Monday, November 28, 2011

New EEOC Regulation For Age Claims Increases Uncertainty for Employers

On a 3-2 vote that broke along party lines, the EEOC approved a new regulation stating that an employer's policy or practice that adversely impacts older workers violates the ADEA unless the employer can justify the policy or practice with a “reasonable factor other than age.”  The regulation partially stems from the Supreme Court's decision in Smith v. City of Jackson, 544 U.S. 228 (2005). In the Smith decision, United States Supreme Court held that the ADEA authorizes recovery for claims that a practice has a disparate impact on employees based on age and that the "reasonable factors other than age" test, rather than the business-necessity test, is the appropriate standard for determining whether a practice that disproportionately affects older employees is unlawful under the ADEA.

The EEOC's new regulation is intended to provide guidance on the definition of what will constitute "reasonable factors other than age."  However, the new regulation emphasizes 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. In other words, there is no bright line rule for employers to follow.  Instead, the regulation provides lists of factors for determining whether an employment practice is reasonable and whether it’s based on a factor other than age.  The EEOC said it will look to tort law to determine what is "reasonable."

In voting against the new regulation, Commissioner Constance S. Barker said “I’m concerned about creating a new defense that imposes a more restrictive and more difficult defense for employers to apply,” especially the small business owner. "No matter how well intentioned these regulations may be, when we look at the small business person who is desperately working to just keep his doors open and keep a few Americans employed, … adding this tort law standard … may mean the difference between keeping his doors open or not," she said.  Similarly, Commissioner  Victoria Lipnic said that “The proposed final rule regulation places a duty on employers to pre-emptively avoid age discrimination and to seek out and assess less discriminatory alternatives,” something that she said neither the ADEA nor the Supreme Court requires.

The "Final Regulation on Disparate Impact and Reasonable Factors Other Than Age" now goes to the U.S. Office of Management and Budget (OMB) for review. Upon OMB approval, the regulation will be published in the Federal Register and become effective a period of time after being published.

We will continue to monitor the progress of the regulation and how courts apply it to employers' everyday practices.

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