More Questions Than Answers - The EEOC's New Regulations On The ADEA
On March 30, 2012, the EEOC issued its long-awaited and much anticipated regulations on the Age Discrimination in Employment Act (“ADEA”).
Most hoped that the regulations would provide clarity for employers relative to employment practices or policies that, without intentionally meaning to do so, adversely affect older workers. In our view, the EEOC's regulations raise more questions than providing answers, and leave employers more uncertain than ever regarding the steps they must take to meet the “reasonable factor other than age” (“RFOA”) defense set forth in the ADEA and recognized by the Supreme Court in Smith v. City of Jackson, 544 U.S. 228 (2005).
While the regulations articulate five “non-exhaustive” factors to be considered to determine whether the employer has acted “reasonably,” the regulations make clear that employers have no guarantee of demonstrating an RFOA defense even if they comply with each and factor. Instead, the EEOC's regulations focus on the “particular facts and circumstances surrounding each individual situation.” In other words, employers will be required to establish a RFOA on a fact-intensive, case-by-case basis. The regulations will undoubtedly be fodder for EEOC and the plaintiffs’ bar in bringing disparate impact collective action claims under the ADEA.
In Smith v. Jackson, the Supreme Court determined that disparate impact claims are allowed under the ADEA. Disparate impact claims implicate policies or practices that, on their face, do not target older workers, but that in reality have a disproportionately negative affect on workers age 40 or above. At the same time, the Supreme Court also recognized that employers could escape liability for the unintended consequences of their policies or practices if such actions were based on an RFOA.
A few years later, the Supreme Court ruled in Meacham v. Knolls Atomic Power Laboratories, 128 S. Ct. 2395 (2008), that the RFOA defense is an affirmative defense that an employer has the burden to prove. The Supreme Court went on to hold, however, that the employer’s burden under the ADEA was not as high as the employer’s burden under Title VII and criticized EEOC’s then existing ADEA regulations that required that an employer justify any disparate impact by demonstrating a “business necessity” for the challenged employment practice.
As a result of the Supreme Court’s decisions in Jackson and Meacham, the EEOC’s current regulations were ostensibly drafted to: (i) make its regulations consistent with the Supreme Court’s decisions; and (ii) to explain the meaning of the RFOA defense.
The New EEOC Regulations
According to the new EEOC regulations, an employer meets its RFOA burden by proving that the challenged employment practice at issue was “both reasonably designed to further or achieve a legitimate business 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.” The regulations then identify the following “considerations” that, although not outcome determinative, describe the most “common characteristics” of reasonable employment practices:
- 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 where 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; and
- 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.
While the identified “considerations” are relevant guideposts of what the EEOC considers to be reasonable, employers should not expect that they will be able to prove the RFOA defense by demonstrating that they engaged in the stated practices. Alternatively, the EEOC's regulations provide that in some cases, an employer need not demonstrate that it took all the above factors into account in order to prove the RFOA defense.
What This Means For Employers Facing ADEA Litigation
Whether courts will adopt the regulations established by the EEOC in whole or in part remains unknown. Similarly, although the regulations have an “effective date” of April 30, 2012, it is not clear whether courts will apply the regulations (if at all) to conduct engaged in prior to April 30, 2012. To be sure, EEOC and the plaintiffs’ bar will argue that the regulations apply retroactively because they purportedly merely restate and/or explain existing law.
Employers should also expect increased challenges and scrutiny from private litigants and EEOC alike in high stakes ADEA litigation. In fact, although the EEOC regulations were purportedly designed to provide clarity on the RFOA defense, the regulations seemingly provide a roadmap for avenues of potential attack over what an employer “should have” done to ensure that employment policies and/or practices do not adversely impact older workers.
For further information on the new EEOC regulations, see our One Minute Memo on this development.