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Reducing Your Workforce? Evaluate reasonable factors other than age to satisfy new EEOC rule

In response to decisions by the United States Supreme Court in 2005 and 2008, the Equal Employment Opportunity Commission has published a new rule, effective April 30, 2012, which affects most employers.  The final Rule addresses the extent to which employers may avoid liability under the Age Discrimination in Employment Act by using “reasonable factors other than age” when laying-off employees or otherwise modifying workplace rules and/or benefits that would have a discriminatory impact on groups of employees. Employers occasionally implement otherwise neutral decisions – concerning new workplace rules, benefit changes or reductions in force – that have a disparate impact on older workers compared to younger workers.  Under these circumstances, employers may be accused of unlawful age discrimination under the ADEA. 

Courts evaluating disparate impact age claims usually examine how an employer selects employees affected by a layoff or workplace rule.  Absent overt age discrimination, employers may defend against these ADEA claims if their decisions do have a disparate impact by showing they are based on reasonable factors other than age.  To establish that defense under the EEOC’s final Rule, employers must demonstrate that their employment decisions are: (i) objectively reasonable; (ii) designed to further a legitimate business purpose; and (iii) administered in a way that reasonably achieves that purpose.  The Rule emphasizes the need for an individualized consideration of the facts and circumstances surrounding the particular situation. 

It includes a list of considerations relevant to assessing reasonableness, which an employer should use, for example, to evaluate the criteria used to select affected employees.  In an effort to analyze such decisions, employers should ask:

  • Are my decision-making criteria related to my business goal?
  • Are my decision-making criteria well-defined and can they be accurately applied?
  • Are my managers and supervisors educated on my decision-making criteria, and can they apply such criteria objectively – without being influenced by age-based stereotypes?
  • Will my decision-making criteria adversely impact older workers significantly more than younger workers?
  • Can I adjust my decision-making criteria to reduce any adverse consequences to older workers?

The EEOC provided examples of how to comply, as follows:

Example 1:  A nursing home decided to reduce costs by terminating its highest paid and least productive employees.  To ensure that supervisors accurately assessed productivity and did not base evaluations on stereotypes, the employer instructed supervisors to evaluate productivity in light of objective factors such as the number of patients served, errors attributed to the employee, and patient outcomes.  Even if the practice did have a disparate impact on older employees, the employer could show that the practice was based on an RFOA because it was reasonably designed and administered to serve the goal of accurately assessing productivity while decreasing the potential impact on older workers.

Example 2: The same employer asked managers to identify the least productive employees without providing any guidance about how to do so.  As a result, older workers were disproportionately rated as least productive.  The design and administration of the practice was not reasonable because it decreased the likelihood that the employer’s stated goal would be achieved and increased the likelihood that older workers would be disadvantaged.  Moreover, accuracy could have been improved and unfair harm decreased by taking a few steps, such as those discussed in Example 1.

If you need assistance in analyzing a new workplace rule or benefit, or reducing the size of your workforce, please contact a member of the Labor and Employment team at Bingham Greenebaum Doll LLP.

To learn more about Benjamin J. Lewis and his practice, visit his profile.

  • Partner

    Ben Lewis is the Co-Chair of the Fiduciary Litigation Practice Group. He focuses his practice on complex business litigation matters, particularly disputes involving breach of fiduciary duty claims against trustees ...

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