Disparate Impact and Age Discrimination Cases –The EEOC Speaks

At the end of March, the EEOC put out a so-called Final Rule dealing with a key affirmative defense for employers in disparate impact age discrimination cases. The Rule is important, because they provide at least some, limited value guidance what an employer has to do to establish a so-called “reasonable factor other than age” as a basis for its employment decisions.  An RFOA is a recognized defense to a disparate impact claim.

It's only been recently that disparate impact claims were even allowed in an age discrimination case. In allowing disparate impact age claims to proceed, the Supreme Court held that there would be no liability for an employer if the disparate impact was attributable to a reasonable factor other than age. Thus, the EEOC began fashioning a rule that would describe considerations that an employer faces when asserting an RFOA defense. And it only took the Commission seven years to figure out what to say.

As a quick refresher, disparate impact claims result when an employer engages in a practice that unintentionally damages members of a protected class. The EEOC rule attempts to provide guidance in assessing whether an employment practice that has a disparate impact on the elderly (that is, anyone over 40 in the Alice in Wonderland of employment discrimination) is reasonably designed to achieve a legitimate business purpose, and administered in a way that reasonably achieves that purpose. The Commission went on to list some examples (the list is not exhaustive) of things that could be taken into account to measure the reasonableness of the employment policy.

For example, the Commission (and presumably a court) will examine the employment practice to see whether the practice is related to the employer’s stated business objective. So far so good – one of the elements of a disparate impact claim is that the employee must, with specifity, identify the challenged employment policy. Ideally, the policy will have some relationship to better business for the employer. Another factor that the Commission will consider is whether the employer has applied the factor fairly and accurately with respect to the protected workforce. This particular criterion also considers whether managers and supervisors have been given guidance and training on how to apply the policy so as to avoid discrimination.  I'm not exactly sure where this requirement comes from-it's not consistent with Supreme Court language, which says that an employer only has a responsibility to base his decisions on a reasonable factor other than age.

As you are probably aware, the Commission and most plaintiffs’ lawyers take the position that giving supervisors too much discretion in terms of their decision making is a recipe for illegal discrimination. It appears that the regulation presumes that supervisors will try to act in a discriminatory manner, and that the smart employer will take sufficient steps to limit a supervisor’s discretion so that a disparate impact is less likely to occur.

Obviously, the Commission's position is at odds with most modern management practices, which focus on giving supervisors more authority and discretion, not less. Employers are also advised to take steps to measure the adverse impact of any employment practice and to take steps to mitigate the harm to any members of a protected class.  Viva additional layers of unnecessary bureaucracy!! As if most companies had little else to spend money on other than checking and rechecking supervisors all day.

Here's an important safety tip, while we are talking about ADEA defenses:  The RFOA defense should not be confused with the bona fide occupational qualification affirmative defense, which the Commission notes applies to facially discriminatory, rather than neutral employment policies.  The RFOA defense is not available in a disparate treatment type of case, but rather only when there is no intent to discriminate.  The key difference between the two is that a bona fide occupational qualification requires an employer to establish and use the business alternative that has the least impact on a protected class.  An RFOA does not.  The Commission tries to dance around this issue in the guidance, but it should be clear that there is no requirement that an employer choose an RFOA alternative that has less impact on the age protected workforce.

Age discrimination case numbers are likely to rise as the working population gets older. Employers should be aware of the impact of the particular policies that they undertake, with an eye to establishing an RFOA  defense down the road.