EEOC Supplies New Rules that May Limit Claims

A business subject to the federal Age Discrimination in Employment Act (ADEA) (those with 20 or more persons on payroll) must ensure it terminates, disciplines or denies benefits to any “older” employee (40 years or more) on “reasonable factors other than age ” (RFOA).

Workplace discrimination claims come in two main forms. “Disparate treatment” claims allege outright discrimination because of the employee’s protected characteristic (age, gender, race, national origin, etc.). “Disparate impact” claims allege that seemingly neutral business practices result in a pattern of discriminatory impact upon persons sharing some protected characteristic, for example a company layoff policy that results in more terminations of older people than younger individuals.

Disparate impact and age discrimination is particularly touchy. For example, a company may well conclude that younger workers should be retained when, as a rule, such individuals tend to more knowledgeable and skilled in particular industries, trumping older employees’ experience. However, a seemingly logical, business-based practice could be successfully challenged if the employer does not systematically document the performance-based criteria applied in such layoff decisions.

Following two Supreme Court decisions critical of Equal Employment Opportunity Commission’s (EEOC) regulations in this area and a 50% increase in age discrimination charges since 2000, the agency published on March 29, 2012 its final rule on Disparate Impact and Reasonable Factors Other Than Age Under the Age Discrimination in Employment Act.

The EEOC’s press release announced the new rule “clarifies that the ADEA prohibits policies and practices that have the effect of harming older individuals more than younger individuals unless the employer can show that the policy or practice is based on a reasonable factor other than age … The final rule strikes the appropriate balance between protecting older workers from discriminatory, unreasonable business decisions and preserving an employer’s ability to make reasonable business decisions.”

To successfully assert the RFOA defense, the EEOC directs that an employer must show that its workplace practice was both designed and applied to achieve “a legitimate business purpose.” The final rule specifies relevant considerations in this process:

• The extent to which the asserted “reasonable factor” is related to the employer’s stated business purpose;
• The extent to which the employer defined and applied the factor fairly and accurately, including the extent of training or guidance to managers and supervisors;
• The extent to which the employer limited supervisors’ discretion to assess employees subjectively, particularly where supervisors would tend evaluate individuals on negative age-based stereotypes;
• The extent to which the employer assessed the demonstrable adverse impact of its employment practice on older workers; and
• The degree of actual impact or harm to individuals within the protected age group as well as the extent to which the employer took steps to reduce that harm.

These newly clarified criteria create the renewed importance for businesses to examine and document key practices and programs that can disproportionately impact older workers, including hiring, training, discipline and termination. An experienced employment law attorney can assist. While the new rule applies to the federal law, state counterpart guidelines could well follow. In California, businesses with five or more on payroll are subject to the age (40-plus) discrimination prohibitions of the Fair Employment and Housing Act (FEHA).

photo: Dorothe Lange