Divided EEOC Approves Draft of Rule Amending Age Discrimination Regulations

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By Kevin P. McGowan

A divided Equal Employment Opportunity Commission Nov. 16 approved a draft final rule to amend the commission's existing Age Discrimination in Employment Act regulations to reflect two U.S. Supreme Court decisions regarding ADEA disparate impact claims and the “reasonable factor other than age” (RFOA) defense.

By a 3-2 vote along party lines, EEOC cleared draft final regulations that now go to the White House Office of Management and Budget for a review period that usually takes about 90 days. If OMB approves, the draft final regulations would return to EEOC for a final vote before taking effect.

EEOC Chair Jacqueline Berrien and Commissioners Stuart Ishimaru and Chai Feldblum, all Democratic appointees, voted in favor of the draft final rule. Berrien said EEOC's draft final regulations would provide “necessary and long-awaited guidance” to courts, employers, and employees regarding the effects of the Supreme Court's decisions in Smith v. Jackson(544 U.S. 228, 92 FEP Cases 1824 (2005); 23 HRR 343, 4/4/05) and Meacham v. Knolls Atomic Power Lab. (554 U.S. 84, 103 FEP Cases 908 (2008); 26 HRR 679, 6/23/08).

Berrien defended EEOC's decision to follow tort law principles in weighing whether an employer has proved the RFOA defense as consistent with Staub v. Proctor Hosp. (131 S.Ct. 1186, 111 FEP Cases 993 (2011); 29 HRR 232, 3/7/11), in which the Supreme Court referred to tort law agency principles in determining when an employer may be held liable for a lower-level supervisor's discriminatory animus.

Commissioners Constance Barker and Victoria Lipnic, the panel's two Republicans, opposed the draft final rule, contending that EEOC lacks any statutory basis under the ADEA for using tort law principles to define the RFOA defense.

“The legal basis simply is not there,” said Barker, who added that she is concerned that EEOC is imposing a “more restrictive” and “more difficult standard” for businesses to apply, particularly small employers.

Lipnic said the draft final rule's use of “tort standards of reasonableness” under the ADEA is “not appropriate or legally justified here.” She said under the draft final rule, EEOC would examine an employer's “entire decisionmaking process” rather than the specific “factor” relied upon, a result that Lipnic said misinterprets the ADEA's intent.

The Supreme Court in Smith and Meacham said the “business necessity” defense under Title VII of the 1964 Civil Rights Act “should have no place in ADEA disparate impact cases,” but EEOC's draft rule “as a practical matter” would hold employers to a business necessity test under the ADEA, Lipnic said.

EEOC's draft final rule is not available to the public while the interagency review process is ongoing, according to a commission spokeswoman.

EEOC Process Began in 2008.

In March 2008, EEOC issued a notice of proposed rulemaking to amend its ADEA regulations in light of Smith v. Jackson, in which the Supreme Court held that disparate impact claims are cognizable under the ADEA but that an employer's RFOA defense to such claims does not require a showing of business necessity.

After the Supreme Court decided Meacham, holding that an employer bears the burden of persuasion regarding the RFOA defense, EEOC said it would not issue a final rule on disparate impact but rather would issue a new proposed rule regarding Meacham's effect on the RFOA defense and review public comments on both its proposals.

In February 2010, EEOC issued a proposed rule regarding the RFOA defense, indicating it would turn to tort law for a legal definition of “reasonableness” to determine whether a challenged employment practice qualified for the RFOA defense (28 HRR 175, 2/22/10).

EEOC received 27 public comments in response to its February 2010 proposed rule, including nine supporting the proposal and eight opposed, said Lynn McDermott of EEOC's Office of Legal Counsel, who described the rulemaking process at EEOC's Nov. 16 public meeting.

EEOC also received about 2,300 identical form faxes opposing the proposal, McDermott said.

EEOC Legal Counsel staff drafted a proposed final rule that it submitted to the five EEOC members in March 2011, McDermott said. After a briefing period and changes made in response to the consultations with EEOC members and their staffs, the Legal Counsel office circulated a revised draft final rule this summer, McDermott said.

That revised draft final rule was the version before EEOC on Nov. 16, according to Commissioner Feldblum.

Commissioners Split on RFOA Approach.

Although EEOC members concurred that the commission needs to update its ADEA regulations, they disagreed about the proper approach for interpreting the act's RFOA defense.

Commissioner Ishimaru noted the Supreme Court decisions “failed to explain the contours” of the RFOA defense, beyond the court's statements that the ADEA defense is less demanding than Title VII's business necessity test. Ishimaru said EEOC's draft final order was a “product of careful deliberation” resulting in a “balanced approach” that would help all sides by clarifying the law.

That “balance” is particularly important in a period when unemployment rates for workers 55 and older have jumped more than 300 percent over the past few years, Ishimaru said.

Feldblum said the draft final rule clarified that the RFOA defense is “not the same” as the Title VII business necessity defense. She expressed “disappointment” that EEOC could not send its draft final rule to OMB with bipartisan support and expressed the hope that such partisan division would be the exception at EEOC.

But commissioners Barker and Lipnic said they could not support an interpretation of the RFOA defense that they consider at odds with congressional intent.

There is “no question” that EEOC's ADEA regulations must be updated to eliminate “inconsistencies” and “misleading” statements following the Supreme Court's opinions, Barker said. EEOC's draft final rule, however, “fabricates a new standard” for the RFOA defense that is not supported by the act, Barker said.

Barker argued there is no statutory basis for a “tort law” standard for determining the reasonableness of an employer's action under the act. Rather, EEOC should simply inquire whether a reasonable basis other than age explains the employer's action, she said. “That should be the end of the inquiry,” Barker said.

AARP Applauds, Chamber Condemns Action.

AARP, a seniors' advocacy organization, applauded EEOC's approval of the ADEA draft final regulations.

The draft regulations “recognize the fundamental American value of fairness and represent important progress in protecting employees against age discrimination in the workplace,” said David Certner, AARP's legislative policy director. “These regulations are consistent with Supreme Court rulings on age-based disparate impact, and will give meaningful effect to the law's prohibitions on employer practices that disproportionately harm older workers.”

AARP noted age discrimination now is “an even more pressing issue” because of an aging workforce and an extended economic downturn in which unemployed older workers stay jobless longer and older workers with jobs defer retirement because of depressed 401(k) accounts or concerns about maintaining health care coverage.

“These regulations will encourage employers to stop and think beforehand about the impact of their practices on older workers,” Certner said.

The U.S. Chamber of Commerce sent a Nov. 15 letter to EEOC Chair Berrien urging EEOC to reopen the ADEA rulemaking for further public comment rather than approve what the chamber considers a badly flawed draft final rule.

The chamber said it had “both procedural and substantive concerns” about EEOC's draft final regulations. “The very restrictive interpretation of the [RFOA] defense proposed by [EEOC] would, if enacted, subject routine economic decisions by businesses to second-guessing by government agencies woefully inept to make those kinds of judgments,” the chamber said.

By Kevin P. McGowan