The Age Discrimination in Employment Act of 1967 (ADEA) prohibits discrimination on the basis of age and covers employees who are 40 years of age and older. The ADEA provides a statutory exception for "reasonable factors other than age."1 Since the Supreme Court held, in Smith v. City of Jackson,2 that employees could bring a disparate impact case under the ADEA, employers have been seeking guidance from the EEOC on how it would interpret the cryptic phrase "reasonable factors other than age" in the disparate impact context. In response to Smith, on March 30, 2012, the EEOC published its revised rule with regard to the RFOA defense. However, the hope that the Final Rule will assist employers engaged in reductions-in-force or setting workforce job qualifications seems unlikely to be realized because the new rule contradicts Smith and the Supreme Court's subsequent opinion in Meacham v. Knolls Atomic Power Laboratory.3 Under the Final Rule, the EEOC makes it more challenging for employers to implement facially neutral employment policies that should otherwise be lawful because they are based legitimately on nonage factors.
Application of the Reasonable Factors Other Than Age Defense in ADEA claims
The ADEA recognizes discrimination claims under the theories of disparate treatment and disparate impact. The former prohibits employers from intentionally discriminating against an employee because of his or her age, whereas the latter prohibits an employer from implementing a facially neutral policy that adversely affects older workers. But the ADEA specifically precludes liability under a disparate impact theory where the "adverse impact is attributable to a nonage factor that was 'reasonable.'"4 For example, Smith held that a city's decision to grant larger raises to lower tier employees was lawful, even though the policy had a disparate impact on the city's older police officers who had more seniority. That is because the policy was reasonable in its purpose to bring salaries in line with surrounding police forces and retain police officers.5
Importantly, so long as an employer's practices are based on reasonable factors other than age, neither the language of the ADEA nor Supreme Court precedent requires an employer to mitigate the potential harm of a practice or consider alternative practices to prevail on a RFOA defense. "Unlike the business necessity test, which asks whether there are other ways for the employer to achieve its goals that do not result in a disparate impact on a protected class, the reasonableness inquiry includes no such requirement."6 Meacham confirmed that "the business necessity test should have no place in ADEA disparate impact cases."7
The EEOC's Revised Regulation Contradicts Smith and Meacham and Threatens the Viability of the RFOA Defense
The EEOC's stated purpose in revising its rule on RFOA was to align the regulation with the Supreme Court's decision in Smith. Consistent with Smith and Meacham, the EEOC's revised rule clarifies that the RFOA defense is only applicable in disparate impact cases.8 But the rule deviates from the statute and case law by suggesting that an employer should be liable for a facially neutral practice if it negligently or unreasonably failed to mitigate the disparate impact associated with its practice.
The regulation provides, in relevant part:
"Considerations that are relevant to whether a practice is based on a reasonable factor other than age include but are not limited to . . .
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