Friday, February 19, 2010

EEOC’s proposed RFOA regulations provide age bias risk-avoidance checklist

The US Equal Employment Opportunity Commission’s (EEOC) proposed regulations defining “reasonable factors other than age” (RFOA) under the Age Discrimination in Employment Act (ADEA) provide a checklist for employers contemplating an employment action that has the potential to adversely impact older workers.

The proposed regulations were published in the Federal Register on February 18, 2010. The EEOC initially published proposed ADEA disparate impact regulations back in March 2008. Based on comments received about the proposed rulemaking, and the Supreme Court’s decisions in Smith v City of Jackson, 544 U.S. 228, 86 EPD ¶41,882 (2005), and Meacham v Knolls Atomic Power Lab, 554 U.S. ___, 128 S. Ct. 239, 91 EPD ¶43,231 (2008), the federal agency decided to issue additional regulations addressing the scope of the RFOA defense.

The 2008 proposed regulations state that an employment practice that has an adverse impact on 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.” When the RFOA exception is raised, the employer has the burden of showing that a reasonable factor other than age exists factually.

What, exactly, constitutes “a reasonable factor other than age,” is the million-dollar question for employers – especially given the prevalence of reductions in force in a still-struggling economy. According to the EEOC, the question is determined based on all the particular facts and circumstances of the situation.

What is reasonable? That the non-age fact is reasonable is a key element of the RFOA defense, the EEOC says. The test is an objective one based on what a reasonable employer, one that is prudent and mindful of its responsibilities under the ADEA, would do in like circumstances. And a prudent employer knows, or should know, that the ADEA was designed to avoid application of neutral employment standards that disproportionately affect employment opportunities of older individuals. Thus, “a reasonable factor is one that an employer exercising reasonable care to avoid limiting the employment opportunities of older persons would use,” the EEOC explains in its notice of proposed rulemaking.

An employer seeking to establish the RFOA defense must show that the employment practice under scrutiny was: (1) reasonably designed to further or achieve a legitimate business purpose; and (2) administered in a manner that reasonably achieves that purpose in light of the particular facts and circumstances known, or that should have been known, to the employer.

Determinative factors. The EEOC’s proposed regulations provide a nonexclusive list of factors relevant to determining whether an employment practice is reasonable:
  • Whether the employment practice and the manner of its implementation are common business practices;
  • The extent to which the factor is related to the employer’s stated business goal;
  • The extent to which the employer took steps to define the factor accurately and to apply the factor fairly and accurately (e.g., training, guidance, instruction of managers);
  • The extent to which the employer took steps to assess the adverse impact of its employment practice on older workers;
  • The severity of the harm to individuals within the protected age group, in terms of both the degree of injury and the numbers of persons adversely affected, and the extent to which the employer took preventive or corrective steps to minimize the severity of the harm, in light of the burden of undertaking such steps; and
  • Whether other options were available and the reasons the employer selected the option it did.
Employer checklist. In light of these factors, and the EEOC’s stated reasons for the proposed revisions to its regulations, prudent employers should consider the following questions before implementing a business practice that has the potential to adversely impact older applicants or employees:
  1. Is the contemplated business practice, and the manner of implementation, common among businesses in like circumstances? Use of a common business practice weighs in an employer’s favor.
  2. Is the non-age factor that justifies the contemplated business practice closely related to the stated business goal(s)? Granting larger raises to lower-echelon employees in order to bring compensation in line with that of surrounding police forces responded to the legitimate goal of retaining police officers in the Smith case.
  3. What steps have been taken to define the non-age factor accurately and apply it fairly and accurately? Consider training managers to avoid age-based stereotyping, and if relevant, how to identify the specific knowledge or skills sets implicated by the contemplated business practice. Decisionmakers should also be trained or given guidance on how to implement the contemplated business practice.
  4. Has the potential for an adverse impact on older applicants or employees been assessed? A reasonable employer implementing a business practice that harms a large number of employees would perform an assessment of whether the practice would have a disproportionate impact based on age. An employer’s failure to measure the impact of a practice that has a substantial age-based adverse impact will not protect it from a determination that it should have known of the impact.
  5. How many older workers would be adversely impacted and how severely would they be harmed by the contemplated business practice? The more severe the harm, the greater the care the employer should exercise. While a reasonable employer may not be required to entirely eliminate the impact, it would nonetheless investigate the reason for the impact and try to reduce it to the extent appropriate given the facts.
  6. If the harm that would result from implementing the contemplated business practice is more than negligible, what steps have been taken, or could be taken, to prevent or minimize the severity of the harm, and what are the burdens associated with taking those steps? Where the harm is severe, the reasonableness determination will include whether the employer knew, or should have known, of measures that would eliminate or reduce the harm, and the extent to which the employer would be burdened by the implementation of such measures.
  7. Are there alternative options available and, if so, why is the contemplated business practice the option of choice? While employers are not required to use the least discriminatory alternative, the employer’s knowledge of, and failure to use, equally effective but less-biased alternatives is relevant to whether the chosen practice is reasonable – especially when there is a significant adverse impact on older workers with only a marginal advancement of a minor goal. Conversely, the fewer the alternatives, the more reasonable the business practice appears.
Factors other than age. Employers should be aware that the RFOA defense is available only when the challenged practice is not based on age. As the EEOC’s proposed regulations state, when the challenged employment practice is based on an objective non-age factor, only the reasonableness of the practice is at issue. But, when disparate impact results from giving supervisors unchecked discretion to engage in subjective decision making, an adverse impact may, in fact, be based on age because decisionmaking supervisors may have acted on the basis of conscious or unconscious age-based stereotypes. The proposed regulations set forth three nonexclusive factors relevant to determining whether the factor on which the practice is based is “other than age”:
  • The extent to which the employer gave supervisors unchecked discretion to assess employees subjectively;
  • The extent to which supervisors were asked to evaluate employees based on factors known to be subject to age-based stereotypes; and
  • The extent to which supervisors were given guidance or training about how to apply the factors and avoid discrimination.
The EEOC is seeking comments on its proposed RFOA regulations, and it remains to be seen whether further revision will follow. In the meantime, employers should consider them a valuable risk-avoidance tool.

2 comments:

  1. Great commentary. This is the best article I've seen on EEOC RFOA recommendations over the last 3 days.

    ReplyDelete
  2. Thank you--very helpful and concise.

    ReplyDelete