The Equal Employment Opportunity Commission (EEOC) recently amended their regulations in order to clarify their interpretation of the U.S. Supreme Court case of Smith v. City of Jackson, Mar. 31, 2008. The Supreme Court ruled that disparate-impact claims are cognizable under the Age Discrimination in Employment Act (‘‘ADEA’’)  but that liability is precluded when the impact
is attributable to a reasonable factor other than age (RFOA). The EEOC proposed rules interpreting the application of the RFOA defense and, after receiving comments from the public, announced the following rule effective April 30, 2012.  While the EEOC interpretative rules are not binding on the courts, they are normally given “presumptive weight” by the courts in cases requiring interpretation of a law. The Final Rule provides considerations for EEOC investigators to use in determining whether an employment practice is based on a RFOA. Because the EEOC has rulemaking authority under the ADEA, courts are likely to defer to the Final Rule when evaluating the RFOA defense.   The new rule on RFOA reads as follows:

In § 1625.7, revise paragraphs (b) through (e) to read as follows: § 1625.7 Differentiations based on reasonable factors other than age (RFOA).

(b) When an employment practice uses age as a limiting criterion, the defense that the practice is justified by a reasonable factor other than age is unavailable.

(c) Any employment practice that adversely affects individuals within the protected age group on the basis of older age is discriminatory unless the practice is justified by a ‘‘reasonable factor other than age.’’ An individual challenging the allegedly unlawful practice is responsible for isolating and identifying the specific employment practice that allegedly causes any observed statistical disparities.

(d) Whenever the ‘‘reasonable factors other than age’’ defense is raised, the employer bears the burdens of production and persuasion to demonstrate the defense. The ‘‘reasonable factors other than age’’ provision is not available as a defense to a claim of disparate treatment.

(e)(1) A reasonable factor other than age is a non-age factor that is objectively reasonable when viewed from the position of a prudent employer mindful of its responsibilities under the ADEA under like circumstances. Whether a differentiation is based on reasonable factors other than age must be decided on the basis of all the particular facts and circumstances surrounding each individual situation. To establish the RFOA defense, an employer must show that the employment practice 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.

(2) Considerations that are relevant to whether a practice is based on a reasonable factor other than age include, but are not limited to:

(i) The extent to which the factor is related to the employer’s stated business purpose;

(ii) 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;

(iii) 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;

(iv) The extent to which the employer assessed the adverse impact of its employment practice on older workers; and

(v) 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.

(3) No specific consideration or combination of considerations need be present for a differentiation to be based on reasonable factors other than age. Nor does the presence of one of these considerations automatically establish the defense.