We apologize for the recent barrage of “labor and employment law alerts,” but with both the NLRB and the EEOC apparently “working overtime” lately, there have been several important topics to bring to your attention which have all come to the forefront at once.
One such item is another new Guidance which has recently been issued by the EEOC and which went into effect on Monday, April 30. This Guidance provides the EEOC’s interpretation of what a “reasonable factor other than age" is when considering whether a practice which has been implemented by an employer has an unintentional or “disparate impact” on those age 40 or older in violation of the ADEA.
As some of you may already be aware, the ADEA includes a “built-in defense,” if you will, which provides that an employer may take an action otherwise prohibited by the ADEA if the practice in question is based on “reasonable factors other than age.” 29 U.S.C. § 623(f)(1).
The U.S. Supreme Court examined employers’ use of this defense back in 2008 in Meacham v. Atomic Power Lab., 554 U.S. 94 (2008) and held that in order to use the “reasonable factors other than age” (RFOA) defense, employers bear the burden of proving that RFOA’s were in play (rather than merely saying this was the case and then requiring the employee to disprove it in order to prevail on a disparate impact claim).
Accordingly, the EEOC’s new Guidance sets out for employers what it believes this “burden of proof” should consist of. Specifically, employers asserting an RFOA defense should be able to show,
1. That the challenged practice was/is related to a stated legitimate business purpose
2. That the practice has in fact been applied fairly and accurately (and that those implementing it have received appropriate training to do so, including training on how to avoid applying it in a discriminatory manner)
3. That subjectivity in the application of the practice has been limited (and again that those implementing it have been made aware of possible risk areas where they may unintentionally interject an age-biased perspective based on age-based stereotypes)
4. That the employer has assessed the adverse impact of the practice on employees (and/or applicants, as applicable) age 40 or over
5. And that based on the degree of the harm to those in this ADEA-protected group (assessed both by the extent of injury to individuals as well as the potential number of individuals to be harmed), the employer took steps to reduce this harm.
Along with this new Guidance, the EEOC also has provided a “Q&A Guide” on its website (www.eeoc.gov
), which discusses some practical applications regarding these five factors.
Regarding factor 1., the EEOC states that it will not be evaluating the employer’s legitimate business purpose (i.e., as to whether the PURPOSE itself is legitimate or not). It will instead be concerned only with whether the stated practice the employer has implemented which is being challenged as part of a disparate impact charge is actually related to this purpose or not. For instance, if an employer decides to cut costs by laying people off, the EEOC is going to want to see that the employer can show that this lay off will actually result in cost savings.
Regarding factor 2., continuing to use our layoff example from above, the EEOC wants to see that in implementing the layoff, those charged with making the selection, based on whatever criteria are chosen by the employer for the same, are provided not only with a “list of the criteria” but also with training as to how the employer wants this criteria applied in order to try to ensure the fair and accurate application of the same.
Continuing with this example, factor 3. would also require that those charged with implementing the layoff criteria also be limited in the amount of “subjectivity” they are permitted to apply in the application of the same. The EEOC also goes a step further in the examples it provides under both factors 2. and 3. to state that it also “encourages” employers to provide examples when training those charged with implementing any type of employment practice, whether it be related to hiring, termination, discipline, evaluations, promotions, raises, transfers, etc., of specifically how an age-biased perspective can “creep into” the process, again, even inadvertently.
The EEOC’s examples of some possible content for this training involve the use of such selection criteria as “is the employee or applicant ‘flexible,’” “do they ‘adapt well to change,’” or “are they ‘willing to learn new things.’” These are all relatively “subjective” criteria which the EEOC believes may lend themselves to allowing an inadvertent age bias to “creep into” a hiring, layoff, promotion, etc. process, unless those implementing the process are specifically warned/trained concerning the same.
Two other recommended “training” examples involve questioning an individual’s “productivity” or “technological savvy.”
Regarding these last two examples, the EEOC is quick to point out that they are not saying employers should be precluded from ever using them as legitimate criteria in a hiring, layoff, promotion, etc. process. Rather, the EEOC just wants employers to make sure in doing so that those considering these factors are given objective rather than subjective criteria by which to measure the candidates in question. For instance, considering whether “the candidate has a working knowledge of XYZ specific computer program [that he/she will need in order to perform the job(s) at issue]” or “did he/she make her production numbers for last quarter, etc.” would still be legitimate “RFOA’s” – even if these questions do end up having a “disparate impact” on applicants and/or employees who are age 40 or older – as opposed to merely subjectively analyzing whether someone is “generally” “productive” or “technologically savvy” or not.
Regarding factor 4., the EEOC states that it does not expect small businesses to pay to have a complicated “adverse impact analysis” done of every hiring, termination, etc. practice. It is, however, candid about the fact that “a large employer that routinely uses sophisticated software to monitor its practices for race and sex-based disparate impact may be acting unreasonably if it does not similarly monitor for age-based impact.”
There are informal methods of assessing adverse impact statistically that we can help you with as needed.
Finally, regarding factor 5., here the EEOC wants to see employers engage in a “balancing test” of sorts – weighing the degree of harm on applicants and/or employees who are age 40 or older with the available options for reducing this harm while still achieving the employer’s legitimate business objective for the practice at issue without unduly burdening the employer’s business. “Where circumstances are such that the employer knew, or reasonably should have known, of a way to noticeably reduce harm to older workers without sacrificing cost or effectiveness, it could be deemed unreasonable for the employer to fail to use such an option.”
The EEOC also notes that these five factors are “not an exhaustive list” and that “no specific consideration or combination of them need be present for a practice to be based on RFOA’s.” “Nor does the presence of one of these factors automatically establish the RFOA defense.”
From a practical standpoint, in order to establish a “disparate impact” claim, an employee or applicant must identify a specific employment practice – not merely “the whole layoff” or “the fact he/she was not hired for a particular job.” They would have to start by identifying a particular test, or question, or set of questions, or a specific criteria which was used in the hiring, termination, promotion, etc. process that they can show had an adverse impact on those age 40 or older. Under the Meacham case cited above, the burden of persuasion then shifts to the employer to establish the RFOA affirmative defense using the factors described above – or others courts may find equally compelling.
The purpose of this alert is to let you know what factors the EEOC and/or courts will be looking at if one of your employment practices is challenged as having an albeit unintentional “disparate impact” on those age 40 or older – so you can adapt your hiring, layoff, promotion, etc. practices accordingly – on the front end, before facing such a challenge.