[Federal Register Volume 75, Number 32 (Thursday, February 18, 2010)]
[Proposed Rules]
[Pages 7212-7218]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-3126]
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EQUAL EMPLOYMENT OPPORTUNITY COMMISSION
29 CFR Part 1625
RIN 3046-AA87
Definition of ``Reasonable Factors Other Than Age'' Under the Age
Discrimination in Employment Act
AGENCY: Equal Employment Opportunity Commission
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Equal Employment Opportunity Commission (``EEOC'' or
``Commission'') is issuing this notice of proposed rulemaking
(``NPRM'') to address the meaning of ``reasonable factors other than
age'' (RFOA) under the Age Discrimination in Employment Act (``ADEA'').
DATES: Comments must be received on or before April 19, 2010. The
Commission will consider any comments received on or before the closing
date and thereafter adopt final regulations. Comments received after
the closing date will be considered to the extent practicable.
ADDRESSES: You may submit comments by any of the following methods:
By mail to Stephen Llewellyn, Executive Officer, Executive
Secretariat, Equal Employment Opportunity Commission, U.S. Equal
Employment Opportunity Commission, 131 ``M'' Street, NE., Washington,
DC 20507.
By facsimile (``FAX'') machine to (202) 663-4114. (There
is no toll free FAX number). Only comments of six or fewer pages will
be accepted via FAX transmittal, in order to assure access to the
equipment. Receipt of FAX transmittals will not be acknowledged, except
that the sender may request confirmation of receipt by calling the
Executive Secretariat staff at (202) 663-4070 (voice) or (202) 663-4074
(TTY). (These are not toll free numbers).
By the Federal eRulemaking Portal: http://www.regulations.gov. After accessing this Web site, follow its
instructions for submitting comments.
Instructions: All comment submissions must include the agency name
and docket number or the Regulatory Information Number (RIN) for this
rulemaking. Comments need be submitted in only one of the above-listed
formats, not all three. All comments received will be posted without
change to http://www.regulations.gov, including any personal
information you provide. Copies of the received comments also will be
available for inspection in the EEOC Library, FOIA Reading Room, by
advanced appointment only, from 9 a.m. to 5 p.m., Monday through Friday
except legal holidays, from April 19, 2010 until the Commission
publishes the rule in final form. Persons who schedule an appointment
in the EEOC Library, FOIA Reading Room, and need assistance to view the
comments will be provided with appropriate aids upon request, such as
readers or print magnifiers. To schedule an appointment to inspect the
comments at the EEOC Library, FOIA Reading Room, contact the EEOC
Library by calling (202) 663-4630 (voice) or (202) 663-4641 (TTY).
(These are not toll free numbers).
FOR FURTHER INFORMATION CONTACT: Dianna B. Johnston, Assistant Legal
Counsel, or Lyn J. McDermott, Senior Attorney-Advisor, at (202) 663-
4638 (voice) or (202) 663-7026 (TTY). (These are not toll free
numbers). This notice also is available in the following formats: Large
print, Braille, audio tape and electronic file on computer disk.
Requests for this notice in an alternative format should be made to the
Publications Information Center at
[[Page 7213]]
1-800-669-3362 (voice) or 1-800-800-3302 (TTY).
SUPPLEMENTARY INFORMATION: On March 31, 2008, the EEOC published a
Notice of Proposed Rulemaking (``NPRM'') proposing to amend its
regulations to reflect the Supreme Court's decision in Smith v. City of
Jackson.\1\ 73 FR 16807, Mar. 31, 2008. The NPRM proposed to revise 29
CFR 1625.7(d) to 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.'' The proposed revision also stated
that the individual challenging the allegedly unlawful employment
practice bears the burden of isolating and identifying the specific
employment practice responsible for the adverse impact. The Commission
also proposed to revise 29 CFR 1625.7(e) to state that, when the RFOA
exception is raised, the employer has the burden of showing that a
reasonable factor other than age exists factually.
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\1\ 544 U.S. 228 (2005).
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In addition to requesting public comment on the proposed rule, the
Commission asked whether regulations should provide more information on
the meaning of ``reasonable factors other than age'' and, if so, what
the regulations should say. Eight commenters supported efforts to
provide more information on the issue, one commenter thought the EEOC
should not provide additional information, and one commenter did not
address the question. After consideration of the public comments, and
in light of recent Supreme Court decisions, the Commission believes it
appropriate to issue a new NPRM to address the scope of the RFOA
defense. Accordingly, before finalizing its regulations concerning
disparate impact under the ADEA, the Commission is publishing this new
NPRM proposing to amend its regulations to define ``reasonable factors
other than age.''
Recent Supreme Court Decisions
In Smith v. City of Jackson,\2\ the United States Supreme Court
held that the ADEA authorizes recovery for disparate impact claims of
discrimination and that the ``reasonable factors other than age'' test,
rather than the business-necessity test, is the appropriate standard
for determining the lawfulness of a practice that disproportionately
affects older individuals.
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\2\ 544 U.S. 228 (2005).
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The Smith plaintiffs, senior police and public safety officers,
alleged that the defendant City's pay plan had a disparate impact on
older workers because it gave proportionately larger pay increases to
newer officers than to more senior officers. Older officers, who tended
to hold senior positions, on average received raises that represented a
smaller percentage of their salaries than did the raises given to
younger officers. The City explained that, after a survey of salaries
in comparable communities, it raised the junior officers' salaries to
make them competitive with those for comparable positions in the
region.\3\
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\3\ Id. at 241-42.
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The Supreme Court ruled that plaintiffs may challenge facially
neutral employment practices under the ADEA but that the ``scope of
disparate-impact liability under the ADEA is narrower than under Title
VII'' of the Civil Rights Act of 1964, 42 U.S.C. 2000e et seq.\4\ The
Court relied in large part on the parallel prohibitory language and the
common purposes of the ADEA and Title VII.\5\ The Court noted that, in
passing the ADEA, Congress was concerned that application of facially
neutral employment standards, such as a high school diploma
requirement, may ``unfairly'' limit the employment opportunities of
older individuals.\6\ The Court observed that there is a ``remarkable
similarity between the congressional goals'' of Title VII and ``those
present in the Wirtz Report.'' \7\
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\4\ Id. at 233-40. Title VII prohibits employment discrimination
based on race, color, religion, sex, and national origin. In Griggs
v. Duke Power Co., 401 U.S. 424 (1971), the Supreme Court first
recognized the disparate impact theory of discrimination under Title
VII. The Court held that Title VII prohibits not only intentional
discrimination but also employment practices that, because they have
a disparate impact on a group protected by Title VII, are ``fair in
form but discriminatory in operation.'' 401 U.S. at 431.
\5\ 544 U.S. at 233-40.
\6\ Id. at 235 n.5 (quoting Report of the Sec'y of Labor, The
Older American Worker: Age Discrimination in Employment 3 (1965),
reprinted in U.S. EEOC, Leg. History of the ADEA 21 (1981) (``Wirtz
Report'')). Section 715 of the Civil Rights Act of 1964 directed the
Secretary of Labor ``to make a full and complete study of the
factors which might tend to result in discrimination in employment
because of age and of the consequences of such discrimination on the
economy and individuals affected.'' 78 Stat. 265. Secretary W.
Willard Wirtz presented his findings and recommendations in the
Wirtz Report.
\7\ 544 U.S. at 235 n.5.
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At the same time, however, the Court identified two key textual
differences that affect the relative scope of disparate impact
liability under the two statutes. First, the ADEA contains the RFOA
provision, which has no parallel in Title VII and precludes liability
for actions ``otherwise prohibited'' by the statute ``where the
differentiation is based on reasonable factors other than age.'' \8\
The RFOA provision ``plays its principal role'' in disparate impact
cases, where it ``preclud[es] liability if the adverse impact was
attributable to a nonage factor that was `reasonable'.'' \9\ Comparing
the RFOA provision with the Equal Pay Act provision that precludes
recovery when a pay differential is based on ``any other factor other
than sex,'' \10\ the Court found it ``instructive'' that ``Congress
provided that employers could use only reasonable factors in defending
a suit under the ADEA.'' \11\
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\8\ Id. at 240. The Court found that the presence of the RFOA
provision supported its conclusion that disparate impact claims are
cognizable under the ADEA. Id. at 238-40.
\9\ Id. at 239.
\10\ 29 U.S.C. 206(d)(1).
\11\ 544 U.S. at 239 n.11 (emphasis in the original).
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Second, in reaction to the decision in Wards Cove Packing Co. v.
Atonio,\12\ which ``narrowly construed the employer's exposure to
liability on a disparate-impact theory,'' Congress amended Title VII
but not the ADEA.\13\ Accordingly, ``Wards Cove's pre-1991
interpretation of Title VII's identical language remains applicable to
the ADEA.'' \14\
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\12\ 490 U.S. 642 (1989). The Wards Cove Court ruled that, in a
Title VII disparate-impact case, the plaintiff must isolate and
identify the specific employment practice that has a disparate
impact. Although the defendant had the burden of articulating a
business justification for the challenged practice, the burden of
persuasion remained at all times with the plaintiff. According to
the Court, ``at the justification stage, * * * the dispositive issue
is whether a challenged practice serves, in a significant way, the
legitimate employment goals of the employer.'' Id. at 659. If the
challenged practice was justified by business necessity, the
plaintiff could still prevail by showing that the employer refused
to adopt an equally effective, less discriminatory alternative. Id.
at 660-61.
\13\ 544 U.S. at 240 (citing the Civil Rights Act of 1991, sec.
2, 105 Stat. 1071).
\14\ Id. at 240. The ``identical'' language is in section
703(a)(2) of Title VII (42 U.S.C. 2000e-2(a)(2)) and section 4(a)(2)
of the ADEA (29 U.S.C. 623(a)(2)), which make it unlawful for
employers ``to limit, segregate, or classify'' individuals in a
manner that would ``deprive or tend to deprive any individual of
employment opportunities or otherwise adversely affect his status as
an employee, because of such individual's [protected status].''
The language of the two statutes significantly differs, however,
with regard to the applicable defense. Unlike the ADEA, which
provides a defense when the practice is based on a reasonable factor
other than age (29 U.S.C. 623(f)(1)), Title VII provides a defense
only when the practice is job related and consistent with business
necessity (42 U.S.C. 2000e-2(k)(1)(A)).
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Applying its analysis, the Court rejected the Smith plaintiffs'
disparate impact claims on the merits. Focusing on the plan's purpose,
design, and implementation, the Court found that the City's pay plan
was based on
[[Page 7214]]
reasonable factors other than age.\15\ The Court noted that the City
grouped officers by seniority in five ranks and set wage ranges based
on salaries in comparable communities. Most of the officers were in the
three lowest ranks, where age did not affect officers' pay. In the two
highest ranks, where all of the officers were over 40, raises were
higher in terms of dollar amounts; they were lower only in terms of
percentage of salary. The Court concluded that the plan, as designed
and administered, ``was a decision based on a `reasonable factor other
than age' that responded to the City's legitimate goal of retaining
police officers.'' \16\
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\15\ The Court also ruled that the plaintiffs failed to satisfy
Wards Cove's requirement that they identify a ``specific test,
requirement, or practice within the pay plan that has an adverse
impact on older workers.'' 544 U.S. at 241.
\16\ Id. at 242.
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Finally, the Court noted that, although ``there may have been other
reasonable ways for the City to achieve its goals, the one selected was
not unreasonable.'' ``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.'' \17\
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\17\ Id. at 243.
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Smith did not specify which party bore the burden of persuasion on
the RFOA defense, and most of the lower courts that addressed the issue
after Smith held that the plaintiff bore the burden of proving that the
employer's action was unreasonable.\18\ Subsequently, in Meacham v.
Knolls Atomic Power Lab.,\19\ the Supreme Court held that an employer
defending an ADEA disparate-impact claim bears both the burden of
production and the burden of persuasion on the reasonable factors other
than age defense.
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\18\ See, e.g., Pippin v. Burlington Res. Oil & Gas Co., 440
F.3d 1186, 1200 (10th Cir. 2006); Meacham v. Knolls Atomic Power
Lab., 461 F.3d 134, 141-43 (2d Cir. 2006), vacated and remanded, 128
S. Ct. 2395 (2008).
\19\ 128 S. Ct. 2395 (2008).
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Knolls Atomic Power Laboratories (``KAPL''), the employer in
Meacham, instituted an involuntary reduction in force (``IRIF'') in
1996 to reduce its workforce by 31 employees. To identify employees for
the IRIF, KAPL asked managers to rate their employees on three
factors--performance, flexibility, and the criticality of their
skills--and to add points for years of service. Managers then ranked
employees according to their scores and identified the lowest ranked
employees for layoff. Thirty of the 31 employees selected for layoff
were older than 40, even though only approximately 58% of the workforce
was older than 40. The plaintiffs' statistical expert testified that
the manner in which managers subjectively scored employees for
flexibility and criticality accounted for the statistically significant
disparities.\20\
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\20\ Id. at 2398-99. The Second Circuit initially affirmed a
jury verdict for the plaintiffs on their disparate impact claim. Id.
at 2399 (citing Meacham v. Knolls Atomic Power Lab., 381 F.3d 56,
74-47 (2d Cir. 2004)). Following the Smith decision, the Supreme
Court vacated the judgment and remanded the case to the appellate
court. On remand, a divided panel of the Second Circuit ruled that
plaintiffs bear the burden of persuasion on the RFOA defense and
held that the plaintiffs had not met that burden. Id. (citing
Meacham v. Knolls Atomic Power Lab., 461 F.3d 134, 140-41, 144 (2d
Cir. 2006)).
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Relying on the text and structure of the ADEA, the Supreme Court
ruled that the RFOA provision creates an affirmative defense. The
provision is in section 623(f)(1), which lists exemptions for employer
practices ``otherwise prohibited'' by sections 623(a), (b), (c), or
(e). As the court observed, it is a ``longstanding convention'' that
the party claiming the benefits of an exemption bears the burden of
proof.\21\
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\21\ Id. at 2400.
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The Court noted that the bona fide occupational qualification
provision, which also is in section 623(f)(1), creates an affirmative
defense. The Court also noted that it has interpreted the Equal Pay Act
exemption for pay differentials based on ``any other factor other than
sex'' as an affirmative defense. In addition, in the Older Workers
Benefit Protection Act, Congress added the phrase ``otherwise
prohibited'' to section 623(f)(2) of the ADEA to clarify that the
section establishes an affirmative defense. This confirms that the
phrase ``refers to an excuse or justification'' and signals an
affirmative defense on which the employer bears the burden of
proof.\22\
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\22\ Id. at 2402.
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The Court rejected KAPL's argument that, to prove that an adverse
action occurred because of age, plaintiffs must show that the
challenged employment practice was not based on a reasonable factor
other than age.\23\ The Court also rejected the Second Circuit's
conclusion that plaintiffs have the RFOA burden of persuasion because
plaintiffs bore the business necessity burden of persuasion under Wards
Cove and the RFOA defense ``replaces'' the business necessity test.
That ``the business necessity test should have no place in ADEA
disparate-impact cases'' does not preclude a finding ``that the RFOA
exemption is an affirmative defense.'' \24\
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\23\ Id. at 2403.
\24\ Id. at 2404.
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Finally, the Court noted that, ``the more plainly reasonable'' the
non-age factor, the smaller the difference between the burdens of
production and persuasion. ``It will be mainly in cases where the
reasonableness of the non-age factor is obscure for some reason, that
the employer will have more evidence to reveal and more convincing to
do in going from production to persuasion.'' \25\
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\25\ Id. at 2406.
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Revisions to Agency Regulations
The Commission proposes to revise current paragraph 1625.7(b) to
clarify the scope of the RFOA defense. Consistent with Smith and
Meacham, the proposed revision explains that whether a particular
employment practice is based on reasonable factors other than age turns
on the facts and circumstances of each particular situation and whether
the employer acted prudently in light of those facts. This standard is
lower than Title VII's business-necessity test \26\ but higher than the
Equal Pay Act's ``any other factor'' test.\27\ It represents a balanced
approach that preserves an employer's right to make reasonable business
decisions while protecting older workers from facially neutral
employment criteria that arbitrarily limit their employment
opportunities.
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\26\ 42 U.S.C. 2000e-2(k)(1)(A)(i) (noting that a particular
employment practice that has a disparate impact based on race,
color, religion, sex, or national origin is unlawful unless the
employer ``demonstrate[s] that the challenged practice is job
related for the position in question and consistent with business
necessity'').
\27\ 29 U.S.C. 206(d)(1)(iv) (noting that a sex-based wage
differential is not unlawful when payment is made pursuant to ``a
differential based on any other factor other than sex'').
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Proposed paragraph 1625.7(b) notes that whether a differentiation
is based on reasonable factors other than age must be decided on the
basis of all the particular facts and circumstances surrounding each
individual situation.
Reasonable
In General
The statutory requirement that the non-age factor be reasonable is
a key element of the RFOA defense.\28\ In Smith, the Court found it
``instructive'' that the ADEA provides a defense only when the factor
is reasonable, unlike the Equal Pay Act, which the Court said permits
an employer to justify a pay differential by proving that it is based
on any factor other than sex.\29\ The test
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for whether an age-based employment practice is lawful is not
``rational basis''; instead, the statute requires that the practice be
``reasonable.'' In defining what factors are reasonable, we look to
tort law,\30\ which contains the most extensive legal definition of
reasonableness.
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\28\ See Meacham, 128 S. Ct. at 2403 (``The focus of the defense
is that the factor relied upon was a `reasonable' one for the
employer to be using.'').
\29\ Smith, 544 U.S. at 239 n.11 (citing 29 U.S.C. 206(d)(1)
(Equal Pay Act recovery barred where pay differential is ``based on
any other factor other than sex'')); compare id. with 29 U.S.C.
623(f)(1) (ADEA's RFOA provision, which bars recovery only when
based on a reasonable factor other than age). Cf. Wards Cove Packing
Co. v. Atonio, 490 U.S. 642, 660 (1989) (``A mere insubstantial
justification * * * will not suffice, because such a low standard of
review would permit discrimination to be practiced through the use
of spurious, seemingly neutral employment practices.'').
\30\ See W. Page Keeton et al., ``Prosser and Keeton on Torts''
1, at 4-6 (5th ed. 1984) (torts ``consist of the breach of duties
fixed * * * by law,'' provide ``compensation of individuals, rather
than the public, for losses which they have suffered within the
scope of their legally recognized interests,'' and impose liability
``upon conduct which is socially unreasonable'').
The Supreme Court has turned to tort law for useful guidance in
resolving employment discrimination cases. See, e.g., Kolstad v.
American Dental Assn., 527 U.S. 526, 538 (1999) (employer's state of
mind relevant to award of punitive damages); Faragher v. City of
Boca Raton, 524 U.S. 775, 799-802 (1998) (because lower courts have
applied a negligence standard to coworker harassment, it is not
appropriate to treat supervisory harassment as being within the
scope of employment; however, agency principles weighed in favor of
holding an employer vicariously liable for some tortious conduct of
a supervisor made possible by abuse of his supervisory authority).
So, too, have lower courts. See Baskerville v. Culligan
International Company, 50 F.3d 428, 432 (7th Cir. 1995) (Posner, J.)
(in determining when an employer has taken reasonable steps to
discover and rectify acts of sexual harassment of its employees, the
court observed that ``what is reasonable depends on the gravity of
the harassment[; j]ust as in conventional tort law a potential
injurer is required to take more care, other things being equal, to
prevent catastrophic accidents than to prevent minor ones, [citing,
inter alia]; W. Page Keeton et al., ``Prosser and Keeton on the Law
of Torts'' 34, at 208 (5th ed. 1984)''; Shager v. Upjohn Co., 913
F.2d 398, 405 (7th Cir. 1990) (noting that age discrimination
constitutes a tort and therefore doctrine of respondeat superior
applies).
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Proposed paragraph 1625.7(b)(1) explains that a reasonable factor
is one that is objectively reasonable when viewed from the position of
a reasonable employer under like circumstances.\31\ It is one that
would be used in a like manner by a prudent \32\ employer mindful of
its responsibilities under the ADEA. In light of Smith and Meacham, a
prudent employer knows or should know that the ADEA was designed in
part to avoid the application of neutral employment standards that
disproportionately affect the employment opportunities of older
individuals.\33\ Accordingly, a reasonable factor is one that an
employer exercising reasonable care to avoid limiting the employment
opportunities of older persons would use.\34\
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\31\ Cf. Restatement (Second) of Torts 283 (1965) (standard of
conduct to avoid liability for negligence ``is that of a reasonable
man under like circumstances'').
\32\ Cf. Restatement (Second) of Torts 283 cmt. c (1965)
(``reasonable man'' standard refers to a person of ``ordinary
prudence'').
\33\ See Smith, 544 U.S. at 235, n.5 (quoting Wirtz Report).
\34\ Cf. Faragher v. City of Boca Raton, 524 U.S. 775, 808-09
(1998) (rejecting employer's argument that it should not be held
liable for negligently failing to promulgate anti-harassment policy
where EEOC regulations advised employers to take all steps necessary
to prevent harassment and holding as a matter of law that employer
did not exercise reasonable care to prevent sexual harassment).
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Consistent with Smith, proposed paragraph 1625.7(b)(1) provides
that the RFOA defense requires evidence that the challenged practice
was reasonably designed to further or achieve a legitimate business
purpose and was reasonably administered to achieve that purpose.\35\ In
Smith, for example, the method chosen by the employer to compete for
new personnel was one used by most employers in like circumstances--
raising the salaries of the least senior employees to attract new
applicants. That an employer uses a common business practice is not
dispositive of reasonableness, but it weighs in the employer's
favor.\36\
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\35\ See Smith, 544 U.S. at 235 n.5 (quoting Wirtz Report's
discussion of employment standards that unfairly limit employment
opportunities of older individuals).
\36\ See id. at 241 (``it is not surprising that certain
employment criteria that are routinely used may be reasonable
despite their adverse impact on older workers as a group'').
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In addition to the employment practice's design, the way in which
it is administered affects its reasonableness. For example, for
purposes of the RFOA defense, it may be reasonable to consider factors
such as job performance and skill sets when deciding whom to discharge
during a reduction in force.\37\ It also may be reasonable to consider
the extent to which an employee possesses a critical skill (i.e., one
that is key to the employer's operations), or is flexible (i.e., has
skills that can be used in various assignments or has the ability to
acquire new skills).\38\ Use of such factors is reasonable under the
ADEA if the employer has made reasonable efforts to administer its
employment practice accurately and fairly and has assessed the age-
based impact of the practice and taken steps to ameliorate unnecessary
and avoidable harm. Steps such as training its managers to avoid age-
based stereotyping, identifying specific knowledge or skills the
employer wants to retain (e.g., familiarity with the company's filing
system or ability to integrate different computer networks), and
providing guidance on how to measure flexibility (e.g., whether an
employee performs a variety of tasks or willingly accepts new
assignments) are evidence of reasonableness.
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\37\ See Pippin v. Burlington Res. Oil & Gas Co., 440 F.3d 1186,
1200-01 (10th Cir. 2006) (finding that reliance on performance
ratings and employee skill sets when choosing workers for layoff was
reasonable as a matter of law but placing RFOA burden of persuasion
on plaintiff).
\38\ See, e.g., Meacham v. Knolls Atomic Power Lab., 461 F.3d
134, 144 (2d Cir. 2006) (noting that employer's expert testified
that `` `criticality' and `flexibility' were ubiquitous components
of `systems for making personnel decisions' ''), vacated and
remanded, 128 S. Ct. 2395 (2008). However, selecting employees for
retention based on their work schedule ``flexibility'' might expose
an employer to allegations of disparate treatment or failure to
accommodate under Title VII or the Americans with Disabilities Act,
42 U.S.C. 12101 et seq. For example, ranking employees according to
their ability to work flexible schedules might affect an employee
who has been assigned to a regular, set schedule as a reasonable
accommodation.
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The determination of reasonableness also requires consideration of
what the employer knew or should have known about the practice's impact
when it took the challenged action.\39\ If the employer had no reason
to know that its actions would have an age-based adverse impact, then
it cannot be expected to take any action to ameliorate such impact. An
employer, however, cannot hide behind lack of knowledge. A reasonable
employer implementing practices that harm significant numbers of
employees will evaluate the process to determine whether its practice
has a disproportionate impact based on age. If the practice has a
substantial adverse age-based impact, the employer's failure to have
measured the impact will not protect it from a finding that it should
have known of the impact.
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\39\ Cf. Burlington Industries, Inc. v. Ellerth, 524 U.S. 742,
759 (1998) (applying agency principles, the Court noted that an
employer may be liable for a supervisor's sexual harassment when the
employer's ``own negligence is a cause of the harassment'' and that
``[a]n employer is negligent if it knew or should have known about
the conduct and failed to stop it'').
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Relevant Factors
To aid in assessing whether an employment practice is based on a
reasonable factor other than age, proposed paragraph 1625.7(b)(1) sets
forth a nonexhaustive list of factors that may be relevant to the RFOA
defense. As noted above, relevant considerations include whether the
practice and its implementation are common business practices and the
extent to which the employer took steps to assess and ameliorate the
adverse impact on older workers. The extent to which the factor is
related to the employer's stated business goals also is relevant to
whether it is a reasonable one. For example, in Smith, the city's
``decision to grant a larger raise to lower echelon
[[Page 7216]]
employees for the purpose of bringing salaries in line with that of
surrounding police forces * * * responded to the City's legitimate goal
of retaining police officers.'' \40\
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\40\ Smith, 544 U.S. at 242.
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The extent to which the employer took steps to define the factor
accurately also is relevant to reasonableness. For example, an
employee's flexibility may be assessed through concrete examples of
behavior such as accepting or resisting new assignments, seeking or
refusing training, and being open or opposed to new ways of doing
things. Similarly, the steps the employer took to apply the factor
fairly and accurately affect the determination of whether the factor
was reasonable. For example, the extent to which the employer provided
decision makers with training or other guidance on how to implement the
practice may be relevant to whether the practice was administered in a
reasonable way.
In addition, the list includes the severity of the practice's
impact on individuals within the protected age group. Severity is
measured both in terms of the degree of injury to affected employees
and the scope of the impact, i.e., the number of persons harmed.\41\
Smith is perhaps the quintessential example of negligible impact
because the impact was slight in both degree and scope. Although the
raises given to older workers were smaller in percentage terms, they
were higher in actual dollar terms. Thus, to the extent that any older
workers suffered any harm, it was minor.\42\ In addition, to the extent
workers could be said to have been disadvantaged, the numbers of those
so affected were small.
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\41\ Restatement (Second) of Torts 293 (1965) (in determining
the magnitude of the risk for the purpose of determining whether the
actor is negligent, factors that must be considered include the
extent of the likely harm and the number of persons whose interests
are likely to be harmed).
\42\ The city's pay plan divided five police ranks into a series
of steps and set the wages for the ranks based on a survey of wages
in surrounding communities. Most of the officers were in the three
lowest ranks, where age did not affect compensation. Compensation
was affected only in the two highest ranks, police lieutenant and
deputy police chief, where all of the officers were over 40.
Although the raises given to the more senior older workers were
smaller in percentage terms than the raises given to the less senior
younger workers, they were larger in dollar terms. Overall,
approximately 66% of the officers under 40 received raises of more
than 10% while approximately 45% of those over 40 did. Smith, 544
U.S. at 241-42.
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The other end of the severity spectrum is one in which the harm to
affected individuals is significant and falls primarily on older
individuals. The more severe the harm, the greater the care that ought
to be exercised.\43\ This end of the spectrum is exemplified by the
facts in Meacham, where the affected employees lost their jobs and the
age-based effect was ``startlingly skewed.'' \44\ This is not to say
that a reasonable employer must entirely eliminate the impact but,
rather, that a reasonable employer would investigate the reason for the
result and attempt to reduce the impact to the extent appropriate to
the given facts.
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\43\ Cf. Restatement (Second) of Torts 298 cmt. b (1965) (``The
greater the danger, the greater the care which must be
exercised.'').
\44\ Meacham v. Knolls Atomic Power Lab., 461 F.3d 134, 145 (2d
Cir. 2006), vacated, 128 S. Ct. 2395 (2008).
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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, also is relevant to the issue of
reasonableness. As noted in the Restatement, the reasonableness of the
employer's actions also includes consideration of the relationship
between the severity of the harm and the availability of measures that
would reduce or eliminate the risk of harm.\45\ If, as in Smith, the
harm is negligible both in terms of the numbers affected and the degree
of harm to those affected, it is not necessary to consider whether
there are measures that would further reduce or eliminate the harm.
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\45\ Cf. Restatement (Second) of Torts 292 cmt. c (1965) (``if
the actor can advance or protect his interest as adequately by other
conduct which involves less risk of harm to others, the risk
contained in his conduct is clearly unreasonable.'').
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On the other hand, if the harm is severe, the determination of
reasonableness includes consideration of whether the employer knew or
should have known of measures that would reduce or eliminate the harm
and the extent of the burden that implementing such measures would
place on the employer.\46\ For example, a reduction-in-force designed
to cut costs by terminating sales people with the highest salaries
might severely affect older workers. The employer could mitigate the
harm by also considering the sales revenues that the affected
individuals generated. By considering revenue as well as salary, the
process would reasonably achieve the employer's important goal of
cutting costs without unfairly limiting the employment opportunities of
older individuals.
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\46\ Id.
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Finally, the determination of reasonableness includes consideration
of whether other options were available and the reasons the employer
selected the option it did. As the proposed regulation notes, this does
not require an employer to adopt a practice that has the least impact
on members of the protected group. Unlike Title VII's business
necessity defense, which requires an employer to use the least
discriminatory alternative,\47\ ``the reasonableness inquiry includes
no such requirement.'' \48\ Thus, the availability of a less
discriminatory practice does not by itself make a challenged practice
unreasonable.
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\47\ Title VII requires an employer to adopt the least
discriminatory alternative. See 42 U.S.C. 2000e-2(k)(1)(A). In
contrast, factors listed in the proposed paragraph refer to what the
employer ``knew or should have known'' at the time of the challenged
action. These factors recognize that the RFOA test is less stringent
than the business necessity test and that ``the scope of disparate-
impact liability under ADEA is narrower than under Title VII.''
Smith, 544 U.S. at 240.
\48\ Smith, 544 U.S. at 243.
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That the reasonableness inquiry does not require an employer to use
the least discriminatory alternative, however, does not mean that the
existence of alternatives is irrelevant. An employer's knowledge of and
failure to use equally effective, but less discriminatory, alternatives
is relevant to whether the employer's chosen practice is reasonable.
This is especially true if the chosen practice significantly affects
the employment opportunities of older individuals but only marginally
advances a minor goal of the employer. ``If the actor can advance or
protect his interest as adequately by other conduct which involves less
risk of harm to others, the risk contained in his conduct is clearly
unreasonable.'' \49\
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\49\ Restatement (Second) of Torts 292, cmt. c (1965).
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On the other hand, the dearth of equally effective options also is
relevant to whether the employer's chosen practice is reasonable. The
fewer options available, the more reasonable the employer's action
appears. Thus, for example, a practice that appears unreasonable in the
abstract because it severely affected a high percentage of older
workers might in fact be reasonable because there were no other options
or the available options were more burdensome than the one chosen.
Factors Other Than Age
Proposed paragraph 1625.7(b)(2) makes clear that, for the RFOA
defense to apply, the challenged practice must be based on a non-age
factor.\50\ As the proposed paragraph notes, disparate impact
challenges typically involve
[[Page 7217]]
practices that are based on objective, non-age factors.\51\ Objectively
measurable factors such as salary and seniority are non-age factors.
Although they may sometimes correlate with age, they are analytically
and factually distinct from age.\52\
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\50\ See 29 CFR 1625.7(c) (``When an employment practice uses
age as a limiting criterion, the defense that the practice is
justified by a reasonable factor other than age is unavailable.'');
Smith, 544 U.S. at 239 (RFOA ``preclud[es] liability if the adverse
impact was attributable to a nonage factor that was `reasonable.'
'').
\51\ See Meacham, 128 S. Ct. at 2403 (``in the typical
disparate-impact case, the employer's practice is `without respect
to age' and its adverse impact (though `because of age') is
`attributable to a nonage factor' * * *'').
\52\ See Hazen Paper Co. v. Biggins, 507 U.S. 604, 611 (1993)
(``Because age and years of service are analytically distinct, an
employer can take account of one while ignoring the other, and thus
it is incorrect to say that a decision based on years of service is
necessarily `age based.' ''); Anderson v. Baxter Healthcare Corp.,
13 F.3d 1120, 1125-26 (7th Cir. 1994) (age and compensation levels
are analytically distinct).
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On the other hand, the unchecked use of subjective criteria that
are subject to age-based stereotypes may not be distinct from age.\53\
The Supreme Court has recognized that the problem of discrimination by
lower-level managers given unchecked discretion to engage in subjective
decision making needs to be addressed and that disparate impact
analysis is sometimes the only way to do so.\54\ Like Title VII, the
ADEA was directed at ``the consequences of employment practices, not
simply the motivation'' and ``good faith `does not redeem employment
procedures * * * that operate as `built-in headwinds' for [protected]
groups and are unrelated to measuring job capability.' '' \55\
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\53\ See Durante v. Qualcomm, 144 Fed. Appx. 603, 606 (9th Cir.
2005) (unpublished) (although `` `[p]laintiffs generally cannot
attack an overall decisionmaking process in the disparate impact
context, [and] must instead identify the particular element or
practice within the process that causes an adverse impact[,]' * * *
an overall decision-making process may be subject to a disparate
impact challenge if the employer utilizes an `undisciplined system
of subjective decision-making' '') (quoting Stout v. Potter, 276
F.3d 118, 1124 (9th Cir. 2002) and Watson v. Fort Worth Bank &
Trust, 487 U.S. 977, 990 (1988)).
\54\ Watson v. Fort Worth Bank and Trust, 487 U.S. 977, 990
(1988).
\55\ Smith, 544 U.S. 228, 234-35 (emphasis in original) (citing
Griggs v. Duke Power Co., 401 U.S. 424, 432 (1971)).
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For example, an employer that is downsizing may want to retain
individuals with the ability to learn new computer skills. If the
employer makes no effort to assess that ability objectively but instead
gives managers unchecked discretion to determine whom to retain, the
decision makers may act on the basis of stereotypes about older
workers' willingness or ability to learn computer skills. As a
consequence, the downsizing may result in a significantly younger but
not necessarily more technologically capable workforce. In that
situation, where age-based stereotypes infected an undisciplined
decision-making process, the employer did not rely on a factor other
than age.
An employer that gives unchecked discretion to supervisors to
engage in subjective decision making should know that doing so may well
cause an age-based disparate impact. Thus, employers that give their
supervisors unchecked discretion to make subjective decisions expose
themselves to liability on this basis. They 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. Instead, evaluation criteria should
be objectified to the extent feasible. For example, instead of asking
supervisors in the abstract to rate employees' willingness to take on
new tasks, employers should instruct supervisors to identify times that
an employee was asked to perform new tasks and to describe the
employee's reaction to such assignments. In addition, supervisors
should be trained to become aware of and avoid age-based stereotyping.
If the employer does give supervisors unchecked discretion to engage in
subjective decision making, it should determine whether doing so had a
disparate impact and, if so, should take reasonable steps to determine
whether that impact might be attributable to supervisors' conscious or
unconscious age bias and to mitigate the problem.\56\
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\56\ An employer that gives supervisors unchecked discretion to
engage in subject decisionmaking should also determine whether doing
so resulted in age-based disparate treatment. Cases challenging
subjective decisionmaking may involve allegations of disparate
treatment as well as disparate impact. See, e.g., Meacham, 128 S.
Ct. at 2398 (noting that plaintiffs raised both disparate-treatment
and disparate-impact claims).
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To aid in assessing whether an employment practice is based on a
non-age factor, proposed paragraph 1625.7(b)(2) sets forth a
nonexhaustive list of factors that are relevant to the RFOA defense.
Relevant factors include 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 Commission invites comments on the proposed changes from all
interested parties.
Regulatory Procedures
Executive Order 12866
Pursuant to Executive Order 12866, EEOC has coordinated this
proposed rule with the Office of Management and Budget. Under section
3(f)(1) of Executive Order 12866, EEOC has determined that the
regulation will not have an annual effect on the economy of $100
million or more or adversely affect in a material way the economy, a
sector of the economy, productivity, competition, jobs, the
environment, public health or safety, or State or local tribal
governments or communities. Therefore, a detailed cost-benefit
assessment of the regulation is not required.
Paperwork Reduction Act
This proposal contains no new information collection requirements
subject to review by the Office of Management and Budget under the
Paperwork Reduction Act (44 U.S.C. chapter 35).
Regulatory Flexibility Act
The Commission certifies under 5 U.S.C. 605(b) that this proposed
rule will not have a significant economic impact on a substantial
number of small entities because it imposes no economic or reporting
burdens on such firms and makes no change to employers' compliance
obligations under the Act. Instead, the proposed rule brings the
Commission's regulations into compliance with recent Supreme Court
interpretations of the Act. For this reason, a regulatory flexibility
analysis is not required.
Unfunded Mandates Reform Act of 1995
This proposed rule will not result in the expenditure by State,
local, or tribal governments, in the aggregate, or by the private
sector, of $100 million or more in any one year, and it will not
significantly or uniquely affect small governments. Therefore, no
actions were deemed necessary under the provisions of the Unfunded
Mandates Reform Act of 1995.
List of Subjects in 29 CFR Part 1625
Advertising, Age, Employee benefit plans, Equal employment
opportunity, Retirement.
Dated: February 12, 2010.
For the Commission.
Stuart J. Ishimaru,
Acting Chairman.
For the reasons set forth in the preamble, the Equal Employment
Opportunity Commission proposes to
[[Page 7218]]
amend 29 CFR chapter XIV part 1625 as follows:
PART 1625--AGE DISCRIMINATION IN EMPLOYMENT ACT
1. The authority citation for part 1625 continues to read as
follows:
Authority: 81 Stat. 602; 29 U.S.C. 621; 5 U.S.C. 301;
Secretary's Order No. 10-68; Secretary's Order No. 11-68; Sec. 9, 81
Stat. 605; 29 U.S.C. 628; sec. 12, 29 U.S.C. 631, Pub. L. 99-592,
100 Stat. 3342; sec. 2, Reorg. Plan No. 1 of 1978, 43 FR 19807.
Subpart A--Interpretations
2. Revise paragraph (b) of Sec. 1625.7 to read as follows:
Sec. 1625.7 Differentiations based on reasonable factors other than
age.
* * * * *
(b) Whether a differentiation is based on reasonable factors other
than age (``RFOA'') must be decided on the basis of all the particular
facts and circumstances surrounding each individual situation.
(1) Reasonable. A reasonable factor is one that is objectively
reasonable when viewed from the position of a reasonable employer
(i.e., a prudent employer mindful of its responsibilities under the
ADEA) under like circumstances. 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 known, to the employer. Factors relevant to determining whether an
employment practice is reasonable include but are not limited to, the
following:
(i) Whether the employment practice and the manner of its
implementation are common business practices;
(ii) The extent to which the factor is related to the employer's
stated business goal;
(iii) 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);
(iv) The extent to which the employer took steps to assess the
adverse impact of its employment practice on older workers;
(v) 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
(vi) Whether other options were available and the reasons the
employer selected the option it did.\1\
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\1\ This does not mean that an employer must adopt an employment
practice that has the least severe impact on members of the
protected age group. ``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.'' Smith v.
City of Jackson, 544 U.S. 228, 243 (2005). Instead, this simply
means that the availability of other options is one of the factors
relevant to whether the practice was a reasonable one. ``If the
actor can advance or protect his interest as adequately by other
conduct which involves less risk of harm to others, the risk
contained in his conduct is clearly unreasonable.'' Restatement
(Second) of Torts 292, cmt. c (1965).
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(2) Factors Other Than Age. When an employment practice has a
significant disparate impact on older individuals, the RFOA defense
applies only if the practice is not based on age. In the typical
disparate impact case, the practice is based on an objective non-age
factor and the only question is whether the practice is reasonable.
When disparate impact results from giving supervisors unchecked
discretion to engage in subjective decision making, however, the impact
may, in fact, be based on age because the supervisors to whom decision
making was delegated may have acted on the bases of conscious or
unconscious age-based stereotypes. Factors relevant to determining
whether a factor is ``other than age'' include, but are not limited to,
the following:
(i) The extent to which the employer gave supervisors unchecked
discretion to assess employees subjectively;
(ii) The extent to which supervisors were asked to evaluate
employees based on factors known to be subject to age-based
stereotypes; and
(iii) The extent to which supervisors were given guidance or
training about how to apply the factors and avoid discrimination.
* * * * *
[FR Doc. 2010-3126 Filed 2-17-10; 8:45 am]
BILLING CODE 6570-01-P