On February 18, 2010, the United States Equal Employment Opportunity Commission (“EEOC”) proposed new regulations regarding the interpretation of “reasonable factors other than age” (“RFOA”) as used in the Age Discrimination in Employment Act of 1967 (“ADEA”). Under the ADEA, an employer may take an action “otherwise prohibited” under the Act if the “differentiation is based on reasonable factors other than age.” 29 U.S.C. § 623 (f)(1). The EEOC proposed the new regulations in light of two recent decisions in which the United States Supreme Court interpreted the RFOA defense.

In Smith v. City of Jackson, 544 U.S. 228 (2005), the Supreme Court held that employment practices, such as the City’s pay plan that provided larger pay increases to newer police officers than to more senior officers, may have a disparate adverse impact on workers age 40 and older and thus violate the ADEA. In deciding in favor of the City, however, the Court concluded that the pay plan was based on a “reasonable factor other than age”. Unfortunately, the Court did not specify which party bore the burden of persuasion on the RFOA defense.

Subsequently, in Meacham v. Knolls Atomic Power Laboratory, 128 S. Ct. 2395 (2008), the Supreme Court clarified that RFOA is an affirmative defense and employers bear both the burden of production and persuasion in using the RFOA defense against disparate impact claims.

In addition to clarifying the RFOA defense, the EEOC’s proposed regulations, if adopted, would amend the existing regulations found at 29 C.F.R. § 162.7(b), which currently provide little guidance on RFOA and simply state that, “[n]o precise and unequivocal determination can be made as to the scope of the phrase ‘differentiation based on reasonable factors other than age.’ Whether such differentiations exist must be decided on the basis of all the particular facts and circumstances surrounding each individual situation.”

The EEOC looked to the tort law definition of “reasonableness” in providing guidance in the proposed regulations as to whether an employment practice fits within the RFOA defense. The proposed regulations state that, “a reasonable factor is one that is objectively reasonable when viewed from the position of a reasonable employer under like circumstances. It is one that would be used in a like manner by a prudent employer mindful of its responsibilities under the ADEA.” The EEOC also stated that in order 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 know to the employer.”

The proposed regulations also provide a list of relevant factors to be used in determining whether an employment practice is reasonable, including:

• whether the employment practice and the method of its implementation are common business practices; 
• the extent to which the factor is related to the employee’s business goal; 
• whether the employer took steps to define the factor accurately and apply the factor fairly; 
• whether the employer assessed the adverse impact of its practice on older workers; 
• the severity of harm to older individuals; and 
• whether the employer had other options available to it and why it selected the option it did.

In clarifying the RFOA defense, the EEOC also observed that employers are not required to prove “business necessity” as they are required prove with respect to the defense of disparate impact claims under Title VII of the Civil Rights Act (ie., race, gender, religion, etc.). Specifically, in defending Title VII claims, employers must show that the employment practice at issue was necessary and there was no less discriminatory alternative. In comparison, in using the RFOA defense, employers need only show that they relied on “reasonable” factors other than age and need not prove that they chose the option with the least discriminatory impact. In deciding to pursue a particular employment practice, however, employers should be aware that the availability of other options is a relevant factor in deciding whether an employement practice was in fact reasonable.

The proposed regulations also discuss the term “factors other than age” and state that the RFOA defense applies in disparate impact cases only if the employment practice is not based on age. Employers should be mindful, however, that the EEOC has observed that disparate impact may result from giving supervisors unfettered discretion to engage in subjective decision-making and should particularly “avoid giving such discretion to rate employees on criteria known to be susceptible to age-based stereotyping, such as flexibility, willingness to learn, or technological skills.” Thus, the EEOC encourages employers to provide training to supervisors to become aware of and avoid age-based stereotyping.

A copy of the proposed regulations can be found at: http://www.regulations.gov/search/Regs/home.html#documentDetail?R=0900006480aa732e. EEOC will accept public comments via the internet at http:///www.regulations.gov.
on the proposed regulations until on or about April 18, 2010.