[Federal Register: March 31, 2008 (Volume 73, Number 62)]
[Proposed Rules]
[Page 16807-16809]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31mr08-32]
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EQUAL EMPLOYMENT OPPORTUNITY COMMISSION
29 CFR Part 1625
RIN 3046-AA76
Disparate Impact Under the Age Discrimination in Employment Act
AGENCY: Equal Employment Opportunity Commission.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Equal Employment Opportunity Commission (``EEOC'' or
``Commission'') is issuing this notice of proposed rulemaking
(``NPRM'') to address issues related to the United States Supreme
Court's decision in Smith v. City of Jackson. The Court ruled that
disparate impact claims are cognizable under the Age Discrimination in
Employment Act (``ADEA'') but that liability is precluded when the
impact is attributable to a reasonable factor other than age. Current
EEOC regulations interpret the ADEA as prohibiting an employment
practice that has a disparate impact on individuals within the
protected age group unless it is justified as a business necessity.
DATES: Comments must be received on or before May 30, 2008. The
Commission will consider any comments received on or before the closing
date and thereafter adopt final regulations. Comments received after
the closing date will be considered to the extent practicable.
ADDRESSES: You may submit comments by any of the following methods:
By mail to Stephen Llewellyn, Executive Officer, Executive
Secretariat, Equal Employment Opportunity Commission, 1801 L Street,
NW., Washington, DC 20507.
By facsimile (``FAX'') machine to (202) 663-4114. (There
is no toll free FAX number). Only comments of six or fewer pages will
be accepted via FAX transmittal, in order to assure access to the
equipment. Receipt of FAX transmittals will not be acknowledged, except
that the sender may request confirmation of receipt by calling the
Executive Secretariat staff at (202) 663-4070 (voice) or (202) 663-4074
(TTY). (These are not toll free numbers).
By the Federal eRulemaking Portal: http://
www.regulations.gov. After accessing this web site, follow its
instructions for submitting comments.
Instructions: All comment submissions must include the agency name
and docket number or the Regulatory Information Number (RIN) for this
rulemaking. Comments need be submitted in only one of the above-listed
formats, not all three. All comments received will be posted without
change to http://www.regulations.gov, including any personal
information you provide. Copies of the received comments also will be
available for inspection in the EEOC Library, FOIA Reading Room, by
advanced appointment only, from 9 a.m. to 5 p.m., Monday through Friday
except legal holidays, from May 30, 2008 until the Commission publishes
the rule in final form. Persons who schedule an appointment in the EEOC
Library, FOIA Reading Room, and need assistance to view the comments
will be provided with appropriate aids upon request, such as readers or
print magnifiers. To schedule an appointment to inspect the comments at
the EEOC Library, FOIA Reading Room, contact the EEOC Library by
calling (202) 663-4630 (voice) or (202) 663-4641 (TTY). (These are not
toll free numbers).
FOR FURTHER INFORMATION CONTACT: Dianna B. Johnston, Assistant Legal
Counsel, or Lyn J. McDermott, Senior Attorney-Advisor, at (202) 663-
4638 (voice) or (202) 663-7026 (TTY). (These are not toll free
numbers). This notice also is available in the following formats: large
print, Braille, audio tape and electronic file on computer disk.
Requests for this notice in an alternative format should be made to the
Publications Information Center at 1-800-669-3362 (voice) or 1-800-800-
3302 (TTY).
SUPPLEMENTARY INFORMATION: In Smith v. City of Jackson, 544 U.S. 228
(2005), the United States Supreme Court held that the ADEA authorizes
recovery for disparate impact claims of discrimination. This holding
validated the Commission's longstanding rule that disparate impact
analysis applies in ADEA cases. The Court also held that the
``reasonable factors other than age'' (``RFOA'') test, rather than the
business-necessity test, is the appropriate standard for determining
the lawfulness of a practice that disproportionately affects older
individuals. This ruling differs from the EEOC's position that an
employment practice that had a disparate impact on individuals within
the protected age group could not be a reasonable factor other than age
unless it was justified as a business necessity. The Commission
proposes to amend its regulation to reflect the Supreme Court's
decision.
Smith v. City of Jackson
The Smith plaintiffs, senior police and public safety officers,
alleged that the defendant City's pay plan had a disparate impact on
older workers because it gave proportionately larger pay increases to
newer officers than to more senior officers. Older officers, who tended
to hold senior positions, on average received raises that represented a
smaller percentage of their salaries than did the raises given to
younger officers. The City explained that, after a survey of salaries
in comparable communities, it raised the junior officers' salaries to
make them competitive with those for comparable positions in the
region. 544 U.S. at 241-42.
The Fifth Circuit Court of Appeals dismissed the plaintiffs'
disparate impact claim on the ground that such claims ``are
categorically unavailable under the ADEA.'' Id. at 231. The Supreme
Court disagreed and ruled that plaintiffs may challenge facially
neutral employment practices under the ADEA. Id. at 233-40. The Court
also ruled, however, that the ``scope of disparate-impact liability
under the ADEA is narrower than under Title VII'' of the Civil Rights
Act of 1964, 42 U.S.C. 2000e et seq.\1\ 544 U.S. at 240.
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\1\ Title VII prohibits employment discrimination based on race,
color, religion, sex, and national origin. In Griggs v. Duke Power
Co., 401 U.S. 424 (1971), the Supreme Court first recognized the
disparate impact theory of discrimination under Title VII. The Court
held that Title VII prohibits not only intentional discrimination
but also employment practices that, because they have a disparate
impact on a group protected by Title VII, are ``fair in form but
discriminatory in operation.'' Id. at 431.
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[[Page 16808]]
In holding that disparate impact claims are cognizable under the
ADEA, the Supreme Court relied in large part on the parallel
prohibitory language and the common purposes of the ADEA and Title VII.
Id. at 233-40. Accord McKennon v. Nashville Banner Pub. Co., 513 U.S.
352, 358 (1995) (statutes share ``common substantive features'' and
``common purpose: `the elimination of discrimination in the
workplace''') (quoting Oscar Meyer & Co. v. Evans, 441 U.S. 750, 756
(1979)). The Court noted that, in passing the ADEA, Congress was
concerned that application of facially neutral employment standards,
such as a high school diploma requirement, may ``unfairly'' limit the
employment opportunities of older individuals. 544 U.S. at 235 n.5
(quoting Report of the Sec'y of Labor, The Older American Worker: Age
Discrimination in Employment 3 (1965), reprinted in U.S. EEOC, Leg.
History of the ADEA 21 (1981)) (``Wirtz Report''). The Court observed
that there is a ``remarkable similarity between the congressional
goals'' of Title VII and ``those present in the Wirtz Report.'' 544
U.S. at 235 n.5.
At the same time, however, the Court identified two key textual
differences that affect the relative scope of disparate impact
liability under the two statutes. First, the ADEA contains the RFOA
provision, which has no parallel in Title VII and precludes liability
for actions ``otherwise prohibited'' by the statute ``where the
differentiation is based on reasonable factors other than age.'' \2\
Id. at 240. Second, in reaction to the decision in Wards Cove Packing
Co. v. Atonio,\3\ which ``narrowly construed the employer's exposure to
liability on a disparate-impact theory,'' Congress amended Title VII
but not the ADEA. 544 U.S. at 240 (citing the Civil Rights Act of 1991,
sec. 2, 105 Stat. 1071). Accordingly, ``Wards Cove's pre-1991
interpretation of Title VII's identical language remains applicable to
the ADEA.'' 544 U.S. at 240.\4\
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\2\ The Court found that the presence of the RFOA provision
supported its conclusion that disparate impact claims are cognizable
under the ADEA. 544 U.S. at 238-40. The RFOA provision ``plays its
principal role'' in disparate impact cases, where it ``preclud[es]
liability if the adverse impact was attributable to a nonage factor
that was `reasonable.' '' Id. at 239. Comparing the RFOA provision
with the Equal Pay Act provision that precludes recovery when a pay
differential is based on ``any other factor other than sex,'' 29
U.S.C. 206(d)(1), the Court found it ``instructive'' that ``Congress
provided that employers could use only reasonable factors in
defending a suit under the ADEA.'' 544 U.S at 239 n.11 (emphasis in
the original).
\3\ 490 U.S. 642 (1989).
\4\ The ``identical'' language is in section 703(a)(2) of Title
VII (42 U.S.C. 2000e-2(a)(2)) and section 4(a)(2) of the ADEA (29
U.S.C. 623(a)(2)), which make it unlawful for employers ``to limit,
segregate, or classify'' individuals in a manner that would deprive
or tend to deprive any individual of employment opportunities or
otherwise adversely affect his status as an employee, because of
such individual's [protected status].
The language of the two statutes significantly differs, however,
with regard to the applicable defense. Unlike the ADEA, which
provides a defense when the practice is based on a reasonable factor
other than age (29 U.S.C. 623(f)(1)), Title VII provides a defense
only when the practice is job related and consistent with business
necessity (42 U.S.C. 2000e-2(k)(1)(A)).
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Applying its analysis, the Court rejected the Smith plaintiffs'
disparate impact claims on the merits. The Court ruled that the
plaintiffs failed to satisfy Wards Cove's requirement that they
identify a ``specific test, requirement, or practice within the pay
plan that has an adverse impact on older workers.'' Id. at 241.
In addition, focusing on the plan's purpose, design, and
implementation, the Court found that the City's pay plan was based on
reasonable factors other than age. The Court noted that the City
grouped officers by seniority in five ranks and set wage ranges based
on salaries in comparable communities. Most of the officers were in the
three lowest ranks, where age did not affect officers' pay. In the two
highest ranks, where all of the officers were over 40, raises were
higher in terms of dollar amounts; they were lower only in terms of
percentage of salary. The Court concluded that the plan, as designed
and administered, ``was a decision based on a `reasonable factor other
than age' that responded to the City's legitimate goal of retaining
police officers.'' Id. at 242.
Finally, the Court noted that, although ``there may have been other
reasonable ways for the City to achieve its goals, the one selected was
not unreasonable.'' Unlike Title VII's business necessity defense,
which requires the employer to use the least discriminatory
alternative, ``the reasonableness inquiry includes no such
requirement.'' Id. at 243.
Revisions to Agency Regulations
The Commission proposes to revise current paragraph 1625.7(d) to
state that an employment practice that has an adverse impact on
individuals within the protected age group on the basis of older age is
discriminatory unless the practice is justified by a ``reasonable
factor other than age'' (RFOA). This revision reflects the Supreme
Court's conclusion that disparate impact claims are cognizable under
the ADEA and that the RFOA test, rather than the business-necessity
test, is the appropriate standard for determining the lawfulness of a
practice that disproportionately affects older individuals.
The proposed revision also states that the individual challenging
the allegedly unlawful employment practice bears the burden of
isolating and identifying the specific employment practice responsible
for the adverse impact. As the Supreme Court stressed in Smith, ``it is
not enough to simply allege that there is a disparate impact on
workers, or point to a generalized policy that leads to such an impact.
Rather, the employee is `responsible for isolating and identifying the
specific employment practices that are allegedly responsible for any
observed statistical disparities.' ''\5\
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\5\ Smith v. City of Jackson, 544 U.S. 228, 241 (2005) (quoting
Wards Cove, 490 U.S. at 656) (emphasis in Smith).
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The Commission proposes to revise current paragraph 1625.7(e) to
state that, when the RFOA exception is raised, the employer has the
burden of showing that a reasonable factor other than age exists
factually. This section reiterates the Commission's longstanding
position that the RFOA provision creates an affirmative defense that
the employer must establish.\6\
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\6\ Until recently, most courts treated RFOA as an affirmative
defense. See, e.g., Enlow v. Salem-Keizer Yellow Cab Co., Inc. 389
F.3d 802, 807-08 (9th Cir. 2004) (in the context of a disparate
treatment claim, characterizing the RFOA as an affirmative defense
and holding that it was unavailable where the challenged practice is
based on age), cert. denied, 544 U.S. 974 (2005); E.E.O.C. v.
Johnson & Higgins, Inc., 91 F.3d 1529, 1541 (2d Cir. 1996) (same),
cert. denied, 522 U.S. 808 (1997). However, the Second and Tenth
Circuits have recently concluded that defendants bear only the
burden of production, not the burden of persuasion, on the issue.
Meacham v. Knolls Atomic Power Lab., 461 F.3d 134, 141-43 (2d Cir.
2006), cert. granted, 76 U.S.L.W. 3391 (U.S. Jan. 18, 2008) (No. 06-
1505); Pippin v. Burlington Res. Oil & Gas Co., 440 F.3d 1186, 1200
(10th Cir. 2006). But see Meacham, 461 F3d at 147-53 (Pooler, J.,
dissenting) (RFOA is an affirmative defense). The court in EEOC v.
Allstate Ins. Co., 458 F. Supp. 2d 980 (E.D. Mo. 2006),
certification for interlocutory appeal on other grounds granted,
2007 WL 38675 (E.D. Mo. Jan. 4, 2007), did not analyze the issue but
followed the lead of Pippin and Meacham to conclude that the
defendant did not bear the burden of proof. For the reasons
explained in the text and accompanying footnotes, the Commission
disagrees with Meacham and Pippin and concludes that the RFOA burden
of proof rests with the employer.
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Requiring the employer to bear the burden of proof is consistent
with the language and structure of the ADEA. The RFOA provision is
found in section 4(f)(1) of the ADEA, which states that ``[i]t shall
not be unlawful for an employer * * * to take any action otherwise
prohibited [by the ADEA] where age is a bona fide occupational
qualification [''BFOQ''] reasonably
[[Page 16809]]
necessary to the normal operation of the particular business, or where
the differentiation is based on reasonable factors other than age.'' 29
U.S.C. 623(f)(1). Since the employer indisputably bears the burden of
proving BFOQ,\7\ the most natural construction of section 4(f)(1) as a
whole is that the employer similarly bears the burden of proving RFOA.
In addition, when Congress enacted the Older Workers Benefit Protection
Act (``OWBPA'') amendments to the ADEA in 1990, it specifically stated
that the employer bears the burden of proof on the RFOA affirmative
defense in section 4(f)(1). S. Rep. No. 101-263, at 30 (1990), as
reprinted in 1990 U.S.C.C.A.N. 1509, 1535 (noting that Congress was
incorporating into section 4(f)(2) ``the language of [section] 4(f)(1)
that is commonly understood to signify an affirmative defense''). This
approach also is consistent with the allocation of burdens under the
Equal Pay Act of 1963, 29 U.S.C. 206(d)(1), which precludes liability
when the employer establishes that a pay differential is ``based on any
other factor other than sex,'' 29 U.S.C. 206(d)(1)(iv).\8\ The Smith
Court did not need to discuss the burden of proof because the
employer's actions were so eminently reasonable that it easily
prevailed regardless of who bore the ultimate burden.
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\7\ See Smith, 544 U.S. at 233 n.3 (2005) (referring to the BFOQ
provision as ``an affirmative defense to liability'').
\8\ Corning Glass Works v. Brennan, 417 U.S. 188, 196-97 (1974)
(shifting the burden of proof to the employer ``is consistent with
the general rule that the application of an exemption under the Fair
Labor Standards Act is a matter of affirmative defense on which the
employer has the burden of proof'').
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The Commission invites comments on these proposed changes from all
interested parties. The Commission also invites comments on whether the
regulations should address other matters concerning the application of
the disparate impact theory of discrimination under the ADEA. In
particular, the Commission would welcome comments on the following
specific question:
1. Should the regulations provide more information on the meaning
of ``reasonable factors other than age''? If so, what should the
regulations say? For example, should the regulations refer to tort law
standards such as negligence and reasonable standard of care when
addressing the meaning of ``reasonable''? Should the regulations offer
factors relevant to whether an employment practice is based on
reasonable factors other than age? If so, what should those factors be?
Regulatory Procedures
Executive Order 12866
Pursuant to Executive Order 12866, EEOC has coordinated this
proposed rule with the Office of Management and Budget. Under section
3(f)(1) of Executive Order 12866, EEOC has determined that the
regulation will not have an annual effect on the economy of $100
million or more or adversely affect in a material way the economy, a
sector of the economy, productivity, competition, jobs, the
environment, public health or safety, or State or local tribal
governments or communities. Therefore, a detailed cost-benefit
assessment of the regulation is not required.
Paperwork Reduction Act
This proposal contains no new information collection requirements
subject to review by the Office of Management and Budget under the
Paperwork Reduction Act (44 U.S.C. chapter 35).
Regulatory Flexibility Act
The Commission certifies under 5 U.S.C. 605(b) that this proposed
rule will not have a significant economic impact on a substantial
number of small entities because it imposes no economic or reporting
burdens on such firms and makes no change to employers' compliance
obligations under the Act. Instead, the proposed rule brings the
Commission's regulations into compliance with a recent Supreme Court
interpretation of the Act. For this reason, a regulatory flexibility
analysis is not required.
Unfunded Mandates Reform Act of 1995
This proposed rule will not result in the expenditure by State,
local, or tribal governments, in the aggregate, or by the private
sector, of $100 million or more in any one year, and it will not
significantly or uniquely affect small governments. Therefore, no
actions were deemed necessary under the provisions of the Unfunded
Mandates Reform Act of 1995.
List of Subjects in 29 CFR Part 1625
Advertising, Age, Employee benefit plans, Equal employment
opportunity, Retirement.
Dated: March 25, 2008.
For the Commission.
Naomi C. Earp,
Chair.
For the reasons set forth in the preamble, the Equal Employment
Opportunity Commission proposes to amend 29 CFR chapter XIV part 1625
as follows:
PART 1625--AGE DISCRIMINATION IN EMPLOYMENT ACT
1. The authority citation for part 1625 continues to read as
follows:
Authority: 81 Stat. 602; 29 U.S.C. 621; 5 U.S.C. 301;
Secretary's Order No. 10-68; Secretary's Order No. 11-68; Sec. 9, 81
Stat. 605; 29 U.S.C. 628; sec. 12, 29 U.S.C. 631, Pub. L. 99-592,
100 Stat. 3342; sec. 2, Reorg. Plan No. 1 of 1978, 43 FR 19807.
Subpart A--Interpretations
2. Revise paragraphs (d) and (e) of Sec. 1625.7 to read as
follows:
Sec. 1625.7 Differentiations based on reasonable factors other than
age.
* * * * *
(d) Any employment practice that adversely affects individuals
within the protected age group on the basis of older age is
discriminatory unless the practice is justified by a ``reasonable
factor other than age.'' An individual challenging the allegedly
unlawful practice is responsible for isolating and identifying the
specific employment practice that is allegedly responsible for any
observed statistical disparities.
(e) Whenever the exception of ``a reasonable factor other than
age'' is raised, the employer bears the burden of proving that the
``reasonable factor other than age'' exists factually.
* * * * *
[FR Doc. E8-6517 Filed 3-28-08; 8:45 am]
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