing evidence establishing the reasonable factor other than age, as well as the ultimate burden of persuading the fact-finder that the RFOA defense applies.
  • Factors EEOC will consider in determining the applicability of the RFOA defense include, but are not limited to: (i) the extent to which the practice is related to the employer's stated business purpose; (ii) whether the employer applied the factor fairly and accurately, including whether supervisors were given training on its application; (iii) the extent to which the employer limited supervisors' ability to assess employees subjectively; (iv) whether the employer assessed the adverse impact of the practice on older workers; and (v) the level of harm to older workers and any steps the employer took to reduce it. EEOC relied in developing these factors on tort law principles, which some commenters have suggested raises the bar for the defense higher than it should be.
  • EEOC emphasized that the determination will depend on the individual facts and circumstances of the situation, and that the considerations it listed are not a checklist, nor are they an exhaustive list.  
Some commenters on the proposed rule noted that certain language suggested the RFOA test was similar to the "business necessity" test used in Title VII cases. In its analysis of the final rule, EEOC agreed that the RFOA defense is a less demanding standard than "business necessity." However, EEOC also made clear that it continues to believe that the RFOA defense is more demanding than a rational-basis standard. Taken together, these statements indicate that EEOC believes employers relying on the RFOA defense must do more than just show the employment practice was not irrational or arbitrary, but need not show that it was essential to the business. The challenge for employers will be in determining what practical space there is between the business necessity defense and the RFOA defense, particularly at the charge level when dealing with EEOC investigators.
In sum, the final rule makes it plain that the EEOC views the RFOA defense as heavily dependent on the particular facts of the situation. By design, the rule provides no clear safe harbor to employers. To strengthen their defense, however, employers should proactively consider which—if any—of their employment practices may adversely affect older workers, and to the extent any disparate impact cannot be eliminated, be prepared to link decisions as closely as possible to a business objective that can be explained to and persuade EEOC investigators.