New EEOC Rule Provides Guidance on "Reasonable Factors Other Than Age" Defense to ADEA Claims

In the April 12, 2010 edition of Legal News: Employment Law Update, we analyzed a proposed EEOC rule addressing the “reasonable factors other than age” (RFOA) defense to age discrimination claims. This proposed rule has now been issued as a final regulation and is currently in effect.The new regulation does two things. First, it codifies the RFOA defense for age discrimination claims. The Age Discrimination in Employment Act  prohibits (1) intentional discrimination against employees who are 40 years of age or older (known as “disparate treatment”); and (2) practices that, although facially neutral with regard to age, have the effect of disproportionately harming workers 40 years of age or older (known as “disparate impact”). Previously, the EEOC had taken the position that an employer must establish that a challenged practice was consistent with “business necessity” to justify a disparate impact on older workers. However, two U.S. Supreme Court decisions held that an employer need only prove that the challenged practice was based on an RFOA — a standard easier for employers to meet than the business necessity standard. An employment practice is based on an RFOA if it was reasonably designed and administered to achieve a legitimate business goal. The new rule incorporates the RFOA defense.

Second, the new rule lists several considerations relevant to assessing the reasonableness of the factors other than age, including:

• 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 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 extent to which the employer limited supervisors’ discretion to assess employees subjectively, particularly when the criteria that the supervisors were asked to evaluate are known to be subject to negative age-based stereotypes
• The extent to which the employer assessed the adverse impact of its employment practice on older workers
• The degree of the harm to individuals within the protected age group, in terms of both the extent of 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 undertaking such steps

The EEOC has issued a “Questions and Answers” guidance document  providing more detailed explanations of how an employer can establish an RFOA for a challenged employment practice under on each of these individual considerations. Based on these explanations, an employer should consider taking the following steps to increase the likelihood that the employer could successfully assert an RFOA:

• Focus on the method chosen for achieving the RFOA, rather than merely the existence of a legitimate business purpose. It is not enough that the business purpose be reasonable — rather, the method chosen to achieve the business purpose must be reasonable.
• Encourage supervisors to evaluate potentially subjective performance criteria using objective measures of the specific skills that are actually used on the job. For example, an employer could instruct supervisors to evaluate productivity in light of the number of customers served by and errors attributed to the employee.
• Large employers that routinely use software to monitor their practices for race- and sex-based disparate impact should similarly monitor for age-based impact. Smaller employers without the resources or expertise to perform sophisticated monitoring could show reasonableness by using more informal methods of assessing impact.
• Modify employment practices, when possible, to reduce the harm caused by the practices on older employees.

In addition, although the guidance document emphasized that documentation of these efforts is not required to establish an RFOA, it would be a good practice for employers to maintain records of their efforts in case the need to defend a particular employment practice arises.