[Federal Register Volume 77, Number 62 (Friday, March 30, 2012)]
[Rules and Regulations]
[Pages 19080-19095]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-5896]
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EQUAL EMPLOYMENT OPPORTUNITY COMMISSION
29 CFR Part 1625
RIN 3046-AA76
Disparate Impact and Reasonable Factors Other Than Age Under the
Age Discrimination in Employment Act
AGENCY: Equal Employment Opportunity Commission.
ACTION: Final rule.
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SUMMARY: The Equal Employment Opportunity Commission (``EEOC'' or
``Commission'') is issuing this final rule to amend its Age
Discrimination in Employment Act (``ADEA'' or ``Act'') regulations
concerning disparate-impact claims and the reasonable factors other
than age defense (``RFOA''). The Commission published proposed rules in
the Federal Register on March 31, 2008, and February 18, 2010, for
sixty-day notice-and-comment periods. After consideration of the public
comments, the Commission has revised portions of the proposed rules and
is now issuing a final rule covering both proposals.
DATES: Effective April 30, 2012.
FOR FURTHER INFORMATION CONTACT: Dianna B. Johnston, Senior Attorney-
Advisor, Aaron Konopasky, Attorney-Advisor, or Davis L. Kim, Attorney-
Advisor, at (202) 663-4640 (voice) or (202) 663-7026 (TTY). (These are
not toll free numbers). This final rule 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 1-800-669-3362
(voice) or 1-800-800-3302 (TTY).
SUPPLEMENTARY INFORMATION:
Background
On March 31, 2008, EEOC published in the Federal Register a Notice
of Proposed Rulemaking (``NPRM'') to address issues related to the
United States Supreme Court's decision in Smith v. City of Jackson.\1\
73 FR 16807, Mar. 31, 2008. The Court ruled that disparate-impact
claims are cognizable under the Age Discrimination in Employment Act
(``ADEA'') \2\ but that liability is precluded when the impact is
attributable to a reasonable factor other than age. 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'' and 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).
\2\ 29 U.S.C. 621-34.
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The NPRM sought public comments on the proposed rule and also
invited comments on whether the Commission should provide more
information on the meaning of ``reasonable factors other than age.''
Seven of the ten commenters clearly supported efforts to provide more
information. One of the seven suggested that reasonable factors should
be related to job requirements or job performance. One commenter who
preferred that the EEOC not address the matter argued that, if the RFOA
definition is subject to regulation, then EEOC should consult case law
for a definition and should draft factors relevant to the RFOA
determination. One commenter opposed efforts to provide more
information on the meaning of RFOA.
As noted below, all commenters who addressed the proposed revision
to 29 CFR 1625(d) supported it. Four commenters endorsed the proposal
as written and two generally supported the section but suggested
changes to the first sentence. For the reasons explained below, the
final rule, which has been redesignated 1625.7(c), retains the
proposal's substantive language.
Five commenters supported the proposed revision to 29 CFR 1625(e)
and four opposed it. The commenters who opposed it argued that
plaintiffs, not employers, should bear the RFOA burden of persuasion.
As noted below, the final rule, which has been redesignated 1625.7(d),
continues to place the burden of persuasion on the employer because the
Supreme Court agreed that the employer has the RFOA burden of
persuasion.\3\
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\3\ Meacham v. Knolls Atomic Power Lab., 554 U.S. 84, 91-92
(2008).
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Subsequently, on February 18, 2010, EEOC published in the Federal
Register a second NPRM to address the meaning
[[Page 19081]]
of ``reasonable factors other than age.'' 75 FR 7212, Feb. 18, 2010.
The Commission noted that, given public comments and the Supreme Court
decisions in Smith and Meacham, it was issuing the NPRM ``before
finalizing its regulations concerning disparate impact under the
ADEA.'' The NPRM proposed to revise 29 CFR 1625.7(b) to state that the
RFOA determination depends on the facts and circumstances of each
specific situation. It defined a reasonable factor as one that is
objectively reasonable when viewed from the position of a reasonable
employer under like circumstances. It provided that the RFOA defense
applies only if the challenged practice is not based on age. In
addition, the NPRM provided non-exhaustive lists of factors relevant to
whether an employment practice is reasonable and whether a factor is
``other than age.''
In response to the February 2010 NPRM, EEOC received 27 comments
from groups and individuals and more than 2,300 facsimiles that were
similar in form and content. Two commenters on the February 2010 NPRM
suggested that the Commission issue a new NPRM if it made any changes
to the material contained in the March 2008 NPRM. One of the two also
suggested the publication of a new NPRM if the EEOC offered new
justifications for the material contained in the February 2010 NPRM.
The other commenter suggested that a new NPRM clarify whether the 2008
and 2010 documents should be read in conjunction.
The Commission does not believe that publication of a new NPRM is
necessary. The Commission has considered all comments received in
response to both notices of proposed rulemaking and has made
appropriate changes to the proposed rules in response to those
comments. This document sets out the revised paragraphs of Sec. Sec.
1625.7(b) through (e). Because Sec. Sec. 1625.7(a) and (f) remain
unchanged, they are not reprinted herein.
Some commenters on the February 2010 NPRM, including those who
submitted form facsimiles, expressed concern that the EEOC's approach
to RFOA would place significant burdens on employers. They argued that
the rule would lead to unwarranted scrutiny of business decisions,
permit second-guessing of routine decisions, and make it harder for
employers to defend against frivolous litigation. Other commenters
thought that the rule presented a fair, workable approach to RFOA.
The ADEA and disparate-impact analysis by definition require some
scrutiny of employer practices that disproportionately harm older
workers. As the Supreme Court held, employers must prove that such
practices are based on reasonable factors other than age once
plaintiffs have identified a specific employment practice that has a
significant disparate impact.\4\ In holding that the RFOA is an
affirmative defense, the Supreme Court recognized that scrutiny of
employer decisions that cause an adverse impact is warranted, as
employers must persuade ``factfinders that their choices are
reasonable'' and that ``this will sometimes affect the way employers do
business with their employees.'' \5\
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\4\ Id. at 96.
\5\ Id. at 101.
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The EEOC's proposed rule was designed to conform existing
regulations to recent Supreme Court decisions and to provide guidance
about the application of the RFOA affirmative defense. It was not
intended to impose unwarranted burdens on employers. Nonetheless, the
Commission recognizes that some commenters interpreted the proposed
rule as imposing significant burdens by requiring employers to meet all
of the factors relevant to the RFOA determination. As explained below,
the Commission has revised the rule to clarify that the factors are not
required elements or duties, but considerations that are manifestly
relevant to determining whether an employer demonstrates the RFOA
defense.
Some commenters argued that the proposed rule improperly imported
Title VII standards into ADEA disparate-impact analysis and conflicted
with the Supreme Court decisions in Smith, Meacham, and Hazen Paper Co.
v. Biggins.\6\ Other commenters believed that the proposed rule was
consistent with the statute and relevant case law. The Commission,
which disagrees with some commenters' interpretations of the statute
and Supreme Court decisions, has addressed their comments in the
context of specific sections of the rule. For the reasons explained
below, the Commission believes that the rule is consistent with the
ADEA and case law interpreting the statute. Where appropriate, the
Commission has revised the rule to make this clearer.
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\6\ 507 U.S. 604 (1993).
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Section-by-Section Analysis
Section 1625.7(b)
Former section 1625.7(c) has been redesignated 1625.7(b). The text
of the paragraph remains unchanged.
Section 1625.7(c)
Section 1625.7(c) revises current section 1625.7(d). The 2008
proposed rule stated that any employment practice that has an age-based
adverse impact on individuals within the protected age group is
discriminatory unless the practice is justified by a reasonable factor
other than age. It also stated that the individual challenging the
practice is responsible for isolating and identifying the specific
employment practice responsible for the adverse impact.
All of the commenters who addressed this section supported it. Four
of them endorsed the section as written. Two of them generally
supported the section but suggested changes to the first sentence. One
commenter argued that the first sentence of the proposed rule
inappropriately implied that the RFOA defense is the only defense
applicable to disparate-impact claims under the ADEA. The commenter
asserted that, although the Smith decision held that RFOA is an
appropriate test for determining the lawfulness of an employment
practice that has an age-based disparate impact, it did not hold that
it was the only test. According to the commenter, section 4(f) \7\ of
the ADEA permits other practices that might have a disparate impact on
members of the protected age group. The commenter did not offer
examples of such practices or otherwise explain how other defenses
might apply in the disparate-impact context.
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\7\ 29 U.S.C. 623(f).
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The final rule, which has been redesignated 1625.7(c), retains the
proposed language. The Supreme Court relied on the RFOA provision to
conclude that the ADEA prohibits disparate-impact discrimination.\8\
The Court's determination that ADEA disparate-impact claims are
cognizable because of the RFOA provision logically leads to the
conclusion that RFOA is the defense to such claims. As the Court
explained in Meacham, the RFOA defense fits \9\ as the appropriate
defense
[[Page 19082]]
to a disparate-impact claim because the age-neutral employment practice
causing the unlawful impact is ``other than age'' and ``otherwise
prohibited.'' \10\
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\8\ Smith, 544 U.S. at 239.
\9\ The applicability of a statutory defense to a claim depends
on whether the defense appropriately responds to the facts raised.
For example, the ``bona fide occupational qualification'' (``BFOQ'')
defense in section 4(f)(1) applies to facially discriminatory
policies, not to neutral practices. See Meacham, 554 U.S. at 92. The
NPRMs proposed to revise section 1625.7 only, which is confined to
the applicability of the RFOA defense and did not propose changes to
other regulatory sections that apply to the ADEA's other affirmative
defenses. See, e.g., 29 CFR 1625.6 (BFOQ), 1625.8 (seniority
systems), 1625.10 (employee benefit plans). The regulations do not
preclude an employer from asserting any statutory defense that
responds to a particular claim. It should be noted that the ADEA's
affirmative defenses in section 4(f)(1) (BFOQ and foreign workplace)
and section 4(f)(2) (seniority system and bona fide employee benefit
plan) structurally and historically apply to intent-based claims.
See, e.g., 29 U.S.C. 623(f)(1), (2). See Trans World Airlines, Inc.
v. Thurston, 469 U.S. 111, 121 (1985) (BFOQ and seniority system
defenses raised to age-based denial of transfers); Mahoney v. Radio
Free Europe/Radio Liberty, Inc., 47 F.3d 447 (DC Cir. 1995) (holding
that foreign workplace defense applied to age-based mandatory
retirement provision).
\10\ Meacham, 554 U.S. at 93.
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Another commenter objected to the use of the term ``justified.''
The commenter asserted that the term is closely associated with Title
VII's business-necessity test and that its use could cause confusion
between the concepts of business necessity and RFOA. The final rule
retains the term ``justified.'' Use of this term is consistent with the
Meacham decision, which noted that the language of section 4(f)(1)
``refers to an excuse or justification for behavior that, standing
alone, violates the statute's prohibition.'' \11\ It is also consistent
with 29 CFR 1625.7(b), the text of which has not been changed. The term
``justified'' designates the party who bears the burden of proof, not
the content of the defense. There is no question that the RFOA standard
is lower than the business-necessity standard, as the rule makes clear.
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\11\ Id. at 95.
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The Commission has simplified the language in the second sentence
of paragraph 1625.7(c). The sentence now refers to the employment
practice ``that allegedly causes'' statistical disparities rather than
the employment practice ``that is allegedly responsible for'' the
disparities.
Paragraph 1625.7(c) reflects the Supreme Court's conclusions that
disparate-impact claims are cognizable under the ADEA, that the
individual alleging disparate impact bears the burden of identifying
the specific employment practice causing the alleged impact, and that
the RFOA defense is the appropriate standard for determining the
lawfulness of a practice that disproportionately affects older
workers.\12\
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\12\ See Smith v. City of Jackson, 544 U.S. 228 (2005).
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Section 1625.7(d)
Section 1625.7(d) revises current section 1625.7(e). The proposed
rule stated that, when the RFOA exception is raised, the employer has
the burden of showing that a reasonable factor other than age exists
factually. Five commenters supported the proposal, and four objected to
placing the burden of proof on the employer. One commenter noted that
the term ``exists factually'' was ambiguous and likely to lead to
confusion.
Subsequently, in Meacham v. Knolls Atomic Power Laboratory, the
Supreme Court confirmed that the employer defending an ADEA claim of
disparate impact has the RFOA burden of proof, i.e., the burden of
persuasion as well as production.\13\ The Commission has revised the
paragraph, which has been redesignated 1625.7(d), to reflect the
Supreme Court's holding that the RFOA provision is an affirmative
defense in disparate-impact cases for which the employer bears the
burdens of production and persuasion. To avoid confusion, the
Commission has deleted the phrase ``exists factually.''
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\13\ 554 U.S. 84, 97 (2008).
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The Commission also has revised the rule to clarify that the RFOA
affirmative defense is unavailable in disparate-treatment cases. In
Smith, the Court rejected the argument that the RFOA exemption acted
simply as a ``safe harbor'' in disparate-treatment cases.\14\ As the
Supreme Court explained in Smith,\15\ the ``other than age'' element of
the RFOA provision makes the defense inapplicable to a claim
conditioned on an age-based intent to discriminate.
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\14\ 544 U.S. at 238-39. Although the majority opinion
specifically rejected Justice O'Connor's view of the RFOA as a
``safe harbor analogous to the legitimate nondiscriminatory reason
(LNR) justification,'' it did not respond to her contention that the
``RFOA provision also plays a distinct (and clearly nonredundant)
role in `mixed-motive' cases.'' 544 U.S. at 253. Thus, the
majority's phrasing that the RFOA provision ``plays its principal
role'' in disparate-impact cases seems to refer to the notion that
it might have a role in mixed-motives cases. Any such role has been
obviated, however, by the Court's subsequent holding that the ADEA
does not permit ``mixed-motives'' claims. Gross v. FBL Financial
Servs. Inc., 557 U.S. 167 (2009).
\15\ 544 U.S. at 238.
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Section 1625.7(e)
Section 1625.7(e) revises current section 1625.7(b). The proposed
rule noted 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. The final rule retains this language, which emphasizes that
the RFOA determination involves a fact-intensive inquiry.\16\ For
organizational purposes, the Commission has changed the order of the
sentences in the paragraph.
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\16\ The determination of whether an employer establishes a
``reasonable factors other than age'' defense is a jury question.
See EEOC v. Allstate Ins. Co., 458 F. Supp.2d 980, aff'd, 528 F.3d
1042 (8th Cir.), reh'g en banc granted and opinion vacated on other
grounds (Sept. 8, 2008).
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The proposed rule divided the discussion of ``reasonable factors
other than age'' into two paragraphs, ``reasonable'' and ``factors
other than age,'' and listed factors relevant to each paragraph. The
``reasonable'' paragraph noted that 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. It stated that an employer
must show that an employment practice was reasonably designed to
achieve a legitimate business purpose and was administered in a way
that reasonably achieves that purpose in light of the facts that were
known or should have been known to the employer. It included a non-
exhaustive list of factors relevant to whether an employment practice
is reasonable.
The ``factors other than age'' paragraph noted that the RFOA
defense applies only if the practice was not based on age. It stated
that, 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. The paragraph noted, however, that a disparate impact
may be based on age when decision makers are given unchecked discretion
to engage in subjective decision making and, as a result, act on the
basis of conscious or unconscious age-based stereotypes. It included a
non-exhaustive list of factors relevant to whether a factor is other
than age.
Factors Other Than Age
Some commenters argued that the ``other than age'' paragraph
conflated disparate treatment and disparate impact and improperly
shifted the burden of proof by requiring the employer to prove that the
challenged employment action was not based on age. They also argued
that the paragraph conflicted with Meacham's statement that the RFOA
defense assumes that a non-age factor is at work.
In response to comments, and to ensure that the rule is not
misconstrued as placing a disparate-treatment burden of proof on
employers, the Commission has revised the discussion into a subsection,
which has been redesignated 1625.7(e)(1)-(3), addressing the term
``reasonable factors other than age.'' The Commission also has revised
the lists into a single, non-exhaustive description of considerations
relevant to the RFOA defense.
[[Page 19083]]
The final rule states that a reasonable factor other than age is 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. The reference to ``non-age factor''
recognizes that ``other than age'' is an express part of the statutory
RFOA defense.\17\
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\17\ 29 U.S.C. 623(f)(1); see also Smith, 544 U.S. at 239
(noting that the RFOA defense ``preclud[es] liability if the adverse
impact was attributable to a nonage factor that was `reasonable'
''). When an employer asserts purportedly neutral criteria, the RFOA
defense is not available if age is a component of the employer's
practice or policy. See, e.g., City of Los Angeles, Dept. of Water &
Manpower v. Manhart, 435 U.S. 702 (1978) (rejecting employer's
assertion of neutral criterion of ``longevity'' where sex determined
longevity).
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Prudent Employer
The preamble to the proposed rule stated that, in light of Smith
and Meacham, a prudent employer would know that the ADEA was designed
in part to avoid the application of neutral standards that
disproportionately affect older workers. One commenter, noting that
more than thirty years had passed between the enactment of the ADEA and
the Supreme Court's determination that the law covered disparate-impact
claims, questioned the Commission's statement. Another commenter agreed
with the Commission and pointed out that the Court had decided Smith
nearly five years, and Meacham nearly two years, before publication of
the NPRM.
The Supreme Court's decisions in Smith and Meacham confirmed EEOC's
longstanding position \18\ that disparate-impact claims are cognizable
under the ADEA and that employers have the burden of establishing the
RFOA defense. The decisions also validated the 1965 Wirtz Report's
concern about ``institutional arrangements'' that unintentionally limit
the opportunities of older workers.\19\ Courts had applied disparate-
impact analysis to ADEA claims for many years,\20\ and it was only
after the Court's 1993 Hazen Paper decision \21\ that some courts held
that disparate-impact claims were not cognizable under the ADEA.\22\
Therefore, the Commission continues to believe that a prudent employer
mindful of its ADEA responsibilities should know that the law prohibits
the use of neutral practices that disproportionately affect older
workers and are not based on reasonable factors other than age. A
reasonable factor other than age is one that an employer exercising
reasonable care would use to avoid limiting the opportunities of older
workers, in light of all the surrounding facts and circumstances.\23\
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\18\ See 29 CFR 1625.7.
\19\ Report of the Sec'y of Labor, The Older American Worker:
Age Discrimination in Employment 15-17 (1965), reprinted in U.S.
EEOC, Leg. History of the ADEA 32-34 (1981) (discussing ``[a] broad
range of personnel programs and practices [that] affect the
employment of the older worker, although they were not developed for
this purpose'') (hereinafter ``Wirtz Report'').
\20\ See, e.g., Maresco v. Evans Chemetics, 964 F.2d 106, 115
(2d Cir. 1992); Abbott v. Fed. Forge, Inc., 912 F.2d 867, 872-77
(6th Cir. 1990); Leftwich v. Harris-Stowe State Coll., 702 F.2d 686
(8th Cir.1983); Geller v. Markham, 635 F.2d 1027 (2d Cir.1980).
\21\ 507 U.S. 604 (1993).
\22\ See, e.g., Mullin v. Raytheon Co., 164 F.3d 696 (1st Cir.
1999); Ellis v. United Airlines, Inc., 73 F.3d 999, 1006-10 (10th
Cir. 1996); EEOC v. Francis W. Parker Sch., 41 F.3d 1073, 1077-78
(7th Cir. 1994). But see Frank v. United Airlines, Inc., 216 F.3d
845, 856 (9th Cir. 2000) (disparate-impact claims cognizable under
ADEA); Criley v. Delta Air Lines Inc., 119 F.3d 102, 105 (2d Cir.
1997) (same); Smith v. City of Des Moines, 99 F.3d 1466, 1470 (8th
Cir. 1996) (same).
\23\ See Smith, 544 U.S. at 235 n.5 (quoting Wirtz Report's
discussion of employment standards that unfairly disadvantage older
workers); 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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Reference to Tort Law
The proposed rule relied on tort principles when discussing what
constitutes a ``reasonable'' factor other than age. Some commenters
thought that the reference to tort law was practical and sensible.
Others, however, objected to the use of tort law. They argued that
employment discrimination law provides sufficient guidance for
determining whether a practice is based on reasonable,
nondiscriminatory factors and that the rule inappropriately imports the
concept of ``reasonable employer'' into the RFOA analysis. One
commenter asserted that, whereas tort law and sexual-harassment theory
assess reasonableness in terms of an individual's efforts to avoid
harm, the RFOA analysis assumes and permits disparate impact. Another
commenter asserted that it is unfair to rely on some tort principles
without including the concepts of contributory negligence and
assumption of the risk.
The final rule continues to refer to tort principles. Employment
discrimination law includes little discussion of reasonableness whereas
tort law extensively analyzes the concept. Indeed, the Supreme Court
recently made clear that federal nondiscrimination laws are torts and
that ``when Congress creates a federal tort [we presume that] it adopts
the background of general tort law.'' \24\ Prior to Staub, the Supreme
Court noted in Faragher v. City of Boca Raton \25\ that lower courts
have unanimously applied tort negligence standards to determine
employer liability for co-worker harassment. Similarly, the Court
turned to tort principles to determine what mental state warrants
punitive damages.\26\ Lower courts also have turned to tort law for
guidance in resolving employment discrimination cases.\27\
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\24\ Staub v. Proctor Hosp., 131 S. Ct. 1186, 1191 (2011)
(citing, among other decisions, Burlington Indus., Inc. v. Ellerth,
524 U.S. 742, 764 (1998)).
\25\ 524 U.S. 775, 799 (1998). In Faragher and Ellerth, the
Court crafted a duty-of-care defense in hostile-environment cases
without any statutory language directing it to do so.
\26\ Kolstad v. Am. Dental Ass'n, 527 U.S. 526, 538 (1999).
\27\ E.g., Baskerville v. Culligan Int'l Co., 50 F.3d 428, 432
(7th Cir. 1995) (reasonableness of employer's steps to discover and
correct sexual harassment ``depends on the gravity of the
harassment''); see also Erickson v. Wis. Dep't of Corr., 469 F.3d
600, 604 (7th Cir. 2006) (``The greater the potential injury to the
employee, the greater care the employer must take.'') (citing
Baskerville); Shager v. Upjohn Co., 913 F.2d 398, 405 (7th Cir.
1990) (noting, in an age case, that discrimination constitutes a
tort).
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The fundamental objective of employment discrimination statutes,
``like that of any statute meant to influence primary conduct, is * * *
to avoid harm.'' \28\ Tort law, too, focuses on the duty to avoid harm
and provides guiding principles to help understand reasonableness in
this context. Under the ADEA, employers are required to avoid the harm
of using facially neutral practices that impair employment
opportunities for older workers and are not reasonable.\29\ Whether a
factor is reasonable can be determined only in light of all of the
surrounding facts and circumstances, including the employer's duty to
be cognizant of the consequences of its choices.
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\28\ Faragher, 524 U.S. at 806 (citing Albemarle Paper Co. v.
Moody, 422 U.S. 405, 417 (1975)).
\29\ See Meacham v. Knolls Atomic Power Lab., 554 U.S. 84, 101
(2008); Smith v. City of Jackson, 544 U.S. 228, 234-5 & n.5 (2005).
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The assertion that the rule should not refer to tort law without
importing the concepts of contributory negligence and assumption of the
risk into the RFOA analysis misapprehends the rule's reference to tort
law. The rule does not import tort principles wholesale; rather, it
merely refers to tort law for guidance. Like the defense to harassment,
the RFOA defense considers what the employer knew about the harm and
what it did to correct it. Negligence principles as applied to co-
worker harassment do not address the concepts of contributory
negligence and assumption of the risk, and there is no
[[Page 19084]]
need to address those concepts in the RFOA context. Moreover, employees
do not ``contribute'' (negligently or otherwise) to an employer's use
of an employment practice that has an age-based disparate impact. In
addition, it would be contrary to the purposes of the anti-
discrimination laws to assert that any employee voluntarily assumes the
risk of being subject to discrimination.\30\
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\30\ McKennon v. Nashville Banner Pub. Co., 513 U.S. 352 (1995)
(the ADEA is part of a wider statutory scheme to protect employees
in the workplace nationwide). Allowing an assumption-of-risk defense
would defeat the ADEA's deterrent purpose; it would allow employers
to avoid liability simply by advertising the fact that they will
discriminate. See Smith v. Sheahan, 189 F.3d 529, 534 (7th Cir.
1999) (dismissing the idea that discriminatory actions can be
excused by a prevailing workplace culture that has included
exclusionary practices and bigotry and stating, ``There is no
assumption-of-risk defense to charges of workplace
discrimination.''); Jenson v. Eveleth Taconite Co., 130 F.3d 1287,
1292 (8th Cir. 1997) (holding that an employer's liability for sex
discrimination is not mitigated by the fact that the work
environment was known to have an egregiously discriminatory
culture); Williams v. Gen. Motors Corp., 187 F.3d 553, 564 (6th Cir.
1999) (`women working in the [male-dominated] trades do not deserve
less protection from the law than women working in a courthouse').''
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Design and Administration of Employment Practice
The proposed rule looked at ``reasonable'' from the position of a
prudent employer and considered how the challenged employment practice
is designed and administered. Some commenters agreed that the rule
should look at how the practice is applied as well as at how it is
designed. Other commenters, however, argued that this approach
inappropriately focuses on the employer's decision-making process
rather than on the factor upon which the decision was based. In their
view, the RFOA inquiry should focus on the factor underlying the
employment practice, not on whether the employer acted reasonably in
selecting the factor.
The final rule continues to focus on how the employment practice is
designed and administered. The RFOA defense arises after an employment
practice has been shown to have an age-based disparate impact. In that
context, the concept of ``reasonable factor'' necessarily includes
consideration of the reasonableness of the factor's application. Thus,
the Smith Court considered not just the City of Jackson's goal of
retaining police officers, but also the design and administration of
the pay plan used to achieve that goal.\31\
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\31\ See Smith, 544 U.S. at 242. (``Reliance on seniority and
rank is unquestionably reasonable given the City's goal of raising
employees' salaries to match those in surrounding communities. * * *
[T]he City's decision to grant a larger raise to lower echelon
employees for the purpose of bringing salaries in line with that of
surrounding police forces was a decision based on a `reasonable
facto[r] other than age' that responded to the City's legitimate
goal of retaining police officers.'').
---------------------------------------------------------------------------
The way in which an employer applies the factor is probative of
whether it is reasonable; a practice that seems reasonable in the
abstract might not be reasonable in its application. For example, an
employer might require candidates for jobs in its meat-processing plant
to pass a physical strength test. It would be reasonable for the
employer to design a test that accurately measures the ability to
perform the job successfully. It would be manifestly unreasonable,
however, for the employer to administer the test inconsistently,
evaluate results unevenly, or judge test takers unreliably. Similarly,
although it might well be reasonable for an employer to conduct a
reduction-in-force (RIF) to save money, if an identified employment
practice caused older workers to be disparately impacted, the cost-
cutting goal alone would not be sufficient to establish the RFOA
defense. The employer would have to show that the 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.
``Reasonable'' and ``Rational Basis''
The preamble to the proposed rule noted that the RFOA defense
requires that a practice be reasonable, which is different from
requiring only that it be rational. Some commenters argued that the
RFOA standard should be a rational-basis standard and that
``reasonable'' means not irrational or not arbitrary. Other commenters
commended the EEOC for clarifying that the reasonableness test is not a
rational-basis test.
The Commission continues to believe that the RFOA defense is more
stringent than a rational-basis or non-arbitrary standard for several
reasons. First, the Supreme Court has held that the RFOA provision
``confirms that Congress, through the ADEA, has effectively elevated
the standard for analyzing age discrimination to heightened scrutiny.''
\32\ In other words, the Supreme Court has previously recognized that
the RFOA reflects a standard of proof higher than a rational-basis
standard.
---------------------------------------------------------------------------
\32\ Kimel v. Florida Bd. of Regents, 528 U.S. 62, 88 (2000).
The Kimel Court held that the ADEA did not validly abrogate states'
Eleventh Amendment immunity from suit by private individuals because
it ``prohibits substantially more * * * than would likely be held
unconstitutional under the * * * rational basis standard.'' Id. at
86. The Court concluded that ``[the RFOA] exception confirms, * * *
rather than disproves, the conclusion that the ADEA's protection
extends beyond the requirements of the Equal Protection Clause.''
Id. at 88.
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Second, proof that an action was rational or non-arbitrary focuses
on whether an articulated reason is a pretext for intentional
discrimination.\33\ Thus, equating the RFOA defense with a rational-
basis standard would improperly conflate ADEA disparate-treatment and
disparate-impact standards of proof. If an employer attempting to
establish the RFOA defense were only required to show that it had acted
rationally, then the employer would merely be required to show that it
had not engaged in intentional age discrimination. In Smith, the
Supreme Court bluntly held that the RFOA provision is not a statutory
safe harbor from liability for disparate treatment when the employer
merely had a rational justification for its actions.\34\
---------------------------------------------------------------------------
\33\ Smith, 544 U.S. at 253.
\34\ Id. at 238-39 (rejecting Justice O'Connor's argument that
``the RFOA provision's reference to `reasonable' factors serves only
to prevent the employer from gaining the benefit of the statutory
safe harbor by offering an irrational justification.'' Id. at 253).
---------------------------------------------------------------------------
Thus, the Supreme Court concluded that the ADEA prohibits more than
intentional discrimination; it also prohibits employers from adopting
facially neutral practices that disproportionately exclude older
workers unless the employer can prove that its actions were based on
reasonable factors other than age. In holding that the RFOA provision
is the defense to disparate-impact claims, the Supreme Court recognized
that the RFOA defense is distinguishable in form and substance from the
``legitimate, nondiscriminatory reason'' evidence that the employer
must produce in individual disparate-treatment cases.\35\ The RFOA
defense necessarily requires more than merely a showing that the
employer's action was not irrational or not arbitrary.\36\ To adopt
commenters' assertions would be to nullify the Smith and Meacham
holdings and undermine the intent of Congress to address ``the
[[Page 19085]]
consequences of employment practices, not simply the motivation.'' \37\
---------------------------------------------------------------------------
\35\ Id. at 238-39 (rejecting Justice O'Connor's contention that
RFOA is safe harbor from liability, because employer can defeat
liability in disparate-treatment case by showing that employee was
rejected for legitimate, nondiscriminatory reason) (citing Texas
Dep't of Cmty. Affairs v. Burdine, 450 U.S. 248, 254 (1981)); see
also Meacham, 554 U.S. at 96, n.12.
\36\ Smith, 544 U.S. at 238-39.
\37\ Id. at 234-35 and n.5 (``just as Griggs recognized that the
high school diploma requirement, which was unrelated to job
performance, had an unfair impact on African-Americans * * * the
Wirtz Report identified the identical obstacle to the employment of
older workers'').
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Third, a rational basis standard would also undercut the Court's
recognition of the RFOA as an affirmative defense. Under a rational-
basis standard, an action ``may be based on rational speculation
unsupported by evidence or empirical data.'' \38\ The decision maker is
not required ``to articulate at any time the purpose or rationale
supporting its classification,'' \39\ and an action will be upheld ``if
there is any reasonably conceivable state of facts that could provide a
rational basis for the classification.'' \40\ By that measure, the
``reasonable'' requirement would afford no protection against practices
that have an age-based disparate impact.\41\
---------------------------------------------------------------------------
\38\ FCC v. Beach Commc'ns, Inc., 508 U.S. 307, 315 (1993)
(Cable Communications Policy Act's distinction between cable
television facilities that serve separately owned buildings and
those that serve buildings under common ownership, 47 U.S.C.
522(7)(B), is rationally related to a legitimate government purpose
under the Fifth Amendment's Due Process Clause).
\39\ Nordlinger v. Hahn, 505 U.S. 1, 15 (1992) (taxation system
focusing on acquisition value of real property rationally furthers
legitimate state interests for purposes of the Equal Protection
Clause of the Fourteenth Amendment).
\40\ FCC v. Beach Commc'ns, Inc., 508 U.S. at 313.
\41\ See id. at 323 n.3 (``Judicial review under the
`conceivable set of facts' test is tantamount to no review at
all.'') (Stevens, J., concurring); see also W. Air Lines, Inc. v.
Criswell, 472 U.S. 400, 422 n. 36 (1985) (rejecting rational-basis
standard for ``bona fide occupational qualification'' defense where,
``under a `rational basis' standard a jury might well consider that
its `inquiry is at an end' with an expert witness' articulation of
any `plausible reaso[n]' for the employer's decision'') (quoting
United States R.R. Ret. Bd. v. Fritz, 449 U.S. 166, 179 (1980)).
---------------------------------------------------------------------------
Finally, equating the RFOA reasonableness requirement with a
rational-basis standard would contradict the Smith Court's holding that
the ``reasonable'' requirement shows that the RFOA provision is more
stringent than the Equal Pay Act's (``EPA'') ``any other factor''
defense.\42\ Indeed, applying the rational-basis test to the RFOA
defense would actually make it less stringent than the EPA's ``any
other factor'' defense as the latter has been construed by the EEOC and
some courts, which have taken the position that, even under the Equal
Pay Act, an employer asserting an ``any other factor other than sex''
defense must show that the factor is related to job requirements or
otherwise is beneficial to the employer's business.\43\
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\42\ See Smith, 544 U.S. at 239 n.11 (2005) (finding it ''
instructive'' that, in contrast to providing an ``any other factor''
defense under the Equal Pay Act, 29 U.S.C. 206(d)(1), ``Congress
provided that employers could use only reasonable factors in
defending a suit under the ADEA'') (emphasis in the original).
\43\ EEOC Compliance Manual, Compensation Discrimination 10-
IV.F.2 (2000) (``An employer asserting a `factor other than sex'
defense also must show that the factor is related to job
requirements or otherwise is beneficial to the employer's
business.''); see also Aldrich v. Randolf Cent. Sch. Dist., 963 F.2d
520, 525-26 (2d Cir. 1992) (factor other than sex must be grounded
in legitimate business-related concerns); EEOC v. J.C. Penny Co.,
843 F.2d 249, 253 (6th Cir. 1988) (factor-other-than-sex defense
requires a legitimate business reason); Glenn v. Gen. Motors Corp.,
841 F.2d 1567, 1571 (11th Cir. 1988) (defense ``applies when the
disparity results from unique characteristics of the same job; from
an individual's experience, training, or ability; or from special
exigent circumstances connected with the business''); Kouba v.
Allstate Ins. Co., 691 F.2d 873, 876-77 (9th Cir. 1982) (employer
must have an acceptable business reason and ``must use the factor
reasonably in light of the employer's stated purpose as well as its
other practices''). But see Behm v. United States, 68 Fed. Cl. 395,
400-01 (Fed. Cir. 2005) (text of EPA does not suggest that factor
other than sex must be business related; applying ``deferential''
rational-basis standard to any-other-factor defense of federal
government employer ``whose business is not business, but
government''); Taylor v. White, 321 F.3d 710, 720 (8th Cir. 2003)
(any-other-factor defense does not involve a reasonableness
inquiry); Fallon v. State of Ill., 882 F.2d 1206, 1211 (7th Cir.
1989) (business-related reason need not be shown).
---------------------------------------------------------------------------
``Reasonable'' and ``Business Necessity''
The February 2010 Notice of Proposed Rulemaking emphasized that the
proposed RFOA standard was lower than the business-necessity test of
Title VII of the Civil Rights Act of 1964,\44\ but higher than the
Equal Pay Act's ``any other factor'' test.\45\ It also stated that the
factors relevant to the reasonableness inquiry recognize that the RFOA
standard is less stringent than the business-necessity standard and
that disparate-impact liability is narrower under the ADEA than under
Title VII.
---------------------------------------------------------------------------
\44\ 42 U.S.C. 2000e-2(k)(1)(A)(i) (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'').
\45\ 29 U.S.C. 206(d)(1)(iv) (permitting sex discrimination in
wages pursuant to a ``differential based on any factor other than
sex.'')
---------------------------------------------------------------------------
Several commenters expressed the view that the proposed rule
impermissibly imposed Title VII's business-necessity test on ADEA
defendants. One of the commenters suggested that EEOC revise the
language to state that the factors ``may'' be relevant to the RFOA
determination. The commenters' arguments generally centered on the
mistaken view that the factors were requirements, and that the factors
concerning employers' efforts to assess impact, minimize harm, and
weigh options amounted to a business-necessity requirement.
In response, the Commission has made several changes. To address
the commenters' view that the factors were required elements or duties,
the rule now refers to ``considerations'' relevant to demonstrating the
defense. The rule sets forth a non-exhaustive description of relevant
considerations, rather than a list of duties to be met. Because the
RFOA determination involves a fact-intensive inquiry, the importance of
a consideration depends on the facts of the particular situation. Based
on the specific facts raised, one or two considerations may be
sufficient to establish the RFOA defense.
In addition, the rule expressly states that no specific
consideration or combination of considerations need be present for a
differentiation to be based on reasonable factors other than age and
that the presence of one consideration does not automatically establish
the defense. Just as the absence of a consideration does not
automatically defeat the RFOA defense, so too the presence of one
consideration does not necessarily prove that a differentiation is
based on reasonable factors other than age. Rather, as the rule makes
clear, the RFOA determination depends on all of the facts and
circumstances in each particular situation.
The Commission disagrees that consideration of efforts to assess
impact, reduce harm, and weigh options suggests a Title VII business-
necessity analysis. However, the Commission has deleted the factor
concerning the availability of options because some commenters
misconstrued the factor as imposing the Title VII standard that the
employer must search for and select the least discriminatory
alternative.\46\ Removal of the factor does not mean that the
availability of measures to reduce harm is irrelevant to
[[Page 19086]]
reasonableness. There may be circumstances in which the availability of
a measure that would noticeably reduce harm was or should have been so
readily apparent that it would be manifestly unreasonable for the
employer to fail to use it. The removal of the factor does, however,
make clear that an employer need not search for alternatives and use
the one that is least discriminatory. These changes, along with the
clarification that none of the considerations is a required element of
the RFOA defense, make clear the distinction between the ADEA RFOA
standard and Title VII's business-necessity standard.
---------------------------------------------------------------------------
\46\ Three commenters disagreed with the Commission's statement,
in the preamble to the proposed rule, that Title VII requires an
employer to adopt the least discriminatory alternative. Under Title
VII, once the employer establishes that the challenged practice is
job related and consistent with business necessity, the burden
shifts to the plaintiff to demonstrate that there is an alternative
employment practice that the employer refuses to adopt. 42 U.S.C.
2000e-2(k)(1)(A)(ii), 2000e-2(k)(1)(C) (adopting pre-Wards Cove
approach to ``alternative employment practice''). The alternative
must be less discriminatory and must serve the employer's legitimate
business needs. See Albemarle Paper Co. v. Moody, 422 U.S. 405, 425
(1975); Dothard v. Rawlinson, 433 U.S. 321, 329 (1977); see also
Ricci v. DeStefano, 129 S. Ct. 2658, 2673 (2009). As a practical
matter, an employer that does not adopt the least discriminatory
effective alternative proposed by the plaintiff will not prevail in
a Title VII disparate-impact case because the plaintiff will be able
to establish the existence of a less discriminatory alternative.
That is not the case under the ADEA, whose RFOA standard is less
stringent than Title VII's business-necessity standard. Smith, 544
U.S. at 243.
---------------------------------------------------------------------------
Under Title VII, if a particular employment practice has a
disparate impact based on race, color, religion, sex, or national
origin, then the employer must ``demonstrate that the challenged
practice is job related for the position in question and consistent
with business necessity.'' \47\ An employer could meet the Title VII
standard by proving, for example, that a test has been validated to
show that it is ``predictive of * * * important elements of work
behavior which comprise * * * the job.'' \48\ In contrast, the RFOA
defense involves the less demanding standard of reasonableness.
---------------------------------------------------------------------------
\47\ 42 U.S.C. 2000e-2(k)(1)(A)(i).
\48\ Albemarle Paper Co. v. Moody, 422 U.S. 405, 431, 434
(1975). The business-necessity standard has been articulated in
other ways. See, e.g., Dothard v. Rawlinson, 433 U.S. 321, 331 n.14
(1977) (``necessary to safe and efficient job performance''); Griggs
v. Duke Power Co., 401 U.S. 424, 432 (1971) (employment practice
must bear a ``manifest relationship to the employment in
question''); El v. Se. Pa. Trans. Auth., 479 F.3d 232, 242, 245 (3d
Cir. 2007) (practice at issue must ``accurately--but not perfectly--
ascertain[] an applicant's ability to perform successfully the job
in question'').
---------------------------------------------------------------------------
Application of the rule's considerations to a physical fitness test
\49\ illustrates the difference between the RFOA and business-necessity
standards. For example, suppose a security company mandated that all
applicants for security guard positions must be able to run a half mile
in three minutes and do 35 push ups in a row. The company's stated
purpose is to ensure that guards are physically able to pursue and
apprehend suspects (consideration (i)). The test defines and measures
the factors of speed and strength and provides clear guidance on how
the test is to be applied accurately and fairly (consideration (ii)).
The employer performs a disparate-impact analysis and finds that large
percentages of older workers and women cannot pass the test.
(consideration (iv)). The employer changes the test so that performance
standards vary based on age and gender, when it learns that a
successful competitor firm uses such standards and is attracting a
large pool of qualified candidates. Although the test continues to
disproportionately exclude older and female applicants, it excludes
fewer of them and still produces qualified hires (consideration (v)).
---------------------------------------------------------------------------
\49\ It is important to emphasize that physical-fitness
requirements must be relevant to successful performance of the
particular job, so as to avoid the use of such tests to restrict the
hiring of older workers when there is no basis for such
requirements, as the 1965 Wirtz Report documented. See Wirtz Report
at 4. Subjecting only older workers to a particular test would be
facially discriminatory and the RFOA defense would not apply. See,
e.g., EEOC v. Massachusetts, 987 F.2d 64, 73 (1st Cir. 1993)
(rejecting RFOA defense to practice requiring employees to pass
physical fitness exam at age 70).
---------------------------------------------------------------------------
The security company would not need to perform a validation study
to establish the RFOA defense. In contrast, to establish a Title VII
business-necessity defense, the employer would need to validate the
test to show that it accurately measured safe and efficient
performance. In addition, even if the employer could show that the test
was validated, proof by female applicants that there were less
discriminatory alternatives that the employer refused to adopt would
impose liability under Title VII. This is just one example of how the
RFOA standard is less stringent than Title VII's business-necessity
standard.
Relevant Considerations
The proposed rule set forth non-exhaustive lists of factors
relevant to whether an employment practice is reasonable and is based
on factors other than age. Although, as discussed above, some
commenters objected to some of the factors, other commenters found the
lists useful and generally supported them. One commenter suggested that
EEOC provide guidance on the types of evidence relevant to the factors
and argued that the evidence should be objective, in existence before
litigation, and more than mere self-serving statements. Another
commenter stated that no single factor should be dispositive of whether
an employment practice is reasonable.
Given the context-specific nature of the RFOA inquiry, it is not
possible to specify every type of relevant evidence. All relevant
evidence should be considered, and such evidence necessarily will vary
according to the facts of each particular situation. Depending on the
circumstances, relevant evidence might include documents describing the
business purpose underlying the challenged practice, copies of any
written guidance that the employer provided to decision makers,
explanations of how the employer implemented the practice, and impact-
related studies that the employer may have conducted. Objective
evidence that was in existence prior to litigation will carry more
weight than mere self-serving statements or after-the-fact rationales.
The first ``reasonable'' factor listed in the proposed rule
concerned whether the employment practice and its implementation were
common business practices. One commenter supported this factor because,
as a factor rather than a required element, it would allow employers to
defend their actions while ensuring that discriminatory practices that
may be common in an industry are not given weight. Other commenters
opposed the factor. Some commenters argued, for example, that the
factor could stifle employer creativity and was not relevant to whether
a particular employer's practice was reasonable under particular
circumstances. Others argued that the commonality of a practice has no
bearing on whether it is discriminatory and expressed concern that the
factor could allow an employer to defend a practice when there is
industry-wide discrimination. One commenter suggested that the factor
should refer to common practices in comparable settings rather than to
common business practices.
In light of the variety of concerns about this factor, the
Commission has deleted it from the relevant considerations.
Section 1625.7(e)(2)(i)
The second item in the proposed rule's list of factors relevant to
``reasonableness'' concerned the extent to which the factor is related
to the employer's stated business goal. One commenter thought that the
factor encompassed the essence of the RFOA defense but suggested that
the term ``stated'' be deleted. Another commenter thought that the term
``stated'' was vague and wondered whether it meant that an employer
must state its goal in advance.
The Commission has revised the provision, which has been
redesignated 1625.7(e)(2)(i), to refer to an employer's ``stated
business purpose,'' which is the legitimate business purpose that the
employer had at the time of the challenged employment practice. This
approach is consistent with Smith, which expressly noted that the
City's ``stated purpose * * * was to `attract and retain qualified
people, provide incentive for performance, maintain competitiveness
with other public sector agencies and ensure equitable compensation to
all employees
[[Page 19087]]
regardless of age, sex, race and/or disability.' '' \50\ The City
reasonably achieved this purpose by raising the salaries of junior
officers to make them competitive with those of comparable positions in
the region.\51\ Similarly, an employer whose stated purpose is to hire
qualified candidates could reasonably achieve this purpose by ensuring
that its hiring criteria accurately reflect job requirements.
---------------------------------------------------------------------------
\50\ Smith, 544 U.S. at 231.
\51\ Id. at 242.
---------------------------------------------------------------------------
Section 1625.7(e)(2)(ii)
The proposed rule said that the extent to which the employer took
steps to define and apply the factor accurately and provided training,
guidance, and instruction to managers was relevant to reasonableness.
Three commenters supported this factor. One of them noted that training
and guidance are sound business practices that are not burdensome. Two
commenters objected to this factor. One argued that this factor is not
necessary because it is subsumed under the factor concerning the
employment practice's relation to the employer's stated business goals.
The other commenter argued that, although providing guidance and
training to managers may be good business practice and may enhance an
employer's RFOA defense, the ADEA does not require employers to take
such steps.
The proposed rule also included consideration of the extent to
which supervisors were given guidance or training in the ``other than
age'' section. Two commenters supported this factor as written, one
commenter asked for guidance on the type of training that will help
supervisors to make decisions based on objective rather than subjective
criteria, and one commenter argued that an employer should lose its
affirmative defense if the employer does not train its managers on
subjective decision making. One commenter opposed this factor and
suggested that EEOC work with stakeholders to determine whether an
employer's preventive training measures should be a Faragher-type
defense \52\ to ADEA disparate-treatment claims. Another commenter
asked how often training should be conducted and suggested that
training should be required for all protected bases if it is required
for age discrimination.
---------------------------------------------------------------------------
\52\ Faragher v. City of Boca Raton, 524 U.S. 775 (1998)
(employer not liable for supervisor harassment that did not result
in tangible employment action if employer exercised reasonable care
to prevent and promptly correct any harassment and employee
unreasonably failed to complain to management or to avoid harm
otherwise).
---------------------------------------------------------------------------
As discussed, the Commission has eliminated the ``other than age''
section and has combined the factors relating to guidance and
instruction of managers into a single consideration, which has been
designated 1625.7(e)(2)(ii). The Commission has deleted the reference
to ``took steps'' to make clear that the consideration focuses on how
the employer actually defined and applied its criteria. Through this
consideration, the final rule recognizes the importance of defining an
employment criterion carefully and educating managers and supervisors
on how to apply it fairly.
As commenters noted, it is in the employer's interest to define and
apply accurately the criteria on which it relies. Ensuring that
decision makers understand and know how to apply the employer's
standard will help to ensure that the employer has the work force it
wants. For example, research demonstrates that older workers are
commonly perceived to be less productive than younger workers but that
such stereotypes are inaccurate.\53\ In fact, studies show a
nonexistent or slightly positive relationship between job performance
and older age.\54\ The output of older workers is equal to that of
younger workers; \55\ older workers are better in terms of accuracy and
steadiness of work output and output level; \56\ and they outperform
younger workers in the area of sales.\57\ Thus, educating decision
makers to be aware of, and avoid, age-based stereotypes can help to
ensure that they apply the employer's standard accurately and do not
unfairly limit the opportunities of older workers.
---------------------------------------------------------------------------
\53\ Robert McCann & Howard Giles, Ageism in the Workplace: A
Communication Perspective, in Ageism: Stereotyping and Prejudice
Against Older Persons 163, 172 (Todd D. Nelson ed. 2002) (citing
J.O. Britton & K.R. Thomas, Age and Sex as Employment Variables:
Views of Employment Service Interviewers, 10 J. Emp. Counseling 180
(1973); S. Cole, Age and Scientific Performance, 84 a.m. J.
Sociology 958 (1979); A. Roe, Changes in Scientific Activities with
Age, 150 Sci. 313 (1965); P. E. Panek et al., Age Differences in
Perceptual Style, Selective Attention, and Perceptual-Motor Reaction
Time, 4 Experimental Aging Res. 377 (1978); N. Munk, Finished at 40,
139 Fortune 50 (1999)).
\54\ See generally McCann & Giles, supra note 53, at 172 (citing
J. A. Forteza & J. M Prieto, Aging and Work Behavior, in Handbook of
Industrial and Organizational Psychology 447 (H. C. Triandis et al.
eds., 2d ed. vol. 4, 1994); D. C. Park, Aging, Cognition, and Work,
7 Hum. Performance 181 (1994); P. Warr, Age and Employment, in
Handbook of Industrial and Organizational Psychology, supra, at
485).
\55\ McCann & Giles, supra note 53, at 173 (citing Commonwealth
Fund, The Untapped Resource: Americans Over 55 at Work (1993)).
\56\ McCann & Giles, supra note 53, at 173 (citing J. Eisenberg,
Relationship Between Age and Effects Upon Work: A Study of Older
Workers in the Garment Industry, Dissertation Abstracts Int'l 41
(4A) (1980)).
\57\ McCann & Giles, supra note 53, at 173 (citing W. H. Holley
et al., Age and Reactions to Jobs: An Empirical study of
Paraprofessional Workers, 1 Aging & Work 33 (1978)).
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For example, an employer seeking to hire individuals with
technological skills could instruct decision makers on the particular
skills (e.g., experience using specific software or developing certain
types of programs) that it needs. Similarly, rather than simply asking
managers to assess an employee's training potential, an employer could
instruct managers to identify the times the employee has received or
sought training. Using objective criteria as much as possible and
providing decision makers with specific job-related information can
help to overcome age-based stereotypes.\58\
---------------------------------------------------------------------------
\58\ See Richard A. Posthuma & Michael A. Campion, Age
Stereotypes in the Workplace: Common Stereotypes, Moderators, and
Future Research Directions, 35 J. Mgmt. 158, 172 (2009)
(availability and use of job-related information reduces the effects
of age-based stereotypes).
---------------------------------------------------------------------------
The rule does not require employers to train their managers. First,
by referring not just to training but to ``guidance or training,'' it
recognizes that employers use a wide range of measures to convey their
expectations to managers, depending on the circumstances. For example,
a small employer might reasonably rely entirely on brief, informal,
verbal instruction. Second, as with all of the considerations in
section 1625.7(e), this consideration is a not a required duty.
Instead, its importance depends on the particular facts raised. Thus,
an employer's RFOA defense will not necessarily fail because, for
example, the employer did not train managers on how to apply its
standard. On the other hand, steps such as carefully defining a
standard and instructing managers on how to apply it are evidence that
the employer's actions were based on reasonable factors other than age
and will support the employer's defense.
The Commission does not agree with the commenter's suggestion that
preventive training measures should be a Faragher-type defense.
Employers have a Faragher-type defense to harassment based on age.\59\
An employer's training measures do not constitute a defense to
disparate treatment or disparate impact, but they should go a long way
toward preventing conscious or unconscious bias from infecting decision
making in the first
[[Page 19088]]
place. Although training is not a required element of the RFOA defense,
it is a key component of efforts to provide a workplace free from
discrimination. The Commission urges employers to educate all employees
on their rights and responsibilities under all anti-discrimination
laws.
---------------------------------------------------------------------------
\59\ See, e.g., Weyers v. Lear Operations Corp., 359 F.3d 1049,
1056 n.6 (8th Cir. 2004) (same analysis applies to hostile-
environment claims under ADEA and Title VII); Terry v. Ashcroft, 336
F.3d 128, 148-50 (2d Cir. 2003) (same); EEOC Enforcement Guidance:
Vicarious Employer Liability for Unlawful Harassment by Supervisors
II (June 18, 1999) (Faragher vicarious-liability rule applies to
unlawful harassment on all covered bases, including age).
---------------------------------------------------------------------------
Section 1625.7(e)(2)(iii)
Paragraph 1625.7(b)(2) of the proposed rule noted that, in the
typical disparate-impact case, an employer has used an objective, non-
age factor and the inquiry focuses on reasonableness. Relying on Watson
v. Fort Worth Bank and Trust,\60\ however, it also said that employers
are subject to liability under disparate-impact analysis for granting
supervisors unchecked discretion to engage in subjective decision
making because the unchecked discretion allows conscious or unconscious
age-based stereotypes to infect the decision-making process and, as
such, is not ``other than age.'' It listed three factors relevant to
whether an employment practice was ``other than age'': the extent to
which the employer gave supervisors unchecked discretion to assess
employees subjectively, the extent to which supervisors evaluated
employees based on factors known to be subject to age-based
stereotypes, and the extent to which supervisors were given guidance or
training.
---------------------------------------------------------------------------
\60\ 487 U.S. 977 (1988).
---------------------------------------------------------------------------
Three commenters supported the proposed rule's approach to
subjective decision making. They noted that subjective decision making
frequently disadvantages older workers and raises the risk of age-based
disparate impact. Other commenters who addressed this issue opposed the
approach and argued that subjective decision making is not inherently
based on age. They asserted that the proposed rule conflicted with
Meacham's statement that the RFOA defense assumes that a non-age factor
is at work, misconstrued Watson, and conflated disparate impact and
disparate treatment. Some commenters asked for more guidance on the
meaning of ``unchecked discretion.''
The preamble to the proposed rule noted that criteria such as
flexibility, willingness to learn, and technological skills are
particularly susceptible to age-based stereotyping. One commenter
argued that it is appropriate for an employer to consider these
qualities, which are relevant to today's workplace. Another commenter
asserted that the factor was too broad and could encompass such
criteria as `` `energy,' `flexibility,' `adaptability,' `long-term
commitment to company,' `success driven,' `tolerance,' [and]
`creativity.' '' The commenter argued that the factor would cause
parties to focus on whether a criterion was subject to stereotypes
rather than on whether an employer evaluated employees negatively
because of age.
The rule continues to recognize that giving supervisors unchecked
discretion to engage in subjective decision making may result in
disparate impact and that employers should take reasonable steps to
ensure supervisors exercise their discretion in a manner that does not
violate the ADEA. To prevent the misunderstanding reflected in the
comments, however, the Commission has revised the rule. First, as noted
above, the rule no longer addresses ``reasonable'' and ``other than
age'' in separate paragraphs, but discusses ``reasonable factor other
than age'' in a single paragraph. Second, the factors listed under
``other than age'' in the NPRM have been integrated into
1625.7(e)(2)(ii) and (e)(2)(iii). Section 1625.7(e)(2)(ii) addresses
the extent to which the employer defined the employment criterion--such
as a subjective factor--and provided supervisors with guidance on how
to apply it. The Commission also has combined two ``other than age''
factors into a single consideration addressing subjective decision
making and the use of criteria susceptible to age-based stereotypes.
Section 1625.7(e)(2)(iii) makes clear that the extent to which the
employer attempts to minimize subjectivity and avoid age-based
stereotyping is relevant to whether or not it acted reasonably,
particularly where the criteria are known to be subject to age-based
stereotypes.
The Commission disagrees with commenters' assertions that the
proposed rule was inconsistent with the Supreme Court's decisions in
Meacham and Watson and believes that the rule is consistent with those
decisions. First, Meacham did not say that a practice is ``without
respect to age'' in every impact case, but only that such is the case
in the typical disparate-impact case.\61\ Second, although ``[i]t is
true * * * that an employer's policy of leaving * * * decisions to the
unchecked discretion of lower level supervisors should itself raise no
inference of discriminatory conduct,'' \62\ this does not mean ``that
the particular supervisors to whom this discretion is delegated always
act without discriminatory intent.'' \63\ As the Supreme Court
recognized in Watson, disparate-impact analysis may be the only way to
combat ``the problem of subconscious stereotypes and prejudices'' that
may affect subjective decision making.\64\ Thus, although employers may
sometimes deem it necessary to use subjective criteria to assess
employees, it is not reasonable to leave the supervisors' discretion
unconstrained.
---------------------------------------------------------------------------
\61\ 554 U.S. at 96.
\62\ Watson, 487 U.S. at 990.
\63\ Id.
\64\ Id.
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Contrary to some commenters' assertions, the rule does not
improperly conflate disparate-treatment and disparate-impact claims. It
is not surprising, however, that disparate-treatment and disparate-
impact claims may overlap in the context of subjective decision making.
As the Supreme Court has noted, ``the necessary premise of the
disparate impact approach is that some employment practices, adopted
without a deliberately discriminatory motive, may in operation be
functionally equivalent to intentional discrimination.'' \65\ As noted
above, the final rule's reference to a ``non-age factor'' reflects the
language of the statutory RFOA defense and the Smith decision.\66\ It
also reflects the Watson decision's endorsement of disparate-impact
analysis to address the problem of stereotypes and prejudices that
impede the elimination of employment discrimination.
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\65\ Id. at 987; see also id. at 998 (factors such as cost of
alternative relevant to ``whether the challenged practice has
operated as the functional equivalent of a pretext for
discriminatory treatment''); accord Wards Cove Packing Co. v.
Atonio, 490 U.S. 642, 660 (1989); Albemarle Paper Co., 422 U.S. at
425.
\66\ See 29 U.S.C. 623(f)(1); Smith, 544 U.S. at 239.
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The proposed rule used the term ``unchecked'' discretion, which was
also used by the Court in Watson. Nevertheless, to address commenters'
confusion about the term, we have eliminated it. The rule now refers to
whether the employer ``limited supervisors' discretion.''
One commenter, noting that the identification of a specific
employment practice is part of a plaintiff's prima facie case, argued
that the issue of subjective decision making is not relevant to the
RFOA defense. As noted above, the final rule expressly states that the
individual challenging the practice is responsible for isolating and
identifying the specific employment practice causing the adverse
impact. As courts have recognized, however, plaintiffs may challenge an
overall decision-making process ``if the employer utilizes an
`undisciplined system of subjective decision making.' '' \67\ If an
individual establishes
[[Page 19089]]
that an employer's use of subjective decision making had an age-based
disparate impact, then the burden shifts to the employer to prove that
the practice is a reasonable factor other than age. The extent to which
the employer limited supervisors' discretion in a manner that minimized
the likelihood that age-based stereotypes would infect the process is
one of a number of factors relevant to whether the employer's practice
is a reasonable, non-age factor.
---------------------------------------------------------------------------
\67\ Durante v. Qualcomm, Inc., 144 Fed. Appx. 603, 606 (9th
Cir. 2005) (unpublished) (quoting Watson, 487 U.S. at 990); see also
Meacham v. Knolls Atomic Power Lab., 461 F.3d 134, 139 (2d Cir.
2006) (unaudited reliance on supervisors' subjective judgment of
employees' flexibility and criticality constituted a specific
employment practice), vacated on other grounds, 554 U.S. 84 (2008).
---------------------------------------------------------------------------
Sections 1625.7(e)(2)(iv) and (v)
The proposed rule listed three factors that some commenters
interpreted as imposing Title VII's business-necessity test on ADEA
disparate-impact claims. One factor addressed the extent to which an
employer assessed the impact of its practice on older workers, and
another factor concerned the severity of harm to individuals in the
protected age group and the extent to which the employer took steps to
minimize the harm. The remaining factor looked at whether other options
were available and the reasons the employer chose the option it did.
Quoting the Smith statement that the RFOA inquiry does not require
employers to adopt a less discriminatory alternative,\68\ a footnote
explained that the factor did not mean that an employer must adopt a
practice that has the least severe age-based impact. The footnote also
quoted a Restatement of Torts (Second) comment concerning unreasonable
risk.
---------------------------------------------------------------------------
\68\ Smith, 544 U.S. at 243.
---------------------------------------------------------------------------
Some commenters argued that the factors conflate the concepts of
impact and reasonableness, which are analytically distinct. They
asserted that the factors improperly impose an affirmative duty to
monitor selection procedures for adverse impact, that employers will
not have data to conduct mandated impact analyses because they do not
collect and report statistics on the ages of employees and applicants,
that conducting impact analyses would be too costly for small
employers, and that the factors penalize employers that do not conduct
analyses. In addition, noting that plaintiffs have the burden of
establishing that an employment practice has a disparate impact, some
commenters argued that the factors inappropriately place the burden of
disproving impact on employers. They also argued that the factor
concerning consideration of other options conflicts with the Smith
statement. Some commenters noted that, under Title VII, plaintiffs, not
employers, have the burden of identifying less discriminatory
alternatives. One commenter who opposed the factor argued that, if the
Commission retains the factor, it should refer to ``other known
options'' because employers should not be expected to know all
potential employment practices. The commenter also argued that the
Smith and Restatement quotes in the footnote were contradictory.
Another commenter expressed concern that an alternative designed to
minimize a practice's age-based impact might have an adverse impact on
another protected group.
Two commenters supported the factor concerning consideration of
other options. They noted that, as the Supreme Court stated in Watson,
evidence that the employer ignored equally effective less
discriminatory alternatives suggests that the challenged practice was
the ``functional equivalent of a pretext for discriminatory
treatment.'' \69\
---------------------------------------------------------------------------
\69\ 487 U.S. at 998.
---------------------------------------------------------------------------
In response to comments, and to emphasize that the rule reflects a
standard that is less stringent than Title VII's business-necessity
test, the Commission has revised the rule to make clear that none of
the considerations is a required element of the RFOA defense. As noted
above, the rule now refers to a non-exhaustive description of
``relevant considerations'' and expressly states that no specific
consideration need be present for a differentiation to be based on
reasonable factors other than age. The importance of each consideration
will necessarily vary according to the facts of each particular
situation.
The final rule retains the impact-assessment and harm
considerations, which have been redesignated 1625.7(e)(2)(iv) and
1625.7(e)(2)(v). The Commission has deleted the reference to ``took
steps'' from 1625.7(e)(2)(iv) to make clear that the consideration
focuses on the extent to which the employer actually assessed the
impact rather than on the steps the employer took to do so. What an
employer reasonably should do to assess impact depends on the facts of
the particular situation. For example, an employer that assesses the
race- and sex-based impact of an employment practice would appear to
act unreasonably if it does not similarly assess the age-based impact.
A small employer that does not generally conduct impact analyses on any
basis, however, may well be able to show that its RIF decisions were
reasonable even if it did not conduct a formal disparate-impact
analysis during the RIF. Similarly, evidence that a policy was not the
type normally subject to disparate-impact analysis would support an
employer's argument that it should not reasonably be expected to
conduct such analysis. Whether or not a formal disparate-impact
analysis is done, if the impact is sufficiently large that the employer
was or should have been aware of it, a failure to have taken reasonable
steps to avoid or mitigate the impact is relevant to whether the
employer's actions were based on reasonable factors other than age.
For purposes of clarity, section 1625.7(e)(2)(v) now refers to the
``degree'' rather than ``severity'' of the harm and the ``extent'' of
injury. The final rule also changes the term ``minimize'' to ``reduce''
with respect to the assessment of the harm caused by different options
to make clear that the rule does not require the adoption of the least
discriminatory alternative.
Consideration of the degree of harm on individuals is measured both
in terms of the scope of the injury to the individual and the scope of
the impact, i.e., the number of persons affected. Smith exemplifies
negligible harm in terms of injury and impact. In Smith, the injury was
relatively minor as the raises affecting older workers were actually
higher in dollar terms, although lower in percentage terms.\70\ The
number of older workers affected was also relatively small.
---------------------------------------------------------------------------
\70\ Smith, 544 U.S. at 241-42.
---------------------------------------------------------------------------
In contrast, the more severe the harm, the greater the care that
ought to be exercised.\71\ The Meacham case exemplifies significant
injury and impact from the loss of jobs affecting a ``startlingly
skewed'' group of older workers.\72\ In light of such significant
injury and impact, it would be reasonable for an employer to
investigate the reasons for such results and attempt to reduce the
impact as appropriate.
---------------------------------------------------------------------------
\71\ Cf. Restatement (Second) of Torts, 298 cmt. b (1965) (``The
greater the danger, the greater the care which must be
exercised.'').
\72\ Meacham v. Knolls Atomic Power Lab., 461 F.3d 134, 145 (2d
Cir. 2006), vacated, 544 U.S. 84 (2008).
---------------------------------------------------------------------------
The extent to which the employer took steps to reduce the harm to
older workers in light of the burden of undertaking such steps is
relevant to reasonableness. Whether an employer knew or reasonably
should have known of measures that would reduce harm informs the
reasonableness of the
[[Page 19090]]
employer's choices.\73\ Thus, the RFOA includes consideration of the
availability of measures to reduce harm, and the extent to which the
employer weighed the harm to older workers against both the costs and
efficiencies of using other measures that will achieve the employer's
stated business purpose.
---------------------------------------------------------------------------
\73\ 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.'').
---------------------------------------------------------------------------
Given the relevance of the availability of measures to reduce harm
contemplated by this consideration, the Commission has deleted the last
factor concerning the availability of options. In addition, commenters
misconstrued the consideration of options as requiring employers to
search out every possible alternative and use the least discriminatory
alternative, comparable to the Title VII's requirement, which the
Supreme Court in Smith reasoned is not mandated by the RFOA
defense.\74\
---------------------------------------------------------------------------
\74\ 544 U.S. at 243.
---------------------------------------------------------------------------
The Commission disagrees with commenters' views that Smith means
that the consideration of alternative or equally effective practices is
irrelevant. Smith stated that the RFOA does not impose Title VII's
``requirement'' that the employer must adopt a less discriminatory
alternative.\75\ This statement does not mean that options or
alternatives are irrelevant to the determination of reasonableness. As
previously explained, the availability of options is manifestly
relevant to the issue of reasonableness.\76\ A chosen practice might
not be reasonable if an employer knew of and ignored an equally
effective option that would have had a significantly less severe impact
on older workers. Whereas Title VII requires an employer to adopt an
equally effective, even marginally less discriminatory alternative, an
employer's choice not to use an alternative that only marginally
reduces the impact might be reasonable under the ADEA.
---------------------------------------------------------------------------
\75\ 42 U.S.C. 2000e-2(k)(1)(A)(ii), 2000e-2(k)(1)(C) (adopting
pre-Wards Cove approach to ``alternative employment practice''). The
RFOA standard does not require the employer to select the least
discriminatory option. Smith, 544 U. S. at 243.
\76\ In addition, the failure to adopt a less discriminatory
alternative may be evidence of pretext under certain circumstances.
Watson, 487 U.S. at 998; see also Wards Cove Packing Co. v. Atonio,
490 U.S. 642, 660-61 (1989) (refusal to adopt less discriminatory
alternative ``would belie a claim [that challenged] practices are
being employed for nondiscriminatory reasons'').
---------------------------------------------------------------------------
The changes to 1625.7(e) clarify that the RFOA standard is lower
than Title VII's ``business necessity'' standard.\77\ They also clarify
that the considerations relevant to the RFOA determination are not
required elements of the RFOA defense. These changes ensure that
employers may continue to make reasonable business decisions that do
not arbitrarily limit the employment opportunities of older workers.
---------------------------------------------------------------------------
\77\ 42 U.S.C. 2000e-2(k)(1)(A)(i).
---------------------------------------------------------------------------
Regulatory Procedures
Executive Orders 13563 and 12866
This final rule has been drafted and reviewed in accordance with
Executive Order (``E.O.'') 13563 and E.O. 12866. Executive Order 13563
directs agencies to propose or adopt a regulation only upon a reasoned
determination that its benefits justify its cost (recognizing that some
benefits and costs are difficult to quantify); tailor its regulations
to impose the least burden on society, consistent with obtaining
regulatory objectives; and select, in choosing among alternative
regulatory approaches, those approaches that maximize net benefits
(including potential economic, environmental, public health and safety,
and other advantages; distributive impacts; and equity). Executive
Order 12866 directs agencies to submit a regulatory impact analysis for
those regulatory actions that are ``economically significant'' within
the meaning of section 3(f)(1).''\78\ A regulatory action is
economically significant under section 3(f)(1) if it is anticipated (1)
to ``[h]ave an annual effect on the economy of $100 million or more,''
or (2) to ``adversely affect in a material way the economy, a sector of
the economy, productivity, competition, jobs, the environment, public
health or safety, or State, local, or tribal governments or
communities.'' \79\ Executive Order 13563 reaffirms the principles
established by E.O. 12866, and further emphasizes the need to reduce
regulatory burden to the extent feasible and permitted by law.\80\
---------------------------------------------------------------------------
\78\ Executive Order 12866 refers to ``those matters identified
as, or determined by the Administrator of OIRA to be, a significant
regulatory action within the scope of section 3(f)(1).'' Id. The
Office of Management & Budget states that ``Executive Order 12866
requires agencies to conduct a regulatory analysis for economically
significant regulatory actions as defined by Section 3(f)(1).''
Circular A-4 (Sept. 17, 2003), available at http://www.whitehouse.gov/omb/circulars_a004_a-4.
\79\ Exec. Order No. 12866, 58 FR 51735 (Oct. 4, 1993),
available at http://www.whitehouse.gov/sites/default/files/omb/inforeg/eo12866.pdf.
\80\ Exec. Order No. 13563, 76 FR 3821 (Jan. 21, 2011).
---------------------------------------------------------------------------
As reported in the February 2010 NPRM, the Commission determined
that the rule is not economically significant under this standard, and
therefore that a full regulatory impact analysis was not required.
However, some comments received during the notice and comment period
suggested, without specifically mentioning the Commission's
determination under E.O. 12866, that the rule would impose greater
costs on regulated entities than the Commission anticipated. To ensure
that regulatory burdens are minimized, the Commission reexamined its
basis for determining that the rule is not economically significant in
light of the comments. It concluded that the determination did not need
to be changed, and that the commenters' stated concerns about costs
reflected a misunderstanding of the rule. The final rule has been
revised to obviate such misunderstanding. For the record, the
Commission presents its analysis of the impact of the rule on regulated
entities and responds to the public comments below.
Analysis
The purpose of the rule is to help explain the implications of the
Supreme Court's decisions in Smith \81\ and Meacham \82\ and the type
of conduct that would support an RFOA defense in court. It therefore
does not require any action on the part of covered entities.\83\
Rather, it provides assistance to covered entities regarding what they
can do to ensure that their practices are based on reasonable factors
other than age. The rule does not expand the coverage of the ADEA to
additional employers or employees. It also does not include reporting,
recordkeeping, or other requirements for compliance. Accordingly, the
Commission concluded that efforts to comply with the rule 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.
---------------------------------------------------------------------------
\81\ 544 U.S. 228 (2005).
\82\ 554 U.S. 84 (2008).
\83\ The ADEA applies to employers with 20 or more employees,
labor organizations, employment agencies, and government entities.
There are approximately 639,288 businesses with 20 or more
employees. United States Small Bus. Ass'n, Employer Firms,
Establishments, Employment, and Annual Payroll Small Firm Class
Sizes, 2007, Table in Firm Data, http://archive.sba.gov/advo/research/us_07ss.pdf (last visited Feb. 15, 2012). There are
approximately 17,000 employment agencies. Am. Staffing Ass'n.,
Staffing FAQs, http://www.americanstaffing.net/statistics/faqs.cfm
(last visited Feb. 15, 2012).
---------------------------------------------------------------------------
However, the Commission recognizes that some covered entities may
choose to modify their business practices in light of the recent
Supreme Court decisions reflected in the rule, and the provisions in
the rule itself, to avoid disparate-impact liability. Therefore, in
[[Page 19091]]
addition to determining that the rule imposes no requirements that have
an economic impact, the Commission investigated whether this type of
voluntary, precautionary behavior would have a significant impact on
the economy.
Cost of Disparate-Impact Analyses
Because paragraph 1625.7(e)(2)(iv) of the rule states that ``[t]he
extent to which the employer assessed the adverse impact of its
employment practice on older workers'' is relevant to the RFOA defense,
some covered entities may perform additional disparate-impact analyses
in response to the rule. The first step of the Commission's inquiry was
therefore to determine the economic consequences of performing
additional analyses.
The Commission does not anticipate that this final rule will
motivate large numbers of employers to perform additional disparate-
impact analyses for the following reasons. First, the current
regulation assumed that employers would routinely analyze job actions
susceptible to disparate-impact claims for potential adverse effects on
older workers, and many employers, especially larger ones, already do
so. Some do so to reduce potential liability for ADEA claims; others
simply wish to avoid disproportionately negative treatment of older
workers.
Second, few job actions would be subject to disparate-impact
analysis.\84\ For example, voluntary terminations and individual
terminations for cause generally will not be subject to disparate-
impact analysis. Third, even actions that involve practices amenable to
disparate-impact analysis do not always require such analysis to ensure
that a practice is reasonable. The rule states that, to demonstrate the
RFOA defense, a covered entity needs to show only that it acted as
would a prudent employer mindful of the requirements of the ADEA. In
many cases, a prudent employer may reasonably decide that a formal
disparate-impact analysis is unnecessary, for example because--
---------------------------------------------------------------------------
\84\ While the Commission is not aware of data on the number of
job actions performed per year that may give rise to a disparate-
impact claim, there is research on the number of disparate-impact
cases filed in federal court under all of the employment
discrimination laws. An analysis of 1,788 randomly selected
employment discrimination cases filed in federal court, and reported
between 1987-2003, showed that only 4% raised disparate-impact
claims. Laura Beth Nielsen et al., Contesting Workplace
Discrimination in Court: Characteristics and Outcomes of Federal
Employment Discrimination Litigation 1987-2003 11 (2008), http://www.americanbarfoundation.org/uploads/cms/documents/nielsen_abf_edl_report_08_final.pdf. ADEA disparate-impact claims are only a
subset of this 4%, as ADEA cases only comprised 20% of the total
number of cases studied. Id. at 9.
--The number of affected employees is relatively small, making impact
readily ascertainable without formal analysis; or
--The employer has reason to believe that the practice will not
negatively impact older workers, and no employees or applicants have
alleged that it would have such impact.
Further, where the covered entity determines that a disparate-
impact analysis is warranted, the associated costs will generally be
minimal. Larger businesses already routinely employ sophisticated
methods of detecting disparate impact on the basis of race, ethnicity,
or gender, and therefore already possess the expertise and resources
required to analyze age data for impact. Because performing an
additional analysis using these pre-existing resources takes little
time, the associated costs will be minimal.
Although smaller entities may be less familiar with disparate-
impact analysis, such entities are even less likely to incur costs for
performing formal analyses, for two reasons. First, the average small
entity's involuntary termination or other selection decisions will most
often involve such a small number of employees that impact will be
readily ascertainable without formal analysis. Second, where the
numbers are large enough to warrant a more formal analysis, the RFOA
defense only requires an entity to take steps that are reasonable under
the circumstances to uncover potential impact. A small entity without
many resources will likely be able to show that it acted reasonably by
using the same methods it uses to detect disparate impact on the basis
of race, ethnicity, or gender, which can often be carried out using
free, readily available Internet tools. By conducting a Web search for
the term ``online disparate-impact analysis calculator,'' a small
entity may find and use an online calculator that can be easily used by
lay people. This tool would enable the entity to test for adverse
impact in less than 10 minutes. Additional steps to evaluate adverse
impact would be reasonable only if, in light of the circumstances and
available resources, a prudent employer mindful of ADEA requirements
would take such steps.
Moreover, if a small entity determines that it requires assistance
to perform these or other efforts to prevent age discrimination in
employment, it may rely on free outreach materials from the Commission.
The Commission expects to issue free small-business-oriented guidance
materials discussing this rule, including technical assistance
specifically designed to instruct small entities how to perform
disparate-impact analyses and interpret the results.
Cost of Taking Steps To Reduce Harm
Paragraph 1625.7(e)(2)(v) states that ``[t]he degree of the harm
[to older workers], 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'' is relevant to the RFOA determination.
Steps to reduce harm to older individuals only become relevant to
the RFOA defense where the employer knew or reasonably should have
known of measures to reduce such harm while effectively achieving its
stated business purpose. Again, the Commission's analysis is limited by
the paucity of data that currently exist. However, because so few job
actions involve neutral employment practices that disproportionately
harm older workers,\85\ only a small percentage of employer decisions
will even present the opportunity for employers to consider steps to
reduce harm to older individuals. Of these cases, only a subset will be
ones in which the employer knew or reasonably should have known of
measures to reduce such harm while effectively achieving its stated
business purpose. Thus, such considerations will be relevant only in a
very small percentage of cases. Further, as stated expressly in the
consideration, the determination whether steps are relevant to the RFOA
defense is made in light of the burdens associated with such steps.
Therefore, a business would not be required to take steps that were
overly burdensome.
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\85\ As previously noted, the percentage of federal employment
discrimination cases raising disparate-impact claims is
approximately 4%. Id. at 11. A review of the ADEA disparate-impact
cases available on Westlaw reveals that approximately 70% failed to
reach the RFOA issue altogether, because the Plaintiff could not
establish impact, leaving only 1.2% of cases.
---------------------------------------------------------------------------
Cost of Instruction and Guidance
Paragraph 1625.7(e)(2)(ii) states that ``[t]he extent to which the
employer defined the factor accurately and applied the factor 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'' is relevant to the RFOA determination. Paragraph
1625.7(e)(2)(iii) states that ``[t]he extent to which the employer
limited supervisors' discretion to assess
[[Page 19092]]
employees subjectively, particularly where the criteria that the
supervisors were asked to evaluate are known to be subject to negative
age-based stereotypes'' is relevant. Therefore, the rule may motivate
some employers to provide additional instruction, guidance, and
training to their supervisors.
In many cases, no instruction will be required to avoid age
discrimination. As noted, voluntary resignations do not raise a
question of disparate impact. Even where the employment action involves
application of selection or termination criteria, instruction will not
always be needed. For example, instruction to avoid age-based
stereotyping will be unnecessary if the selection criteria are
objective.
Where instruction is needed, the associated costs will generally be
de minimis. Larger employers will not incur significant costs because
they already provide regular training for supervisors, including
regular EEO training. Any instructions necessary to avoid age-biased
applications of selection or termination criteria may easily be
incorporated into this regular training.
Smaller businesses are even less likely to incur additional
training costs. Because of the small number of people involved, many
layoff decisions made by small entities are relatively straightforward,
making instruction unnecessary to avoid age-biased applications of
employment criteria. Further, even where some instruction is
appropriate, entities small in size can typically provide such
instruction informally, thereby avoiding costs associated with formal
training. In addition, a small business wanting help with its training,
or with other efforts to reduce adverse impact on older workers, may
rely on the Commission's assistance. Each year, the Commission performs
a very large number of free outreach presentations for employers, human
resource managers, and their counsel, as well as fee-based training
sessions offered at approximately $350. In fiscal year 2009 alone, the
Commission offered 1,889 no-cost outreach events that addressed ADEA
compliance, reaching more than 127,000 people, many of whom were from
small businesses, and offered approximately 300 fee-based private-
sector trainings that reached more than 13,000 people. In addition, the
Commission expects to issue small-business-oriented guidance materials
discussing the rule, as it has done in other contexts.\86\
---------------------------------------------------------------------------
\86\ See, e.g., Equal Employment Opportunity Comm'n, The ADA: A
Primer for Small Business, http://www.eeoc.gov/ada/adahandbook.html.
---------------------------------------------------------------------------
Benefits of the Rule
Under E.O. 13563, the Commission must assess not only the rule's
negative effects on the economy but also its positive effects. Here
again, the Commission's assessment was necessarily limited by the data
that currently exist. Indeed, doing this assessment highlights the need
for more focused research on the economic costs and benefits of
ensuring equal employment opportunity. Nevertheless, on the basis of
the general considerations below, the Commission determined that the
rule will have modest positive effects on the economy.
--Providing additional instruction about how to implement employment
practices in a manner that is free from age bias carries the benefit of
obtaining more accurate employee evaluations. As stated in the section-
by section analysis above, research demonstrates that negative age-
based stereotypes are not only harmful to older individuals but also
inaccurate--a large number of empirical studies and research reviews
indicate that there is a nonexistent or slightly positive relationship
between job performance and older age.\87\ These data suggest that
taking measures to eliminate age bias in selection and termination can
actually improve the employer's bottom line.
---------------------------------------------------------------------------
\87\ See supra notes 53-57.
---------------------------------------------------------------------------
--Data show that older individuals who become unemployed have more
difficulty finding a new position and tend to stay unemployed longer
than younger individuals.\88\ To the extent that the difficulty in
finding new work is attributable to neutral practices that act as
barriers to the employment of older workers, the regulation should help
to reduce the rate of their unemployment and, thus, help to reduce
these unique burdens on society. This effort is likely to become
increasingly important as the Baby Boom Generation grows older, raising
the number of older individuals in the workforce.\89\
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\88\ See Impact of Economy on Older Workers: Meeting of the
Equal Employment Opportunity Comm'n (2010) (written testimony of
William E. Spriggs, Ph.D.), available at http://www.eeoc.gov/eeoc/meetings/11-17-10/spriggs.cfm (citing Bureau of Lab. Statistics,
Unemployed Persons by Age, Sex, Race, Hispanic or Latino Ethnicity,
Marital Status, and Duration of Unemployment, http://www.bls.gov/web/empsit/cpseea36.pdf (last visited Mar. 12, 2011); Bureau of Lab.
Statistics, Displaced Workers Summary (Aug. 26, 2010, 10 a.m.),
http://www.bls.gov/news.release/disp.nr0.htm).
\89\ Id. (citing Bureau of Lab. Statistics, Employment
Projections (Dec. 10, 2009, 10 a.m.), http://www.bls.gov/news.release/ecopro.nr0.htm (reporting that the number of persons in
the labor force age 55 years and older is expected to increase by 43
percent by 2018).
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--Encouraging employers to avoid practices that adversely affect older
workers will reduce employers' litigation costs. In a disparate-impact
case, the plaintiff has the initial burden of demonstrating that the
challenged practice has a disproportionately negative effect on the
protected group. If an employer less frequently uses practices that
have a disproportionately negative effect on older workers, older
individuals will less frequently have reason to allege discrimination.
--The rule will also reduce employers' litigation costs by eliminating
the considerable uncertainty left after the Supreme Court's decisions
in Smith \90\ and Meacham.\91\ Although the Court clearly held that
employers asserting the RFOA defense do not need to demonstrate that
the practice is a business necessity, as required by the current
regulations,\92\ it did not provide guidance on the application of the
RFOA standard. Because employers bear the burden of proving that their
actions were based on reasonable factors other than age, they will
benefit from a greater ability to assess their own liability as a
result of the rule, and therefore to avoid litigation.
\90\ 544 U.S. 228 (2005).
\91\ 554 U.S. 84 (2008).
\92\ See 29 CFR 1625.7(d), 46 FR 47724 (Sept. 29, 1981) (amended
herein) (``When an employment practice, including a test, is claimed
as a basis for different treatment of employees or applicants for
employment on the grounds that it is a `factor other than' age, and
such practice has an adverse impact on individuals within the
protected age group, it can only be justified as a business
necessity.'').
The Commission also concludes that a wide range of qualitative,
dignitary, and related intrinsic benefits must be considered. These
benefits include the values identified in E.O. 13563, such as equity,
human dignity, and fairness. Specifically, the qualitative benefits
attributable to the final rule include but are not limited to the
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following:
--Reducing discrimination against older individuals promotes human
dignity and self-respect, and diminishes feelings of exclusion and
humiliation.
--Reducing discrimination against older individuals also yields third-
party benefits such as a reduction in the prevalence of age-based
stereotypes and associated stigma.
[[Page 19093]]
--Increased participation in the workforce by older individuals
benefits both employers and coworkers in ways that may not be subject
to monetary quantification, including increasing diversity,
understanding, and fairness in the workplace.
--Reducing discrimination against older individuals benefits workers in
general and society at large by creating less discriminatory work
environments.
Public Comments
The comments suggesting that the rule will impose economic burdens
were as follows:
--Six commenters stated that the rule would require employers to
monitor or analyze employment decisions for adverse impact on older
workers. One of these commenters stated more specifically that the rule
would require employers to compare the impact of each practice on
employees of every age with its impact on employees of every other age.
Another commenter thought that disparate-impact analysis would require
employers to collect age information about its applicants and
employees.
--Four commenters asserted that the rule would require employers to
search for and evaluate alternative means of achieving their business
goals. One stated more specifically that the number of alternatives
that employers must evaluate under the rule is ``potentially
infinite.''
--One commenter asserted that the rule imposed a duty on employers to
provide training, instruction, or guidance to its supervisors. Other
commenters asserted that the rule required employers to provide
training to supervisors in order to limit the discretion that they
exercise when assessing employees subjectively, particularly with
respect to factors known to be susceptible to age-based
stereotypes.\93\
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\93\ Some commenters interpreted the February 2010 NPRM as
asserting that employers should not assess employee qualities such
as flexibility, willingness to learn, and technological skills
(qualities that are often assessed subjectively). These commenters
objected that the rule would deprive employers of their ability to
seek out employees with these qualities, which are valuable in the
workplace. The Commission does not assert that employers should not
seek out employees with these qualities, or that they are not
valuable. It does maintain, however, that if employers assess
qualities such as flexibility, willingness to learn, and
technological skills, they should take reasonable steps to ensure
that the assessments are accurate and not influenced by common age-
based stereotypes. Such steps may include providing an objective
means of assessing the desired quality and instructing managers how
to be fair in their evaluations.
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--One commenter stated that the rule would require employers to hire
consultants to determine whether their practices are ``common business
practices.''
--One commenter asserted that the rule would make it much harder for
employers to win even the most frivolous of age discrimination claims
at the summary judgment stage. The same commenter asserted that the
rule would require litigants to engage in extensive discovery to
determine whether each of the listed factors had been met, including
whether the employer considered alternatives and whether it took steps
to minimize harm to older workers.
Commission Response
The comments do not alter the Commission's conclusion that the rule
will not impose unacceptable or unreasonable costs on society. As
previously noted, the comments were based on a misunderstanding of the
proposed rule, and the final rule was revised to obviate such
misapprehension. As shown above, any costs associated with the rule
will be minimal.
Response to Comments Regarding the Cost of Disparate-Impact Analyses
The comments overstate the number of disparate-impact analyses that
will be performed by employers as a result of the rule. As explained
above, a disparate-impact analysis is appropriate in only a small
proportion of job actions, is already done by many employers pursuant
to existing regulations and case law, and, even where the practice is
amenable to disparate-impact analysis, such analysis is not always
required to ensure that a practice is reasonable. If an impact analyses
is done, neither existing law nor this regulation would require it to
compare the practice's impact on individuals of every age with its
impact on individuals of every other age. The RFOA defense requires
only such steps as would be taken by a prudent employer mindful of the
requirements of the ADEA.
The Commission disagrees with the assertion of one commenter that
obtaining the required age data would be burdensome. Generally,
employees' birth dates are available to employers because they are
recorded in personnel files.
Response to Comments Regarding the Cost of Evaluating Alternatives
As explained above, the Commission has deleted the factor
discussing the availability of other ways for the employer to achieve
its stated business purpose, because commenters misunderstood the
factor to mean that employers must search out every possible
alternative (or, in the words of one commenter, a ``potentially
infinite'' number of alternatives) and use the one that is least
discriminatory. Of course, as also explained above, the deletion of the
factor does not mean that the availability of other measures to achieve
the employer's purposes is irrelevant to the defense. Whether an
employer knew or reasonably should have known of measures that would
reduce harm informs the reasonableness of the employer's choices.
Because so few job actions involve neutral employment practices
that disproportionately harm older workers, only a small percentage of
employer decisions will even present the opportunity for employers to
consider the relative harm of various options.\94\ Only a subset of
these actions will be ones in which the employer knew or reasonably
should have known of measures that would reduce harm to older
individuals. Further, when an employer does decide to evaluate whether
another option would reduce harm to older individuals, it may do so
using the same low-cost methods that were described above in the
discussion of the cost of disparate-impact analyses. Overall costs are
therefore likely to be extremely low.
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\94\ See supra note 87.
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Response to Comments Regarding the Cost of Instruction and Guidance
The comments assert generally that the additional training will be
burdensome. As explained in the analysis above, training costs
associated with the rule will be minimal.
Response to Comments Regarding the Cost of Determining Whether a
Business Practice Is Common
The Commission has deleted the factor concerning whether a business
practice is common from the considerations. Therefore, the Commission
need not discuss the commenter's assertion that this factor requires
businesses to hire consultants to determine whether their practices are
common.
Response to Comments Regarding the Cost of Frivolous Litigation
The Commission disagrees with one commenter's assertion that the
rule would increase employers' vulnerability to frivolous litigation or
make it more difficult for employers to win against frivolous claims at
the summary
[[Page 19094]]
judgment stage. Of course, individuals may file frivolous litigation
regardless of the underlying law. Further, even without the rule,
determining whether a practice is a based on reasonable factors other
than age is a fact-specific inquiry; the commenter provided no reason
to conclude that the considerations in the final rule are any more
complicated than other facts relevant to the RFOA analysis. Indeed, as
noted, the Commission concludes the rule is likely to reduce employers'
litigation costs.
Conclusion
For the foregoing reasons, the Commission has determined that the
final rule 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.
Regulatory Flexibility Act
The purpose of the Regulatory Flexibility Act (RFA), 5 U.S.C. 601-
612, is to ensure that statutory goals are achieved without imposing
unnecessary and unjustifiable regulatory burdens on small businesses
and other small entities, which may have few resources to devote to
regulatory compliance. To achieve this purpose, the RFA requires
federal agencies to conduct a series of analyses on proposed rules. The
analyses are designed to ensure that the agency considers ways of
minimizing any significant regulatory burdens imposed on small entities
by the rules.
The goal of the analysis is to determine whether the proposed rule
will have a significant economic impact on a substantial number of
small entities. If it will, the agency must consider alternative
regulatory approaches that may minimize the impact. If the rule will
not have a significant impact on a substantial number of small
entities, it may so certify under 5 U.S.C. 605(b).
In the February 2010 NPRM, the Commission certified under 5 U.S.C.
605(b) that the proposed rule would not have a significant economic
impact on a substantial number of small entities, and therefore did not
include an initial regulatory flexibility analysis. Although the final
rule covers a substantial number of small entities,\95\ the
Commission's threshold analysis indicated that, for the reasons
discussed in detail in the section on Executive Order 12866 above, the
costs imposed by the rule generally are de minimis and therefore would
not significantly impact small business.
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\95\ The rule covers all employers with at least 20 employees,
labor organizations, employment agencies, and state and local
governments. According to 2007-based statistics from the Small
Business Administration, there were 620,977 businesses with 20 or
more employees and fewer than 500 employees. United States Small
Bus. Ass'n, Employer Firms, Establishments, Employment, and Annual
Payroll Small Firm Class Sizes, 2007, Table in Firm Data, http://archive.sba.gov/advo/research/us_07ss.pdf (last visited Jan. 22,
2011).
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Public Comments
Two commenters disagreed with the Commission's decision to certify
the rule, and therefore requested further analysis under the RFA. One
of these commenters asserted that the rule would economically impact
small entities by suggesting that they keep track of alternative
employment practices and the reasons for their choices, and that they
give supervisors additional guidance and training. In light of these
comments and the comments discussed above regarding E.O. 12866, the
Commission reexamined the factual basis for its certification.
Commission Response
The comments provide no reason to alter the Commission's initial
conclusion that the rule will not impose unnecessary or unjustifiable
regulatory burdens on small entities. The comments did not include any
factual basis for their assertions and, for reasons specifically
discussed in the E.O. 12866 analysis above, the Commission has
determined that small entities are unlikely to incur costs as a result
of this rule.
As explained above, the rule will seldom be implicated in actions
by small employers because issues of age-based disparate impact are
most likely to arise in the context of mass terminations, hiring based
on tests, or other practices involving significant numbers of
individuals. Although there are no data available that speak
specifically to this issue, the Commission estimates that the average
small entity is unlikely to be involved in even one such practice. If a
small employer were to engage in such a practice, moreover, the number
of individuals affected is likely to be so small that impact can be
ascertained without resort to formal disparate-impact analysis. If the
employer wants to do such analysis, free and easy to use tools are
available on the Internet. Therefore, the Commission disagrees with the
commenter that small entities will be significantly burdened by
additional impact analyses performed as a result of the rule.
The Commission also disagrees that small entities will be
significantly burdened by the need to keep track of alternative
employment practices and the reasons for their choices. As explained
above, consideration of alternative employment practices would be
relevant only in a very small percentage of cases.\96\ Further, if a
small employer undertook a neutral practice that disproportionately
harmed older workers, the determination of the reasonableness of the
factor it used would be made in light of its resources. The entity's
resources also inform the determination of whether it would be
reasonable for it to take, or not to take, further steps to reduce
harm. Therefore, small employers will not be disproportionately
burdened by this aspect of the rule.
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\96\ See supra note 94, and the accompanying text.
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For the reasons explained above, the Commission disagrees with the
commenter's assertion that small entities will be significantly
burdened by additional guidance and training performed as a result of
the rule. Indeed, the rule is likely to have little impact on small
employers.
Conclusion
For the foregoing reasons, the Commission certifies pursuant to
section 605(b) of the Regulatory Flexibility Act, 5 U.S.C. 605(b), that
this rule will not have a significant economic impact on a substantial
number of small entities.
Paperwork Reduction Act
This final rule contains no new or revised information collection
requirements subject to review by the Office of Management and Budget
under the Paperwork Reduction Act (44 U.S.C. chapter 35).
Unfunded Mandates Reform Act of 1995
This final 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.
Congressional Review Act
To the extent that this rule is subject to the Congressional Review
Act, the Commission has complied with its requirements by submitting
this final rule to Congress prior to publication in the Federal
Register.
[[Page 19095]]
List of Subjects in 29 CFR Part 1625
Advertising, Age, Employee benefit plans, Equal employment
opportunity, Retirement.
Dated: March 7, 2012.
For the Commission.
Jacqueline A. Berrien,
Chair.
For the reasons set forth in the preamble, the Equal Employment
Opportunity Commission 29 CFR chapter XIV part 1625 is amended as
follows:
PART 1625--AGE DISCRIMINATION IN EMPLOYMENT ACT
0
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
0
2. In Sec. 1625.7, revise paragraphs (b) through (e) to read as
follows:
Sec. 1625.7 Differentiations based on reasonable factors other than
age (RFOA).
* * * * *
(b) 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.
(c) Any employment practice that adversely affects 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.'' An individual challenging the allegedly
unlawful practice is responsible for isolating and identifying the
specific employment practice that allegedly causes any observed
statistical disparities.
(d) Whenever the ``reasonable factors other than age'' defense is
raised, the employer bears the burdens of production and persuasion to
demonstrate the defense. The ``reasonable factors other than age''
provision is not available as a defense to a claim of disparate
treatment.
(e)(1) A reasonable factor other than age is 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. 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. 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.
(2) Considerations that are relevant to whether a practice is based
on a reasonable factor other than age include, but are not limited to:
(i) The extent to which the factor is related to the employer's
stated business purpose;
(ii) The extent to which the employer defined the factor accurately
and applied the factor 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;
(iii) 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;
(iv) The extent to which the employer assessed the adverse impact
of its employment practice on older workers; and
(v) 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.
(3) No specific consideration or combination of considerations need
be present for a differentiation to be based on reasonable factors
other than age. Nor does the presence of one of these considerations
automatically establish the defense.
* * * * *
[FR Doc. 2012-5896 Filed 3-29-12; 8:45 am]
BILLING CODE 6570-01-P