Do you ever get the idea that all developments out of Washington, DC are bad for employers?  Well, at least in this instance, there is some good news for a change.

On March 29, 2012, the EEOC issued its Final Rule on Disparate Impact and “Reasonable Factors Other Than Age” Under The Age Discrimination in Employment Act.

The U.S. Supreme Court had previously criticized the prior EEOC regulation, which had required employers to prove a “business necessity” for policies that had a disproportionate effect  on workers over 40.  Now, in response to a disparate impact claim, employers must only show that their practices are based on a “reasonable factor other than age,” which is the RFOA defense.  As explained by the EEOC, the RFOA defense is much easier to prove than “business necessity.”

The Final Rule does two (2) things: (1) it clarifies that the RFOA defense may be used in response to a disparate impact claim, not “business necessity”; and (2) it explains how the RFOA applies.  Importantly, an employer is only required to assert a RFOA defense when the employee has identified a specific employment policy or practice, and established that the practice harmed older workers substantially more than younger workers.  This is a tough standard for an employee to meet.  Moreover, even if the employee satisfies the test, to qualify for the RFOA defense, the employer must only show that it  reasonably designed and administered its policy to achieve a legitimate business purpose in light of the circumstances.

In summary, the employer must demonstrate: (1) that the criteria utilized in the policy or practice is related to a legitimate business purpose; (2) that managers and supervisor were given guidance or training on how to apply the factor to avoid discrimination; (3) that managers or supervisors were given limited discretion to assess employees subjectively; (4) that the adverse impact on older workers was assessed; and (5) the employer took steps to reduce harm to those in the protected age group.

Employers thus now have an easier defense to disparate impact age claims and specific guidelines to assert the defense.  Welcome news for once!