Thomas Hutton, Esq.
Patterson Buchanan Fobes Leitch & Kalzer
By 2018 about one in four U.S. workers will be 55 or older, according to the U.S. Bureau of Labor Statistics. In 2011, the average retirement age among U.S. employees increased to 63.1 years, from 61 years as recently as 2006. Over the same time period, the percentage of employees who did not retire until age 65 or older doubled, from 15 to 30 percent.
Part of what’s behind these trends is the sheer size of the 77 million-member Baby Boom generation compared to relatively smaller subsequent generations. Another part is the decline in retirement security that has accompanied the shift from defined benefit to defined contribution retirement plans, along with the increase in the minimum age to receive full Social Security benefits to 67, with incentives to stay on until age 70. As for job security, although workers aged 55 and older have lower unemployment rates than do younger workers, the average duration of unemployment in April 2012 for workers aged 55 and up was 60 weeks, compared to 38.5 weeks for those under 55.
These data provide important context for employers evaluating their legal risks from age discrimination complaints. And as one indicator of the risk environment, in the decade from FY 2001 through FY 2011 the number of age discrimination charges filed with the U.S. Equal Employment Opportunity Commission (EEOC) increased by a remarkable 46.6 percent.
Now the U.S. Equal Employment Opportunity Commission (EEOC) has finalized new regulations concerning a key legal defense that employers can raise to certain age discrimination claims. The rules went into effect on April 20, 2012. The bad news for employers is that using the defense has been made somewhat more difficult. The silver lining, if there is one, is that employers can use the regulations as a framework for evaluating their workplace decisions to try to minimize the odds that they will be successfully challenged.
The federal Age Discrimination in Employment Act (ADEA) protects employees ages 40 and older. The EEOC enforces the ADEA. Protected employees can bring ADEA challenges not just to intentional discrimination by employers but also to facially neutral rules and decisions that happen to have a disparate impact on older workers. An employer can defeat this kind of disparate impact claim by showing that its rule or decision, even if it did disproportionally affect older workers, was based on “reasonable factors other than age.” This “RFOA defense” is an easier standard for the employer to meet than having to demonstrate that its rule or decision was a matter of “business necessity,” the test under some other anti-discrimination laws.
The EEOC’s new regulations set forth how the Commission will evaluate the employer’s RFOA defense. In general, if an employer’s actions have a disparate impact on older employees, the actions will be deemed to be based on “reasonable” factors other than age if they would have been taken by a “prudent employer,” which 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.” In other words, there is no clear, one-size-fits-all rule.
Instead, the EEOC goes on to list the considerations it will use for making this individualized determination. These are:
- The relationship of the employer’s rule or decision to the stated business purpose of the rule or decision;
- The extent to which the employer accurately defined and fairly applied its stated decision factor, including any guidance or training it provided to those managers and other staff who were tasked with making and implementing the rule or decision;
- The extent to which the employer limited the discretion of supervisors in making or implementing the decision or rules, so that the potential for negative stereotypes about age to taint the decisions was minimized;
- The extent to which the employer assessed the adverse impact its rule or decision would have on older employees; and
- The degree of harm the employer’s rule or decision had on employees within the ADEA-protected age group, i.e., how significant was the injury and to how many employees, as well as what steps the employer attempted to take in order to mitigate the degree of harm, with consideration for how burdensome it would have been for the employer to take further mitigating measures.
The takeaway from the new regulations is that they offer a useful roadmap for employers that are considering decisions or rules that may disproportionally impact employees who are aged 40 or older. Here are the kinds of questions the employer should ask before proceeding:
- What is the business purpose we are trying to accomplish in making this decision?
- Is this decision likely to impact older workers more than younger ones?
- If so, what impact, and how severe an impact, will the decision have on older employees, and how many employees are we talking about?
- How can we provide very clear guidance and training to supervisors on how to make and implement this decision so that they do it in an objective, non-discriminatory manner?
- What reasonable measures can we take to try to mitigate the adverse impact on older employees, consistent with what we are trying to accomplish and at acceptable cost?
An employer that goes through this decision-making process—and that documents it—will be better positioned to defend its decision if facing an ADEA complaint.