ADEA Changes: EEOC Muddles The RFOA Defense To Disparate-Impact Age Bias Claims

On March 30, 2012, the Equal Employment Opportunity Commission ("EEOC") issued the final rule to amend its Age Discrimination in Employment Act ("ADEA") regulations concerning the reasonablefactors- other-than-age ("RFOA") defense to disparate-impact claims. The revised EEOC regulations take effect on April 30, 2012.

In its 2005 ruling in Smith v. City of Jackson, 544 U.S. 228, the Supreme Court held that ADEA, like Title VII of the Civil Rights Act of 1964, reaches disparate-impact claims. Because legitimate employment criteria like length of service and experience are often correlated with increasing age, Congress in the RFOA provision1 took care to insulate reasonable business decisions from challenge even when they disproportionately affect older workers. Smith makes clear that "the scope of disparate-impact liability under ADEA is narrower than under Title VII." 544 U.S. at 240. Whereas the employer's defense to Title VII disparate-impact claims requires a showing of "business necessity," ADEA's RFOA defense "preclud[es] liability if the adverse impact was attributable to a non-age factor that was 'reasonable.'" Id. at 239. In Smith, the RFOA provision sheltered the municipal employer's policy of basing pay raises on seniority and position for the purpose of meeting the competition, even though there were other means of retaining employees with less adverse impact on older workers. As the Court reasoned: "Unlike the business necessity test, which asks whether there are other ways for the employer to achieve its goals that do not result in a disparate impact on a protected class, the reasonableness inquiry includes no such requirement." Id. at 243.

Despite this clear language, the EEOC has always advocated a narrow construction of the RFOA defense, seeking to equate it, as far as possible, with the business necessity concept applicable under Title VII. In the agency's new regulations, the viability of the RFOA defense will depend on the employer's ability to show that the challenged practice was objectively reasonable when viewed from the position of a "prudent employer" mindful of its responsibilities under the ADEA under like circumstances.

The Commission states that the new rule does no more than conform its regulations to Smith and Meacham v. Knolls Atomic Power Lab., 554 U.S. 94 (2008), a later decision confirming that the RFOA defense is a true affirmative defense requiring the defendant to carry the burden of persuasion. There is reason to believe, however, that the revised regulation attempts to go beyond existing law to impose a more rigorous standard for application of the defense, or at the very least, create more opportunity for factual disputes and litigation.

The new regulation adopts the perspective of a "prudent employer" to determine whether or not an employer has relied upon "reasonable" non-age factors in making the challenged employment decision. This standard – the agency informs – is based on principles derived from tort law that impose a duty to avoid harm: "Whether a factor is reasonable can be determined only in light of all of the surrounding facts and circumstances, including the employer's duty to be cognizant of the consequences of its choices."2 In effect, though seemingly in conflict with the Supreme Court's decision in Smith, the new rule allows plaintiffs to argue that it imposes a duty on employers to assess and measure the impact of employment practices on older workers before implementing them.

The Revised Rule

The most significant change is to the former 29 C.F.R. § 1625.7(b), which provided little guidance on the RFOA defense, stating only that "[n]o precise and unequivocal determination can be made as to the scope of the phrase...