seal.pngBy Jennifer Riley and Reema Kapur

On November 16, 2011, the Equal Employment Opportunity Commission (“EEOC”), by a 3-2 vote, approved a draft final regulation clarifying the parameters of the “reasonable factors other than age” (“RFOA”) defense under the Age Discrimination in Employment Act (“ADEA”). The proposed regulation now goes to the Federal Office of Management and Budget (“OMB”) for review and approval. If adopted, the proposed regulation potentially will make it easier for older workers to pursue disparate impact claims under the ADEA.

Background & Context
The EEOC purportedly proposed the regulation to bring its rules in line with two U.S. Supreme Court rulings that address the RFOA defense in the context of claims that facially neutral employment policies or practices have a disparate impact on older workers.

In Smith v. City of Jackson, 544 U.S. 228 (2005), a group of older police officers brought suit alleging that the City violated the ADEA when it adopted a pay plan that provided them less-generous salary increases than younger officers. The Supreme Court confirmed that disparate impact claims are cognizable under the ADEA and held that the appropriate standard for determining the legality of practices that disproportionately affect older workers is the RFOA defense, not the more stringent “business necessity” test. The Supreme Court concluded that the City’s decision, ostensibly for the purpose of bringing salaries in line with that of surrounding police forces, was a decision based on a “reasonable facto[r] other than age,” even though there might have been other reasonable ways for the City to achieve its goals.

Three years later, the Supreme Court issued its decision in Meacham v. Knolls Atomic Power Laboratory, 554 U.S. 84 (2008). In Meacham, the Supreme Court reaffirmed its previous ruling that the business necessity test “should have no place in ADEA disparate-impact cases,” but went on to hold that the RFOA exemption is an affirmative defense on which employers bear the burdens of production and persuasion. The Supreme Court recognized that “putting employers to the work of persuading fact-finders that their choices are reasonable makes it harder and costlier to defend [disparate impact cases],” but noted that such concerns would have to be directed at Congress. 

The EEOC’s Proposed Regulation
The EEOC sought to revise the current ADEA regulations to clarify the RFOA standard. On February 18, 2010, the EEOC issued a proposed rule to revise current ADEA regulations under 29 C.F.R. § 1625.7(b). By a 3 to 2 vote this past week, the EEOC approved the proposal. EEOC Chair Jacqueline Berrien and Commissioners Stuart Ishimaru and Chai Feldblum voted in favor of sending the rule to the OMB. Constance Barker and Victoria Lipnic, the two Republican members of the EEOC, voted against the draft final rule. 

The inter-agency review process at OMB typically lasts 3 to 6 months. If approved by the OMB, more information on the final rule will be provided when it is published. Whereas the details are not yet available, the lack of bipartisan support and accompanying comments indicate that the new rule may make it easier for older workers to pursue ADEA disparate impact cases and more difficult for employers to assert affirmative defenses based on reasonable factors other than age. 

Implications For Employers
Our recent Management Alert on the proposed rule discusses the impact of the proposed regulation. Whether by design or effect, should they become law, the proposed regulation would raise multiple hurdles for employers needing to downsize their businesses in order to remain profitable or competitive. The proposed regulation also would throw a curve ball into the defense of ADEA collective actions for disparate impact claims involving application of the RFOA defense.

Employers should stay tuned!