The Equal Employment Opportunity Commission issued a final rule clarifying the standard for the “reasonable factors other than age” defense to discrimination claims under the Age Discrimination in Employment Act. The EEOC’s stated purpose in amending the ADEA regulations is to align the standard with U.S. Supreme Court case law and to provide guidance on the meaning of the RFOA defense. The new rule was published on March 30, 2012, and will go into effect on April 30, 2012.

The RFOA defense applies in the context of discrimination claims brought under a disparate impact theory, i.e., that a facially neutral practice or policy has a negative impact on employees or applicants in a protected classification. Under Title VII of the Civil Rights Act of 1964, after a plaintiff establishes a prima facie case of disparate impact, the employer may assert a “business necessity” defense. To do so, the employer must prove that the practice or policy at issue is justified by business necessity.

In 2005, in Smith v. City of Jackson, the Supreme Court held that disparate impact claims were cognizable under the ADEA. However, due to language in the ADEA that has no corollary under Title VII, the Supreme Court declined to adopt the business necessity defense from Title VII jurisprudence. Instead, the Supreme Court held that an employer may defend against a disparate impact claim under the ADEA by showing that the policy or practice at issue was premised on reasonable factors other than age.

In the final rule, consistent with the Supreme Court’s 2008 decision in Meacham v. Knolls Atomic Power Laboratory, the EEOC clarifies that the employer has both the burden of production and persuasion to establish the RFOA defense. The EEOC also crystallizes its position that the RFOA defense requires more than a showing that the policy or practice has a rational basis. However, the RFOA defense is intended to be a less-demanding standard than the business necessity defense of Title VII.

In addition to clarifying the burdens on employers, the new rule offers guidance on the meaning and application of “reasonable factors other than age.” In general, the final rule defines an RFOA as “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.” This definition adopts the tort standard of reasonableness.

The rule also delineates several non-exhaustive factors relevant to whether the policy or practice is justified by an RFOA:

  • The extent to which the factor is related to the employer’s stated business purpose for the practice or policy
  • The extent to which the employer defined the factor accurately and applied it 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
  • 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

Although the EEOC purports to agree that Title VII’s business necessity defense is inapplicable in an ADEA case—and that the RFOA defense is less strict than the business necessity defense—the EEOC’s articulation of the above-listed RFOA factors could have the practical effect of requiring employers to meet the more demanding business necessity showing.

Moreover, if accepted by courts, the EEOC’s directive that the RFOA defense requires a case-by-case analysis of the design and administration of a practice or policy—not just the goal of the practice or policy—could result in second-guessing of employer decisions, making it more difficult for employers to dispose of age discrimination cases on summary judgment.

The EEOC’s rule on the RFOA defense will likely have the most impact in the case of layoffs and workforce reorganizations. If your business is considering a layoff program or reorganization, members of Ballard Spahr’s Labor and Employment Group are available to assist you in designing a program to avoid these and other possible pitfalls. For more information, please contact Leslie A. Eaton at 303.299.7302 or, Amy L. Bashore at 856.761.3402 or, or the member of the Labor and Employment Group with whom you work.

Copyright © 2012 by Ballard Spahr LLP.
(No claim to original U.S. government material.)

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the author and publisher.

This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.