Hunton Employment & Labor Perspectives

The EEOC recently voted to move forward on new regulations that will likely make it easier for older workers to bring disparate impact claims, and harder for employers to defend against such claims.  The EEOC is taking the position that employers have to prove their choices are reasonable when adopting policies that might adversely affect older workers, and the rules provide several guidelines for consideration.  In light of the new regulations, employers should revisit the factors used in making hiring, promotion, and termination decisions and take steps to minimize the use of subjective criteria and procedures.  Employers should also consider the likelihood that litigation costs may increase as more cases may survive summary judgment, and consult with legal counsel to determine whether additional precautions must be put into place to proactively address potential disparate impact issues.

The new regulations were drafted in response to two U.S. Supreme Court decisions that changed the landscape for employers facing ADEA claims.  In Smith v. City of Jackson (2005), the Court held that an employment practice which disparately impacts older workers is not discriminatory if it can be justified by a “reasonable factor other than age.”  Because Smith did not specify which party bore the burden of persuasion on this defense, the Court decisively ruled in Meacham v. Knolls Atomic Power Lab (2008), that an employer bears both the burden of production and the burden of persuasion.

 The new regulations seek to clarify the scope of the “reasonable factor other than age” defense in a number of ways.  The regulations offer a nonexhaustive list of factors to be used in determining the “reasonableness” of the challenged employment practice.  The list includes considerations such as whether the employer’s practice and implementation involved a common business practice, the extent to which the practice is related to the employer’s stated business goal, the extent to which the employer took steps to assess the adverse impact of the practice on older workers, and whether alternative options were available.  The proposed rules also consider the extent to which the employer gave supervisors unchecked discretion to assess employees subjectively and the extent to which supervisors were given guidance on how to apply the factors and avoid discrimination.

 Critics of the proposed regulations argue that the rules, along with the Smith/Meachum  analysis, make it virtually impossible for even the most careful employer to survive summary judgment on a disparate impact claim because a plaintiff merely has to show that the facially-neutral employment practice falls more heavily on older workers.  Opponents also question the EEOC’s reliance on a tort theory of “reasonableness” to create a duty on the part of the employer to avoid discrimination.  Along these lines, one of the commissioners who voted against the rule expressed concern that the rule would be vulnerable to substantive and procedural legal challenges as a result of its “wholesale application of tort law [principles].”