19080 Federal Register / Vol. 77, No. 62 / Friday, March 30, 2012 / Rules and Regulations 

1 544 U.S. 228 (2005). 

2 29 U.S.C. 621–34. 

3 Meacham v. Knolls Atomic Power Lab., 554 U.S. 

84, 91–92 (2008). 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 20 

Estate Tax; Estates of Decedents 

Dying After August 16, 1954 

CFR Correction 

■ In Title 26 of the Code of Federal 

Regulations, Parts 2 to 29, revised as of 

April 1, 2011, on page 392, in 

§ 20.2053–4, at the end of paragraph 

(c)(3), Examples 1–3 are added to read 

as follows: 

§ 20.2053–4 Deduction for claims against 

the estate. 

* * * * * 

(c) * * * 

(3) * * * 

Example 1. There are three claims against 

the estate of the decedent (D) that are not 

paid and are not deductible under § 20.2053– 

1(d)(4) or paragraph (b) of this section: 

$25,000 of Claimant A, $35,000 of Claimant 

B, and $1,000,000 of Claimant C. The 

executor of D’s estate (E) may not claim a 

deduction under this paragraph with respect 

to any portion of the claim of Claimant C 

because the value of that claim exceeds 

$500,000. E may claim a deduction under 

this paragraph for the total amount of the 

claims filed by Claimant A and Claimant B 

($60,000) because the aggregate value of the 

full amount of those claims does not exceed 

$500,000. 

Example 2. There are three claims against 

the estate of the decedent (D) that are not 

paid and are not deductible under § 20.2053– 

1(d)(4) or paragraph (b) of this section; 

specifically, a separate $200,000 claim of 

each of three claimants, A, B and C. The 

executor of D’s estate (E) may claim a 

deduction under this paragraph for any two 

of these three claims because the aggregate 

value of the full amount of any two of the 

claims does not exceed $500,000. E may not 

deduct any part of the value of the remaining 

claim under this paragraph because the 

aggregate value of the full amount of all three 

claims would exceed $500,000. 

Example 3. As a result of an automobile 

accident involving the decedent (D) and A, 

D’s gross estate includes a claim against A 

that is valued at $750,000. In the same 

matter, A files a counterclaim against D’s 

estate that is valued at $1,000,000. A’s claim 

against D’s estate is not paid and is not 

deductible under § 20.2053–1(d)(4). All other 

section 2053 claims and expenses of D’s 

estate have been paid and are deductible. The 

executor of D’s estate (E) deducts $750,000 of 

A’s claim against the estate under § 20.2053– 

4(b). E may claim a deduction under this 

paragraph (c) for the total value of A’s claim 

not deducted under § 20.2053–4(b), or 

$250,000. If, instead, the value of A’s claim 

against D’s estate is $1,500,000, so that the 

amount not deductible under § 20.2053–4(b) 

exceeds $500,000, no deduction is available 

under this paragraph (c). 

* * * * * 

[FR Doc. 2012–7819 Filed 3–29–12; 8:45 am] 

BILLING CODE 1505–01–D 

EQUAL EMPLOYMENT OPPORTUNITY 

COMMISSION 

29 CFR Part 1625 

RIN 3046–AA76 

Disparate Impact and Reasonable 

Factors Other Than Age Under the Age 

Discrimination in Employment Act 

AGENCY: Equal Employment 

Opportunity Commission. 

ACTION: Final rule. 

SUMMARY: The Equal Employment 

Opportunity Commission (‘‘EEOC’’ or 

‘‘Commission’’) is issuing this final rule 

to amend its Age Discrimination in 

Employment Act (‘‘ADEA’’ or ‘‘Act’’) 

regulations concerning disparate-impact 

claims and the reasonable factors other 

than age defense (‘‘RFOA’’). The 

Commission published proposed rules 

in the Federal Register on March 31, 

2008, and February 18, 2010, for sixtyday notice-and-comment periods. After 

consideration of the public comments, 

the Commission has revised portions of 

the proposed rules and is now issuing 

a final rule covering both proposals. 

DATES: Effective April 30, 2012. 

FOR FURTHER INFORMATION CONTACT: 

Dianna B. Johnston, Senior AttorneyAdvisor, Aaron Konopasky, AttorneyAdvisor, or Davis L. Kim, AttorneyAdvisor, at (202) 663–4640 (voice) or 

(202) 663–7026 (TTY). (These are not 

toll free numbers). This final rule 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: 

Background 

On March 31, 2008, EEOC published 

in the Federal Register a Notice of 

Proposed Rulemaking (‘‘NPRM’’) to 

address issues related to the United 

States Supreme Court’s decision in 

Smith v. City of Jackson.1 73 FR 16807, 

Mar. 31, 2008. The Court ruled that 

disparate-impact claims are cognizable 

under the Age Discrimination in 

Employment Act (‘‘ADEA’’) 2 but that 

liability is precluded when the impact 

is attributable to a reasonable factor 

other than age. The NPRM proposed to 

revise 29 CFR 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’’ and 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. The 

Commission also proposed to revise 29 

CFR 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. 

The NPRM sought public comments 

on the proposed rule and also invited 

comments on whether the Commission 

should provide more information on the 

meaning of ‘‘reasonable factors other 

than age.’’ Seven of the ten commenters 

clearly supported efforts to provide 

more information. One of the seven 

suggested that reasonable factors should 

be related to job requirements or job 

performance. One commenter who 

preferred that the EEOC not address the 

matter argued that, if the RFOA 

definition is subject to regulation, then 

EEOC should consult case law for a 

definition and should draft factors 

relevant to the RFOA determination. 

One commenter opposed efforts to 

provide more information on the 

meaning of RFOA. 

As noted below, all commenters who 

addressed the proposed revision to 29 

CFR 1625(d) supported it. Four 

commenters endorsed the proposal as 

written and two generally supported the 

section but suggested changes to the 

first sentence. For the reasons explained 

below, the final rule, which has been 

redesignated 1625.7(c), retains the 

proposal’s substantive language. 

Five commenters supported the 

proposed revision to 29 CFR 1625(e) 

and four opposed it. The commenters 

who opposed it argued that plaintiffs, 

not employers, should bear the RFOA 

burden of persuasion. As noted below, 

the final rule, which has been 

redesignated 1625.7(d), continues to 

place the burden of persuasion on the 

employer because the Supreme Court 

agreed that the employer has the RFOA 

burden of persuasion.3

Subsequently, on February 18, 2010, 

EEOC published in the Federal Register 

a second NPRM to address the meaning 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 77, No. 62 / Friday, March 30, 2012 / Rules and Regulations 19081 

4 Id. at 96. 

5 Id. at 101. 

6 507 U.S. 604 (1993). 

7 29 U.S.C. 623(f). 

8Smith, 544 U.S. at 239. 

9The applicability of a statutory defense to a 

claim depends on whether the defense 

appropriately responds to the facts raised. For 

example, the ‘‘bona fide occupational qualification’’ 

(‘‘BFOQ’’) defense in section 4(f)(1) applies to 

facially discriminatory policies, not to neutral 

practices. See Meacham, 554 U.S. at 92. The 

NPRMs proposed to revise section 1625.7 only, 

which is confined to the applicability of the RFOA 

defense and did not propose changes to other 

regulatory sections that apply to the ADEA’s other 

affirmative defenses. See, e.g., 29 CFR 1625.6 

(BFOQ), 1625.8 (seniority systems), 1625.10 

(employee benefit plans). The regulations do not 

preclude an employer from asserting any statutory 

defense that responds to a particular claim. It 

Continued 

of ‘‘reasonable factors other than age.’’ 

75 FR 7212, Feb. 18, 2010. The 

Commission noted that, given public 

comments and the Supreme Court 

decisions in Smith and Meacham, it was 

issuing the NPRM ‘‘before finalizing its 

regulations concerning disparate impact 

under the ADEA.’’ The NPRM proposed 

to revise 29 CFR 1625.7(b) to state that 

the RFOA determination depends on the 

facts and circumstances of each specific 

situation. It defined a reasonable factor 

as one that is objectively reasonable 

when viewed from the position of a 

reasonable employer under like 

circumstances. It provided that the 

RFOA defense applies only if the 

challenged practice is not based on age. 

In addition, the NPRM provided nonexhaustive lists of factors relevant to 

whether an employment practice is 

reasonable and whether a factor is 

‘‘other than age.’’ 

In response to the February 2010 

NPRM, EEOC received 27 comments 

from groups and individuals and more 

than 2,300 facsimiles that were similar 

in form and content. Two commenters 

on the February 2010 NPRM suggested 

that the Commission issue a new NPRM 

if it made any changes to the material 

contained in the March 2008 NPRM. 

One of the two also suggested the 

publication of a new NPRM if the EEOC 

offered new justifications for the 

material contained in the February 2010 

NPRM. The other commenter suggested 

that a new NPRM clarify whether the 

2008 and 2010 documents should be 

read in conjunction. 

The Commission does not believe that 

publication of a new NPRM is 

necessary. The Commission has 

considered all comments received in 

response to both notices of proposed 

rulemaking and has made appropriate 

changes to the proposed rules in 

response to those comments. This 

document sets out the revised 

paragraphs of §§ 1625.7(b) through (e). 

Because §§ 1625.7(a) and (f) remain 

unchanged, they are not reprinted 

herein. 

Some commenters on the February 

2010 NPRM, including those who 

submitted form facsimiles, expressed 

concern that the EEOC’s approach to 

RFOA would place significant burdens 

on employers. They argued that the rule 

would lead to unwarranted scrutiny of 

business decisions, permit secondguessing of routine decisions, and make 

it harder for employers to defend against 

frivolous litigation. Other commenters 

thought that the rule presented a fair, 

workable approach to RFOA. 

The ADEA and disparate-impact 

analysis by definition require some 

scrutiny of employer practices that 

disproportionately harm older workers. 

As the Supreme Court held, employers 

must prove that such practices are based 

on reasonable factors other than age 

once plaintiffs have identified a specific 

employment practice that has a 

significant disparate impact.4 In holding 

that the RFOA is an affirmative defense, 

the Supreme Court recognized that 

scrutiny of employer decisions that 

cause an adverse impact is warranted, as 

employers must persuade ‘‘factfinders 

that their choices are reasonable’’ and 

that ‘‘this will sometimes affect the way 

employers do business with their 

employees.’’ 5

The EEOC’s proposed rule was 

designed to conform existing regulations 

to recent Supreme Court decisions and 

to provide guidance about the 

application of the RFOA affirmative 

defense. It was not intended to impose 

unwarranted burdens on employers. 

Nonetheless, the Commission 

recognizes that some commenters 

interpreted the proposed rule as 

imposing significant burdens by 

requiring employers to meet all of the 

factors relevant to the RFOA 

determination. As explained below, the 

Commission has revised the rule to 

clarify that the factors are not required 

elements or duties, but considerations 

that are manifestly relevant to 

determining whether an employer 

demonstrates the RFOA defense. 

Some commenters argued that the 

proposed rule improperly imported 

Title VII standards into ADEA disparateimpact analysis and conflicted with the 

Supreme Court decisions in Smith, 

Meacham, and Hazen Paper Co. v. 

Biggins.6 Other commenters believed 

that the proposed rule was consistent 

with the statute and relevant case law. 

The Commission, which disagrees with 

some commenters’ interpretations of the 

statute and Supreme Court decisions, 

has addressed their comments in the 

context of specific sections of the rule. 

For the reasons explained below, the 

Commission believes that the rule is 

consistent with the ADEA and case law 

interpreting the statute. Where 

appropriate, the Commission has 

revised the rule to make this clearer. 

Section-by-Section Analysis 

Section 1625.7(b) 

Former section 1625.7(c) has been 

redesignated 1625.7(b). The text of the 

paragraph remains unchanged. 

Section 1625.7(c) 

Section 1625.7(c) revises current 

section 1625.7(d). The 2008 proposed 

rule stated that any employment 

practice that has an age-based adverse 

impact on individuals within the 

protected age group is discriminatory 

unless the practice is justified by a 

reasonable factor other than age. It also 

stated that the individual challenging 

the practice is responsible for isolating 

and identifying the specific employment 

practice responsible for the adverse 

impact. 

All of the commenters who addressed 

this section supported it. Four of them 

endorsed the section as written. Two of 

them generally supported the section 

but suggested changes to the first 

sentence. One commenter argued that 

the first sentence of the proposed rule 

inappropriately implied that the RFOA 

defense is the only defense applicable to 

disparate-impact claims under the 

ADEA. The commenter asserted that, 

although the Smith decision held that 

RFOA is an appropriate test for 

determining the lawfulness of an 

employment practice that has an agebased disparate impact, it did not hold 

that it was the only test. According to 

the commenter, section 4(f) 7 of the 

ADEA permits other practices that 

might have a disparate impact on 

members of the protected age group. 

The commenter did not offer examples 

of such practices or otherwise explain 

how other defenses might apply in the 

disparate-impact context. 

The final rule, which has been 

redesignated 1625.7(c), retains the 

proposed language. The Supreme Court 

relied on the RFOA provision to 

conclude that the ADEA prohibits 

disparate-impact discrimination.8 The 

Court’s determination that ADEA 

disparate-impact claims are cognizable 

because of the RFOA provision logically 

leads to the conclusion that RFOA is the 

defense to such claims. As the Court 

explained in Meacham, the RFOA 

defense fits 9 as the appropriate defense 


sroberts on DSK5SPTVN1PROD with RULES
19082 Federal Register / Vol. 77, No. 62 / Friday, March 30, 2012 / Rules and Regulations 

should be noted that the ADEA’s affirmative 

defenses in section 4(f)(1) (BFOQ and foreign 

workplace) and section 4(f)(2) (seniority system and 

bona fide employee benefit plan) structurally and 

historically apply to intent-based claims. See, e.g., 

29 U.S.C. 623(f)(1), (2). See Trans World Airlines, 

Inc. v. Thurston, 469 U.S. 111, 121 (1985) (BFOQ 

and seniority system defenses raised to age-based 

denial of transfers); Mahoney v. Radio Free Europe/ 

Radio Liberty, Inc., 47 F.3d 447 (DC Cir. 1995) 

(holding that foreign workplace defense applied to 

age-based mandatory retirement provision). 

10 Meacham, 554 U.S. at 93. 

11 Id. at 95. 

12See Smith v. City of Jackson, 544 U.S. 228 

(2005). 

13 554 U.S. 84, 97 (2008). 

14 544 U.S. at 238–39. Although the majority 

opinion specifically rejected Justice O’Connor’s 

view of the RFOA as a ‘‘safe harbor analogous to 

the legitimate nondiscriminatory reason (LNR) 

justification,’’ it did not respond to her contention 

that the ‘‘RFOA provision also plays a distinct (and 

clearly nonredundant) role in ‘mixed-motive’ 

cases.’’ 544 U.S. at 253. Thus, the majority’s 

phrasing that the RFOA provision ‘‘plays its 

principal role’’ in disparate-impact cases seems to 

refer to the notion that it might have a role in 

mixed-motives cases. Any such role has been 

obviated, however, by the Court’s subsequent 

holding that the ADEA does not permit ‘‘mixedmotives’’ claims. Gross v. FBL Financial Servs. Inc., 

557 U.S. 167 (2009). 

15 544 U.S. at 238. 

16The determination of whether an employer 

establishes a ‘‘reasonable factors other than age’’ 

defense is a jury question. See EEOC v. Allstate Ins. 

Co., 458 F. Supp.2d 980, aff’d, 528 F.3d 1042 (8th 

Cir.), reh’g en banc granted and opinion vacated on 

other grounds (Sept. 8, 2008). 

to a disparate-impact claim because the 

age-neutral employment practice 

causing the unlawful impact is ‘‘other 

than age’’ and ‘‘otherwise 

prohibited.’’ 10

Another commenter objected to the 

use of the term ‘‘justified.’’ The 

commenter asserted that the term is 

closely associated with Title VII’s 

business-necessity test and that its use 

could cause confusion between the 

concepts of business necessity and 

RFOA. The final rule retains the term 

‘‘justified.’’ Use of this term is 

consistent with the Meacham decision, 

which noted that the language of section 

4(f)(1) ‘‘refers to an excuse or 

justification for behavior that, standing 

alone, violates the statute’s 

prohibition.’’ 11 It is also consistent with 

29 CFR 1625.7(b), the text of which has 

not been changed. The term ‘‘justified’’ 

designates the party who bears the 

burden of proof, not the content of the 

defense. There is no question that the 

RFOA standard is lower than the 

business-necessity standard, as the rule 

makes clear. 

The Commission has simplified the 

language in the second sentence of 

paragraph 1625.7(c). The sentence now 

refers to the employment practice ‘‘that 

allegedly causes’’ statistical disparities 

rather than the employment practice 

‘‘that is allegedly responsible for’’ the 

disparities. 

Paragraph 1625.7(c) reflects the 

Supreme Court’s conclusions that 

disparate-impact claims are cognizable 

under the ADEA, that the individual 

alleging disparate impact bears the 

burden of identifying the specific 

employment practice causing the 

alleged impact, and that the RFOA 

defense is the appropriate standard for 

determining the lawfulness of a practice 

that disproportionately affects older 

workers.12

Section 1625.7(d) 

Section 1625.7(d) revises current 

section 1625.7(e). The proposed rule 

stated that, when the RFOA exception is 

raised, the employer has the burden of 

showing that a reasonable factor other 

than age exists factually. Five 

commenters supported the proposal, 

and four objected to placing the burden 

of proof on the employer. One 

commenter noted that the term ‘‘exists 

factually’’ was ambiguous and likely to 

lead to confusion. 

Subsequently, in Meacham v. Knolls 

Atomic Power Laboratory, the Supreme 

Court confirmed that the employer 

defending an ADEA claim of disparate 

impact has the RFOA burden of proof, 

i.e., the burden of persuasion as well as 

production.13 The Commission has 

revised the paragraph, which has been 

redesignated 1625.7(d), to reflect the 

Supreme Court’s holding that the RFOA 

provision is an affirmative defense in 

disparate-impact cases for which the 

employer bears the burdens of 

production and persuasion. To avoid 

confusion, the Commission has deleted 

the phrase ‘‘exists factually.’’ 

The Commission also has revised the 

rule to clarify that the RFOA affirmative 

defense is unavailable in disparatetreatment cases. In Smith, the Court 

rejected the argument that the RFOA 

exemption acted simply as a ‘‘safe 

harbor’’ in disparate-treatment cases.14

As the Supreme Court explained in 

Smith,15 the ‘‘other than age’’ element of 

the RFOA provision makes the defense 

inapplicable to a claim conditioned on 

an age-based intent to discriminate. 

Section 1625.7(e) 

Section 1625.7(e) revises current 

section 1625.7(b). The proposed rule 

noted that whether a differentiation is 

based on reasonable factors other than 

age must be decided on the basis of all 

the particular facts and circumstances 

surrounding each individual situation. 

The final rule retains this language, 

which emphasizes that the RFOA 

determination involves a fact-intensive 

inquiry.16 For organizational purposes, 

the Commission has changed the order 

of the sentences in the paragraph. 

The proposed rule divided the 

discussion of ‘‘reasonable factors other 

than age’’ into two paragraphs, 

‘‘reasonable’’ and ‘‘factors other than 

age,’’ and listed factors relevant to each 

paragraph. The ‘‘reasonable’’ paragraph 

noted that a reasonable factor is one that 

is objectively reasonable when viewed 

from the position of a reasonable 

employer (i.e., a prudent employer 

mindful of its responsibilities under the 

ADEA) under like circumstances. It 

stated that an employer must show that 

an employment practice was reasonably 

designed to achieve a legitimate 

business purpose and was administered 

in a way that reasonably achieves that 

purpose in light of the facts that were 

known or should have been known to 

the employer. It included a nonexhaustive list of factors relevant to 

whether an employment practice is 

reasonable. 

The ‘‘factors other than age’’ 

paragraph noted that the RFOA defense 

applies only if the practice was not 

based on age. It stated that, in the 

typical disparate-impact case, the 

practice is based on an objective nonage factor and the only question is 

whether the practice is reasonable. The 

paragraph noted, however, that a 

disparate impact may be based on age 

when decision makers are given 

unchecked discretion to engage in 

subjective decision making and, as a 

result, act on the basis of conscious or 

unconscious age-based stereotypes. It 

included a non-exhaustive list of factors 

relevant to whether a factor is other than 

age. 

Factors Other Than Age 

Some commenters argued that the 

‘‘other than age’’ paragraph conflated 

disparate treatment and disparate 

impact and improperly shifted the 

burden of proof by requiring the 

employer to prove that the challenged 

employment action was not based on 

age. They also argued that the paragraph 

conflicted with Meacham’s statement 

that the RFOA defense assumes that a 

non-age factor is at work. 

In response to comments, and to 

ensure that the rule is not misconstrued 

as placing a disparate-treatment burden 

of proof on employers, the Commission 

has revised the discussion into a 

subsection, which has been 

redesignated 1625.7(e)(1)–(3), 

addressing the term ‘‘reasonable factors 

other than age.’’ The Commission also 

has revised the lists into a single, nonexhaustive description of considerations 

relevant to the RFOA defense. 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 77, No. 62 / Friday, March 30, 2012 / Rules and Regulations 19083 

17 29 U.S.C. 623(f)(1); see also Smith, 544 U.S. at 

239 (noting that the RFOA defense ‘‘preclud[es] 

liability if the adverse impact was attributable to a 

nonage factor that was ‘reasonable’ ’’). When an 

employer asserts purportedly neutral criteria, the 

RFOA defense is not available if age is a component 

of the employer’s practice or policy. See, e.g., City 

of Los Angeles, Dept. of Water & Manpower v. 

Manhart, 435 U.S. 702 (1978) (rejecting employer’s 

assertion of neutral criterion of ‘‘longevity’’ where 

sex determined longevity). 

18See 29 CFR 1625.7. 

19Report of the Sec’y of Labor, The Older 

American Worker: Age Discrimination in 

Employment 15–17 (1965), reprinted in U.S. EEOC, 

Leg. History of the ADEA 32–34 (1981) (discussing 

‘‘[a] broad range of personnel programs and 

practices [that] affect the employment of the older 

worker, although they were not developed for this 

purpose’’) (hereinafter ‘‘Wirtz Report’’). 

20See, e.g., Maresco v. Evans Chemetics, 964 F.2d 

106, 115 (2d Cir. 1992); Abbott v. Fed. Forge, Inc., 

912 F.2d 867, 872–77 (6th Cir. 1990); Leftwich v. 

Harris-Stowe State Coll., 702 F.2d 686 (8th 

Cir.1983); Geller v. Markham, 635 F.2d 1027 

(2d Cir.1980). 

21 507 U.S. 604 (1993). 

22See, e.g., Mullin v. Raytheon Co., 164 F.3d 696 

(1st Cir. 1999); Ellis v. United Airlines, Inc., 73 F.3d 

999, 1006–10 (10th Cir. 1996); EEOC v. Francis W. 

Parker Sch., 41 F.3d 1073, 1077–78 (7th Cir. 1994). 

But see Frank v. United Airlines, Inc., 216 F.3d 845, 

856 (9th Cir. 2000) (disparate-impact claims 

cognizable under ADEA); Criley v. Delta Air Lines 

Inc., 119 F.3d 102, 105 (2d Cir. 1997) (same); Smith 

v. City of Des Moines, 99 F.3d 1466, 1470 (8th Cir. 

1996) (same). 

23See Smith, 544 U.S. at 235 n.5 (quoting Wirtz 

Report’s discussion of employment standards that 

unfairly disadvantage older workers); cf. Faragher 

v. City of Boca Raton, 524 U.S. 775, 808–09 (1998) 

(rejecting employer’s argument that it should not be 

held liable for negligently failing to promulgate 

anti-harassment policy where EEOC regulations 

advised employers to take all steps necessary to 

prevent harassment and holding as a matter of law 

that employer did not exercise reasonable care to 

prevent sexual harassment). 

24Staub v. Proctor Hosp., 131 S. Ct. 1186, 1191 

(2011) (citing, among other decisions, Burlington 

Indus., Inc. v. Ellerth, 524 U.S. 742, 764 (1998)). 

25 524 U.S. 775, 799 (1998). In Faragher and 

Ellerth, the Court crafted a duty-of-care defense in 

hostile-environment cases without any statutory 

language directing it to do so. 

26Kolstad v. Am. Dental Ass’n, 527 U.S. 526, 538 

(1999). 

27E.g., Baskerville v. Culligan Int’l Co., 50 F.3d 

428, 432 (7th Cir. 1995) (reasonableness of 

employer’s steps to discover and correct sexual 

harassment ‘‘depends on the gravity of the 

harassment’’); see also Erickson v. Wis. Dep’t of 

Corr., 469 F.3d 600, 604 (7th Cir. 2006) (‘‘The 

greater the potential injury to the employee, the 

greater care the employer must take.’’) (citing 

Baskerville); Shager v. Upjohn Co., 913 F.2d 398, 

405 (7th Cir. 1990) (noting, in an age case, that 

discrimination constitutes a tort). 

28 Faragher, 524 U.S. at 806 (citing Albemarle 

Paper Co. v. Moody, 422 U.S. 405, 417 (1975)). 

29See Meacham v. Knolls Atomic Power Lab., 554 

U.S. 84, 101 (2008); Smith v. City of Jackson, 544 

U.S. 228, 234–5 & n.5 (2005). 

The final rule states that a reasonable 

factor other than age is a non-age factor 

that is objectively reasonable when 

viewed from the position of a prudent 

employer mindful of its responsibilities 

under the ADEA under like 

circumstances. The reference to ‘‘nonage factor’’ recognizes that ‘‘other than 

age’’ is an express part of the statutory 

RFOA defense.17

Prudent Employer 

The preamble to the proposed rule 

stated that, in light of Smith and 

Meacham, a prudent employer would 

know that the ADEA was designed in 

part to avoid the application of neutral 

standards that disproportionately affect 

older workers. One commenter, noting 

that more than thirty years had passed 

between the enactment of the ADEA and 

the Supreme Court’s determination that 

the law covered disparate-impact 

claims, questioned the Commission’s 

statement. Another commenter agreed 

with the Commission and pointed out 

that the Court had decided Smith nearly 

five years, and Meacham nearly two 

years, before publication of the NPRM. 

The Supreme Court’s decisions in 

Smith and Meacham confirmed EEOC’s 

longstanding position 18 that disparateimpact claims are cognizable under the 

ADEA and that employers have the 

burden of establishing the RFOA 

defense. The decisions also validated 

the 1965 Wirtz Report’s concern about 

‘‘institutional arrangements’’ that 

unintentionally limit the opportunities 

of older workers.19 Courts had applied 

disparate-impact analysis to ADEA 

claims for many years,20 and it was only 

after the Court’s 1993 Hazen Paper 

decision 21 that some courts held that 

disparate-impact claims were not 

cognizable under the ADEA.22

Therefore, the Commission continues to 

believe that a prudent employer mindful 

of its ADEA responsibilities should 

know that the law prohibits the use of 

neutral practices that disproportionately 

affect older workers and are not based 

on reasonable factors other than age. A 

reasonable factor other than age is one 

that an employer exercising reasonable 

care would use to avoid limiting the 

opportunities of older workers, in light 

of all the surrounding facts and 

circumstances.23

Reference to Tort Law 

The proposed rule relied on tort 

principles when discussing what 

constitutes a ‘‘reasonable’’ factor other 

than age. Some commenters thought 

that the reference to tort law was 

practical and sensible. Others, however, 

objected to the use of tort law. They 

argued that employment discrimination 

law provides sufficient guidance for 

determining whether a practice is based 

on reasonable, nondiscriminatory 

factors and that the rule inappropriately 

imports the concept of ‘‘reasonable 

employer’’ into the RFOA analysis. One 

commenter asserted that, whereas tort 

law and sexual-harassment theory 

assess reasonableness in terms of an 

individual’s efforts to avoid harm, the 

RFOA analysis assumes and permits 

disparate impact. Another commenter 

asserted that it is unfair to rely on some 

tort principles without including the 

concepts of contributory negligence and 

assumption of the risk. 

The final rule continues to refer to tort 

principles. Employment discrimination 

law includes little discussion of 

reasonableness whereas tort law 

extensively analyzes the concept. 

Indeed, the Supreme Court recently 

made clear that federal 

nondiscrimination laws are torts and 

that ‘‘when Congress creates a federal 

tort [we presume that] it adopts the 

background of general tort law.’’ 24 Prior 

to Staub, the Supreme Court noted in 

Faragher v. City of Boca Raton 25 that 

lower courts have unanimously applied 

tort negligence standards to determine 

employer liability for co-worker 

harassment. Similarly, the Court turned 

to tort principles to determine what 

mental state warrants punitive 

damages.26 Lower courts also have 

turned to tort law for guidance in 

resolving employment discrimination 

cases.27

The fundamental objective of 

employment discrimination statutes, 

‘‘like that of any statute meant to 

influence primary conduct, is * * * to 

avoid harm.’’ 28 Tort law, too, focuses on 

the duty to avoid harm and provides 

guiding principles to help understand 

reasonableness in this context. Under 

the ADEA, employers are required to 

avoid the harm of using facially neutral 

practices that impair employment 

opportunities for older workers and are 

not reasonable.29 Whether a factor is 

reasonable 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. 

The assertion that the rule should not 

refer to tort law without importing the 

concepts of contributory negligence and 

assumption of the risk into the RFOA 

analysis misapprehends the rule’s 

reference to tort law. The rule does not 

import tort principles wholesale; rather, 

it merely refers to tort law for guidance. 

Like the defense to harassment, the 

RFOA defense considers what the 

employer knew about the harm and 

what it did to correct it. Negligence 

principles as applied to co-worker 

harassment do not address the concepts 

of contributory negligence and 

assumption of the risk, and there is no 


sroberts on DSK5SPTVN1PROD with RULES
19084 Federal Register / Vol. 77, No. 62 / Friday, March 30, 2012 / Rules and Regulations 

30 McKennon v. Nashville Banner Pub. Co., 513 

U.S. 352 (1995) (the ADEA is part of a wider 

statutory scheme to protect employees in the 

workplace nationwide). Allowing an assumption-ofrisk defense would defeat the ADEA’s deterrent 

purpose; it would allow employers to avoid liability 

simply by advertising the fact that they will 

discriminate. See Smith v. Sheahan, 189 F.3d 529, 

534 (7th Cir. 1999) (dismissing the idea that 

discriminatory actions can be excused by a 

prevailing workplace culture that has included 

exclusionary practices and bigotry and stating, 

‘‘There is no assumption-of-risk defense to charges 

of workplace discrimination.’’); Jenson v. Eveleth 

Taconite Co., 130 F.3d 1287, 1292 (8th Cir. 1997) 

(holding that an employer’s liability for sex 

discrimination is not mitigated by the fact that the 

work environment was known to have an 

egregiously discriminatory culture); Williams v. 

Gen. Motors Corp., 187 F.3d 553, 564 (6th Cir. 1999) 

(‘women working in the [male-dominated] trades do 

not deserve less protection from the law than 

women working in a courthouse’).’’ 

31See Smith, 544 U.S. at 242. (‘‘Reliance on 

seniority and rank is unquestionably reasonable 

given the City’s goal of raising employees’ salaries 

to match those in surrounding communities. * * * 

[T]he City’s decision to grant a larger raise to lower 

echelon employees for the purpose of bringing 

salaries in line with that of surrounding police 

forces was a decision based on a ‘reasonable facto[r] 

other than age’ that responded to the City’s 

legitimate goal of retaining police officers.’’). 

32Kimel v. Florida Bd. of Regents, 528 U.S. 62, 

88 (2000). The Kimel Court held that the ADEA did 

not validly abrogate states’ Eleventh Amendment 

immunity from suit by private individuals because 

it ‘‘prohibits substantially more * * * than would 

likely be held unconstitutional under the * * * 

rational basis standard.’’ Id. at 86. The Court 

concluded that ‘‘[the RFOA] exception confirms, 

* * * rather than disproves, the conclusion that the 

ADEA’s protection extends beyond the 

requirements of the Equal Protection Clause.’’ Id. at 

88. 

33Smith, 544 U.S. at 253. 

34 Id. at 238–39 (rejecting Justice O’Connor’s 

argument that ‘‘the RFOA provision’s reference to 

‘reasonable’ factors serves only to prevent the 

employer from gaining the benefit of the statutory 

safe harbor by offering an irrational justification.’’ 

Id. at 253). 

35 Id. at 238–39 (rejecting Justice O’Connor’s 

contention that RFOA is safe harbor from liability, 

because employer can defeat liability in disparatetreatment case by showing that employee was 

rejected for legitimate, nondiscriminatory reason) 

(citing Texas Dep’t of Cmty. Affairs v. Burdine, 450 

U.S. 248, 254 (1981)); see also Meacham, 554 U.S. 

at 96, n.12. 

36Smith, 544 U.S. at 238–39. 

need to address those concepts in the 

RFOA context. Moreover, employees do 

not ‘‘contribute’’ (negligently or 

otherwise) to an employer’s use of an 

employment practice that has an agebased disparate impact. In addition, it 

would be contrary to the purposes of the 

anti-discrimination laws to assert that 

any employee voluntarily assumes the 

risk of being subject to discrimination.30

Design and Administration of 

Employment Practice 

The proposed rule looked at 

‘‘reasonable’’ from the position of a 

prudent employer and considered how 

the challenged employment practice is 

designed and administered. Some 

commenters agreed that the rule should 

look at how the practice is applied as 

well as at how it is designed. Other 

commenters, however, argued that this 

approach inappropriately focuses on the 

employer’s decision-making process 

rather than on the factor upon which the 

decision was based. In their view, the 

RFOA inquiry should focus on the 

factor underlying the employment 

practice, not on whether the employer 

acted reasonably in selecting the factor. 

The final rule continues to focus on 

how the employment practice is 

designed and administered. The RFOA 

defense arises after an employment 

practice has been shown to have an agebased disparate impact. In that context, 

the concept of ‘‘reasonable factor’’ 

necessarily includes consideration of 

the reasonableness of the factor’s 

application. Thus, the Smith Court 

considered not just the City of Jackson’s 

goal of retaining police officers, but also 

the design and administration of the pay 

plan used to achieve that goal.31

The way in which an employer 

applies the factor is probative of 

whether it is reasonable; a practice that 

seems reasonable in the abstract might 

not be reasonable in its application. For 

example, an employer might require 

candidates for jobs in its meatprocessing plant to pass a physical 

strength test. It would be reasonable for 

the employer to design a test that 

accurately measures the ability to 

perform the job successfully. It would 

be manifestly unreasonable, however, 

for the employer to administer the test 

inconsistently, evaluate results 

unevenly, or judge test takers 

unreliably. Similarly, although it might 

well be reasonable for an employer to 

conduct a reduction-in-force (RIF) to 

save money, if an identified 

employment practice caused older 

workers to be disparately impacted, the 

cost-cutting goal alone would not be 

sufficient to establish the RFOA 

defense. The employer would have to 

show that the practice was both 

reasonably designed to further or 

achieve a legitimate business purpose 

and administered in a way that 

reasonably achieves that purpose in 

light of the particular facts and 

circumstances that were known, or 

should have been known, to the 

employer. 

‘‘Reasonable’’ and ‘‘Rational Basis’’ 

The preamble to the proposed rule 

noted that the RFOA defense requires 

that a practice be reasonable, which is 

different from requiring only that it be 

rational. Some commenters argued that 

the RFOA standard should be a rationalbasis standard and that ‘‘reasonable’’ 

means not irrational or not arbitrary. 

Other commenters commended the 

EEOC for clarifying that the 

reasonableness test is not a rationalbasis test. 

The Commission continues to believe 

that the RFOA defense is more stringent 

than a rational-basis or non-arbitrary 

standard for several reasons. First, the 

Supreme Court has held that the RFOA 

provision ‘‘confirms that Congress, 

through the ADEA, has effectively 

elevated the standard for analyzing age 

discrimination to heightened 

scrutiny.’’ 32 In other words, the 

Supreme Court has previously 

recognized that the RFOA reflects a 

standard of proof higher than a rationalbasis standard. 

Second, proof that an action was 

rational or non-arbitrary focuses on 

whether an articulated reason is a 

pretext for intentional discrimination.33

Thus, equating the RFOA defense with 

a rational-basis standard would 

improperly conflate ADEA disparatetreatment and disparate-impact 

standards of proof. If an employer 

attempting to establish the RFOA 

defense were only required to show that 

it had acted rationally, then the 

employer would merely be required to 

show that it had not engaged in 

intentional age discrimination. In 

Smith, the Supreme Court bluntly held 

that the RFOA provision is not a 

statutory safe harbor from liability for 

disparate treatment when the employer 

merely had a rational justification for its 

actions.34

Thus, the Supreme Court concluded 

that the ADEA prohibits more than 

intentional discrimination; it also 

prohibits employers from adopting 

facially neutral practices that 

disproportionately exclude older 

workers unless the employer can prove 

that its actions were based on 

reasonable factors other than age. In 

holding that the RFOA provision is the 

defense to disparate-impact claims, the 

Supreme Court recognized that the 

RFOA defense is distinguishable in form 

and substance from the ‘‘legitimate, 

nondiscriminatory reason’’ evidence 

that the employer must produce in 

individual disparate-treatment cases.35

The RFOA defense necessarily requires 

more than merely a showing that the 

employer’s action was not irrational or 

not arbitrary.36 To adopt commenters’ 

assertions would be to nullify the Smith 

and Meacham holdings and undermine 

the intent of Congress to address ‘‘the 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 77, No. 62 / Friday, March 30, 2012 / Rules and Regulations 19085 

37 Id. at 234–35 and n.5 (‘‘just as Griggs 

recognized that the high school diploma 

requirement, which was unrelated to job 

performance, had an unfair impact on AfricanAmericans * * * the Wirtz Report identified the 

identical obstacle to the employment of older 

workers’’). 

38 FCC v. Beach Commc’ns, Inc., 508 U.S. 307, 

315 (1993) (Cable Communications Policy Act’s 

distinction between cable television facilities that 

serve separately owned buildings and those that 

serve buildings under common ownership, 47 

U.S.C. 522(7)(B), is rationally related to a legitimate 

government purpose under the Fifth Amendment’s 

Due Process Clause). 

39Nordlinger v. Hahn, 505 U.S. 1, 15 (1992) 

(taxation system focusing on acquisition value of 

real property rationally furthers legitimate state 

interests for purposes of the Equal Protection Clause 

of the Fourteenth Amendment). 

40 FCC v. Beach Commc’ns, Inc., 508 U.S. at 313. 

41See id. at 323 n.3 (‘‘Judicial review under the 

‘conceivable set of facts’ test is tantamount to no 

review at all.’’) (Stevens, J., concurring); see also W. 

Air Lines, Inc. v. Criswell, 472 U.S. 400, 422 n. 36 

(1985) (rejecting rational-basis standard for ‘‘bona 

fide occupational qualification’’ defense where, 

‘‘under a ‘rational basis’ standard a jury might well 

consider that its ‘inquiry is at an end’ with an 

expert witness’ articulation of any ‘plausible 

reaso[n]’ for the employer’s decision’’) (quoting 

United States R.R. Ret. Bd. v. Fritz, 449 U.S. 166, 

179 (1980)). 

42See Smith, 544 U.S. at 239 n.11 (2005) (finding 

it ’’ instructive’’ that, in contrast to providing an 

‘‘any other factor’’ defense under the Equal Pay Act, 

29 U.S.C. 206(d)(1), ‘‘Congress provided that 

employers could use only reasonable factors in 

defending a suit under the ADEA’’) (emphasis in 

the original). 

43EEOC Compliance Manual, Compensation 

Discrimination 10–IV.F.2 (2000) (‘‘An employer 

asserting a ‘factor other than sex’ defense also must 

show that the factor is related to job requirements 

or otherwise is beneficial to the employer’s 

business.’’); see also Aldrich v. Randolf Cent. Sch. 

Dist., 963 F.2d 520, 525–26 (2d Cir. 1992) (factor 

other than sex must be grounded in legitimate 

business-related concerns); EEOC v. J.C. Penny Co., 

843 F.2d 249, 253 (6th Cir. 1988) (factor-other-thansex defense requires a legitimate business reason); 

Glenn v. Gen. Motors Corp., 841 F.2d 1567, 1571 

(11th Cir. 1988) (defense ‘‘applies when the 

disparity results from unique characteristics of the 

same job; from an individual’s experience, training, 

or ability; or from special exigent circumstances 

connected with the business’’); Kouba v. Allstate 

Ins. Co., 691 F.2d 873, 876–77 (9th Cir. 1982) 

(employer must have an acceptable business reason 

and ‘‘must use the factor reasonably in light of the 

employer’s stated purpose as well as its other 

practices’’). But see Behm v. United States, 68 Fed. 

Cl. 395, 400–01 (Fed. Cir. 2005) (text of EPA does 

not suggest that factor other than sex must be 

business related; applying ‘‘deferential’’ rationalbasis standard to any-other-factor defense of federal 

government employer ‘‘whose business is not 

business, but government’’); Taylor v. White, 321 

F.3d 710, 720 (8th Cir. 2003) (any-other-factor 

defense does not involve a reasonableness inquiry); 

Fallon v. State of Ill., 882 F.2d 1206, 1211 (7th Cir. 

1989) (business-related reason need not be shown). 

44 42 U.S.C. 2000e–2(k)(1)(A)(i) (a particular 

employment practice that has a disparate impact 

based on race, color, religion, sex, or national origin 

is unlawful unless the employer ‘‘demonstrate[s] 

that the challenged practice is job related for the 

position in question and consistent with business 

necessity’’). 

45 29 U.S.C. 206(d)(1)(iv) (permitting sex 

discrimination in wages pursuant to a ‘‘differential 

based on any factor other than sex.’’) 

46Three commenters disagreed with the 

Commission’s statement, in the preamble to the 

proposed rule, that Title VII requires an employer 

to adopt the least discriminatory alternative. Under 

Title VII, once the employer establishes that the 

challenged practice is job related and consistent 

with business necessity, the burden shifts to the 

plaintiff to demonstrate that there is an alternative 

employment practice that the employer refuses to 

adopt. 42 U.S.C. 2000e–2(k)(1)(A)(ii), 2000e– 

2(k)(1)(C) (adopting pre-Wards Cove approach to 

‘‘alternative employment practice’’). The alternative 

must be less discriminatory and must serve the 

employer’s legitimate business needs. See 

Albemarle Paper Co. v. Moody, 422 U.S. 405, 425 

(1975); Dothard v. Rawlinson, 433 U.S. 321, 329 

(1977); see also Ricci v. DeStefano, 129 S. Ct. 2658, 

2673 (2009). As a practical matter, an employer that 

does not adopt the least discriminatory effective 

alternative proposed by the plaintiff will not prevail 

in a Title VII disparate-impact case because the 

plaintiff will be able to establish the existence of a 

less discriminatory alternative. That is not the case 

under the ADEA, whose RFOA standard is less 

stringent than Title VII’s business-necessity 

standard. Smith, 544 U.S. at 243. 

consequences of employment practices, 

not simply the motivation.’’ 37

Third, a rational basis standard would 

also undercut the Court’s recognition of 

the RFOA as an affirmative defense. 

Under a rational-basis standard, an 

action ‘‘may be based on rational 

speculation unsupported by evidence or 

empirical data.’’ 38 The decision maker 

is not required ‘‘to articulate at any time 

the purpose or rationale supporting its 

classification,’’ 39 and an action will be 

upheld ‘‘if there is any reasonably 

conceivable state of facts that could 

provide a rational basis for the 

classification.’’ 40 By that measure, the 

‘‘reasonable’’ requirement would afford 

no protection against practices that have 

an age-based disparate impact.41

Finally, equating the RFOA 

reasonableness requirement with a 

rational-basis standard would contradict 

the Smith Court’s holding that the 

‘‘reasonable’’ requirement shows that 

the RFOA provision is more stringent 

than the Equal Pay Act’s (‘‘EPA’’) ‘‘any 

other factor’’ defense.42 Indeed, 

applying the rational-basis test to the 

RFOA defense would actually make it 

less stringent than the EPA’s ‘‘any other 

factor’’ defense as the latter has been 

construed by the EEOC and some courts, 

which have taken the position that, even 

under the Equal Pay Act, an employer 

asserting an ‘‘any other factor other than 

sex’’ defense must show that the factor 

is related to job requirements or 

otherwise is beneficial to the employer’s 

business.43

‘‘Reasonable’’ and ‘‘Business Necessity’’ 

The February 2010 Notice of Proposed 

Rulemaking emphasized that the 

proposed RFOA standard was lower 

than the business-necessity test of Title 

VII of the Civil Rights Act of 1964,44 but 

higher than the Equal Pay Act’s ‘‘any 

other factor’’ test.45 It also stated that the 

factors relevant to the reasonableness 

inquiry recognize that the RFOA 

standard is less stringent than the 

business-necessity standard and that 

disparate-impact liability is narrower 

under the ADEA than under Title VII. 

Several commenters expressed the 

view that the proposed rule 

impermissibly imposed Title VII’s 

business-necessity test on ADEA 

defendants. One of the commenters 

suggested that EEOC revise the language 

to state that the factors ‘‘may’’ be 

relevant to the RFOA determination. 

The commenters’ arguments generally 

centered on the mistaken view that the 

factors were requirements, and that the 

factors concerning employers’ efforts to 

assess impact, minimize harm, and 

weigh options amounted to a businessnecessity requirement. 

In response, the Commission has 

made several changes. To address the 

commenters’ view that the factors were 

required elements or duties, the rule 

now refers to ‘‘considerations’’ relevant 

to demonstrating the defense. The rule 

sets forth a non-exhaustive description 

of relevant considerations, rather than a 

list of duties to be met. Because the 

RFOA determination involves a factintensive inquiry, the importance of a 

consideration depends on the facts of 

the particular situation. Based on the 

specific facts raised, one or two 

considerations may be sufficient to 

establish the RFOA defense. 

In addition, the rule expressly states 

that no specific consideration or 

combination of considerations need be 

present for a differentiation to be based 

on reasonable factors other than age and 

that the presence of one consideration 

does not automatically establish the 

defense. Just as the absence of a 

consideration does not automatically 

defeat the RFOA defense, so too the 

presence of one consideration does not 

necessarily prove that a differentiation 

is based on reasonable factors other than 

age. Rather, as the rule makes clear, the 

RFOA determination depends on all of 

the facts and circumstances in each 

particular situation. 

The Commission disagrees that 

consideration of efforts to assess impact, 

reduce harm, and weigh options 

suggests a Title VII business-necessity 

analysis. However, the Commission has 

deleted the factor concerning the 

availability of options because some 

commenters misconstrued the factor as 

imposing the Title VII standard that the 

employer must search for and select the 

least discriminatory alternative.46

Removal of the factor does not mean 

that the availability of measures to 

reduce harm is irrelevant to 


sroberts on DSK5SPTVN1PROD with RULES
19086 Federal Register / Vol. 77, No. 62 / Friday, March 30, 2012 / Rules and Regulations 

47 42 U.S.C. 2000e–2(k)(1)(A)(i). 

48Albemarle Paper Co. v. Moody, 422 U.S. 405, 

431, 434 (1975). The business-necessity standard 

has been articulated in other ways. See, e.g., 

Dothard v. Rawlinson, 433 U.S. 321, 331 n.14 

(1977) (‘‘necessary to safe and efficient job 

performance’’); Griggs v. Duke Power Co., 401 U.S. 

424, 432 (1971) (employment practice must bear a 

‘‘manifest relationship to the employment in 

question’’); El v. Se. Pa. Trans. Auth., 479 F.3d 232, 

242, 245 (3d Cir. 2007) (practice at issue must 

‘‘accurately—but not perfectly—ascertain[] an 

applicant’s ability to perform successfully the job in 

question’’). 

49 It is important to emphasize that physicalfitness requirements must be relevant to successful 

performance of the particular job, so as to avoid the 

use of such tests to restrict the hiring of older 

workers when there is no basis for such 

requirements, as the 1965 Wirtz Report 

documented. See Wirtz Report at 4. Subjecting only 

older workers to a particular test would be facially 

discriminatory and the RFOA defense would not 

apply. See, e.g., EEOC v. Massachusetts, 987 F.2d 

64, 73 (1st Cir. 1993) (rejecting RFOA defense to 

practice requiring employees to pass physical 

fitness exam at age 70). 

reasonableness. There may be 

circumstances in which the availability 

of a measure that would noticeably 

reduce harm was or should have been 

so readily apparent that it would be 

manifestly unreasonable for the 

employer to fail to use it. The removal 

of the factor does, however, make clear 

that an employer need not search for 

alternatives and use the one that is least 

discriminatory. These changes, along 

with the clarification that none of the 

considerations is a required element of 

the RFOA defense, make clear the 

distinction between the ADEA RFOA 

standard and Title VII’s businessnecessity standard. 

Under Title VII, if a particular 

employment practice has a disparate 

impact based on race, color, religion, 

sex, or national origin, then the 

employer must ‘‘demonstrate that the 

challenged practice is job related for the 

position in question and consistent with 

business necessity.’’ 47 An employer 

could meet the Title VII standard by 

proving, for example, that a test has 

been validated to show that it is 

‘‘predictive of * * * important elements 

of work behavior which comprise * * * 

the job.’’ 48 In contrast, the RFOA 

defense involves the less demanding 

standard of reasonableness. 

Application of the rule’s 

considerations to a physical fitness 

test 49 illustrates the difference between 

the RFOA and business-necessity 

standards. For example, suppose a 

security company mandated that all 

applicants for security guard positions 

must be able to run a half mile in three 

minutes and do 35 push ups in a row. 

The company’s stated purpose is to 

ensure that guards are physically able to 

pursue and apprehend suspects 

(consideration (i)). The test defines and 

measures the factors of speed and 

strength and provides clear guidance on 

how the test is to be applied accurately 

and fairly (consideration (ii)). The 

employer performs a disparate-impact 

analysis and finds that large percentages 

of older workers and women cannot 

pass the test. (consideration (iv)). The 

employer changes the test so that 

performance standards vary based on 

age and gender, when it learns that a 

successful competitor firm uses such 

standards and is attracting a large pool 

of qualified candidates. Although the 

test continues to disproportionately 

exclude older and female applicants, it 

excludes fewer of them and still 

produces qualified hires (consideration 

(v)). 

The security company would not 

need to perform a validation study to 

establish the RFOA defense. In contrast, 

to establish a Title VII businessnecessity defense, the employer would 

need to validate the test to show that it 

accurately measured safe and efficient 

performance. In addition, even if the 

employer could show that the test was 

validated, proof by female applicants 

that there were less discriminatory 

alternatives that the employer refused to 

adopt would impose liability under 

Title VII. This is just one example of 

how the RFOA standard is less stringent 

than Title VII’s business-necessity 

standard. 

Relevant Considerations 

The proposed rule set forth nonexhaustive lists of factors relevant to 

whether an employment practice is 

reasonable and is based on factors other 

than age. Although, as discussed above, 

some commenters objected to some of 

the factors, other commenters found the 

lists useful and generally supported 

them. One commenter suggested that 

EEOC provide guidance on the types of 

evidence relevant to the factors and 

argued that the evidence should be 

objective, in existence before litigation, 

and more than mere self-serving 

statements. Another commenter stated 

that no single factor should be 

dispositive of whether an employment 

practice is reasonable. 

Given the context-specific nature of 

the RFOA inquiry, it is not possible to 

specify every type of relevant evidence. 

All relevant evidence should be 

considered, and such evidence 

necessarily will vary according to the 

facts of each particular situation. 

Depending on the circumstances, 

relevant evidence might include 

documents describing the business 

purpose underlying the challenged 

practice, copies of any written guidance 

that the employer provided to decision 

makers, explanations of how the 

employer implemented the practice, and 

impact-related studies that the employer 

may have conducted. Objective 

evidence that was in existence prior to 

litigation will carry more weight than 

mere self-serving statements or after-thefact rationales. 

The first ‘‘reasonable’’ factor listed in 

the proposed rule concerned whether 

the employment practice and its 

implementation were common business 

practices. One commenter supported 

this factor because, as a factor rather 

than a required element, it would allow 

employers to defend their actions while 

ensuring that discriminatory practices 

that may be common in an industry are 

not given weight. Other commenters 

opposed the factor. Some commenters 

argued, for example, that the factor 

could stifle employer creativity and was 

not relevant to whether a particular 

employer’s practice was reasonable 

under particular circumstances. Others 

argued that the commonality of a 

practice has no bearing on whether it is 

discriminatory and expressed concern 

that the factor could allow an employer 

to defend a practice when there is 

industry-wide discrimination. One 

commenter suggested that the factor 

should refer to common practices in 

comparable settings rather than to 

common business practices. 

In light of the variety of concerns 

about this factor, the Commission has 

deleted it from the relevant 

considerations. 

Section 1625.7(e)(2)(i) 

The second item in the proposed 

rule’s list of factors relevant to 

‘‘reasonableness’’ concerned the extent 

to which the factor is related to the 

employer’s stated business goal. One 

commenter thought that the factor 

encompassed the essence of the RFOA 

defense but suggested that the term 

‘‘stated’’ be deleted. Another commenter 

thought that the term ‘‘stated’’ was 

vague and wondered whether it meant 

that an employer must state its goal in 

advance. 

The Commission has revised the 

provision, which has been redesignated 

1625.7(e)(2)(i), to refer to an employer’s 

‘‘stated business purpose,’’ which is the 

legitimate business purpose that the 

employer had at the time of the 

challenged employment practice. This 

approach is consistent with Smith, 

which expressly noted that the City’s 

‘‘stated purpose * * * was to ‘attract 

and retain qualified people, provide 

incentive for performance, maintain 

competitiveness with other public 

sector agencies and ensure equitable 

compensation to all employees 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 77, No. 62 / Friday, March 30, 2012 / Rules and Regulations 19087 

50Smith, 544 U.S. at 231. 51 Id. at 242. 52 Faragher v. City of Boca Raton, 524 U.S. 775 

(1998) (employer not liable for supervisor 

harassment that did not result in tangible 

employment action if employer exercised 

reasonable care to prevent and promptly correct any 

harassment and employee unreasonably failed to 

complain to management or to avoid harm 

otherwise). 

53Robert McCann & Howard Giles, Ageism in the 

Workplace: A Communication Perspective, in 

Ageism: Stereotyping and Prejudice Against Older 

Persons 163, 172 (Todd D. Nelson ed. 2002) (citing 

J.O. Britton & K.R. Thomas, Age and Sex as 

Employment Variables: Views of Employment 

Service Interviewers, 10 J. Emp. Counseling 180 

(1973); S. Cole, Age and Scientific Performance, 84 

a.m. J. Sociology 958 (1979); A. Roe, Changes in 

Scientific Activities with Age, 150 Sci. 313 (1965); 

P. E. Panek et al., Age Differences in Perceptual 

Style, Selective Attention, and Perceptual-Motor 

Reaction Time, 4 Experimental Aging Res. 377 

(1978); N. Munk, Finished at 40, 139 Fortune 50 

(1999)). 

54See generally McCann & Giles, supra note 53, 

at 172 (citing J. A. Forteza & J. M Prieto, Aging and 

Work Behavior, in Handbook of Industrial and 

Organizational Psychology 447 (H. C. Triandis et al. 

eds., 2d ed. vol. 4, 1994); D. C. Park, Aging, 

Cognition, and Work, 7 Hum. Performance 181 

(1994); P. Warr, Age and Employment, in Handbook 

of Industrial and Organizational Psychology, supra, 

at 485). 

55McCann & Giles, supra note 53, at 173 (citing 

Commonwealth Fund, The Untapped Resource: 

Americans Over 55 at Work (1993)). 

56McCann & Giles, supra note 53, at 173 (citing 

J. Eisenberg, Relationship Between Age and Effects 

Upon Work: A Study of Older Workers in the 

Garment Industry, Dissertation Abstracts Int’l 41 

(4A) (1980)). 

57McCann & Giles, supra note 53, at 173 (citing 

W. H. Holley et al., Age and Reactions to Jobs: An 

Empirical study of Paraprofessional Workers, 1 

Aging & Work 33 (1978)). 

58See Richard A. Posthuma & Michael A. 

Campion, Age Stereotypes in the Workplace: 

Common Stereotypes, Moderators, and Future 

Research Directions, 35 J. Mgmt. 158, 172 (2009) 

(availability and use of job-related information 

reduces the effects of age-based stereotypes). 

59See, e.g., Weyers v. Lear Operations Corp., 359 

F.3d 1049, 1056 n.6 (8th Cir. 2004) (same analysis 

applies to hostile-environment claims under ADEA 

and Title VII); Terry v. Ashcroft, 336 F.3d 128, 148– 

50 (2d Cir. 2003) (same); EEOC Enforcement 

Guidance: Vicarious Employer Liability for 

Unlawful Harassment by Supervisors II (June 18, 

1999) (Faragher vicarious-liability rule applies to 

unlawful harassment on all covered bases, 

including age). 

regardless of age, sex, race and/or 

disability.’ ’’ 50 The City reasonably 

achieved this purpose by raising the 

salaries of junior officers to make them 

competitive with those of comparable 

positions in the region.51 Similarly, an 

employer whose stated purpose is to 

hire qualified candidates could 

reasonably achieve this purpose by 

ensuring that its hiring criteria 

accurately reflect job requirements. 

Section 1625.7(e)(2)(ii) 

The proposed rule said that the extent 

to which the employer took steps to 

define and apply the factor accurately 

and provided training, guidance, and 

instruction to managers was relevant to 

reasonableness. Three commenters 

supported this factor. One of them noted 

that training and guidance are sound 

business practices that are not 

burdensome. Two commenters objected 

to this factor. One argued that this factor 

is not necessary because it is subsumed 

under the factor concerning the 

employment practice’s relation to the 

employer’s stated business goals. The 

other commenter argued that, although 

providing guidance and training to 

managers may be good business practice 

and may enhance an employer’s RFOA 

defense, the ADEA does not require 

employers to take such steps. 

The proposed rule also included 

consideration of the extent to which 

supervisors were given guidance or 

training in the ‘‘other than age’’ section. 

Two commenters supported this factor 

as written, one commenter asked for 

guidance on the type of training that 

will help supervisors to make decisions 

based on objective rather than subjective 

criteria, and one commenter argued that 

an employer should lose its affirmative 

defense if the employer does not train 

its managers on subjective decision 

making. One commenter opposed this 

factor and suggested that EEOC work 

with stakeholders to determine whether 

an employer’s preventive training 

measures should be a Faragher-type 

defense 52 to ADEA disparate-treatment 

claims. Another commenter asked how 

often training should be conducted and 

suggested that training should be 

required for all protected bases if it is 

required for age discrimination. 

As discussed, the Commission has 

eliminated the ‘‘other than age’’ section 

and has combined the factors relating to 

guidance and instruction of managers 

into a single consideration, which has 

been designated 1625.7(e)(2)(ii). The 

Commission has deleted the reference to 

‘‘took steps’’ to make clear that the 

consideration focuses on how the 

employer actually defined and applied 

its criteria. Through this consideration, 

the final rule recognizes the importance 

of defining an employment criterion 

carefully and educating managers and 

supervisors on how to apply it fairly. 

As commenters noted, it is in the 

employer’s interest to define and apply 

accurately the criteria on which it relies. 

Ensuring that decision makers 

understand and know how to apply the 

employer’s standard will help to ensure 

that the employer has the work force it 

wants. For example, research 

demonstrates that older workers are 

commonly perceived to be less 

productive than younger workers but 

that such stereotypes are inaccurate.53

In fact, studies show a nonexistent or 

slightly positive relationship between 

job performance and older age.54 The 

output of older workers is equal to that 

of younger workers; 55 older workers are 

better in terms of accuracy and 

steadiness of work output and output 

level; 56 and they outperform younger 

workers in the area of sales.57 Thus, 

educating decision makers to be aware 

of, and avoid, age-based stereotypes can 

help to ensure that they apply the 

employer’s standard accurately and do 

not unfairly limit the opportunities of 

older workers. 

For example, an employer seeking to 

hire individuals with technological 

skills could instruct decision makers on 

the particular skills (e.g., experience 

using specific software or developing 

certain types of programs) that it needs. 

Similarly, rather than simply asking 

managers to assess an employee’s 

training potential, an employer could 

instruct managers to identify the times 

the employee has received or sought 

training. Using objective criteria as 

much as possible and providing 

decision makers with specific jobrelated information can help to 

overcome age-based stereotypes.58

The rule does not require employers 

to train their managers. First, by 

referring not just to training but to 

‘‘guidance or training,’’ it recognizes 

that employers use a wide range of 

measures to convey their expectations to 

managers, depending on the 

circumstances. For example, a small 

employer might reasonably rely entirely 

on brief, informal, verbal instruction. 

Second, as with all of the considerations 

in section 1625.7(e), this consideration 

is a not a required duty. Instead, its 

importance depends on the particular 

facts raised. Thus, an employer’s RFOA 

defense will not necessarily fail 

because, for example, the employer did 

not train managers on how to apply its 

standard. On the other hand, steps such 

as carefully defining a standard and 

instructing managers on how to apply it 

are evidence that the employer’s actions 

were based on reasonable factors other 

than age and will support the 

employer’s defense. 

The Commission does not agree with 

the commenter’s suggestion that 

preventive training measures should be 

a Faragher-type defense. Employers 

have a Faragher-type defense to 

harassment based on age.59 An 

employer’s training measures do not 

constitute a defense to disparate 

treatment or disparate impact, but they 

should go a long way toward preventing 

conscious or unconscious bias from 

infecting decision making in the first 


sroberts on DSK5SPTVN1PROD with RULES
19088 Federal Register / Vol. 77, No. 62 / Friday, March 30, 2012 / Rules and Regulations 

60 487 U.S. 977 (1988). 

61 554 U.S. at 96. 

62Watson, 487 U.S. at 990. 

63 Id. 

64 Id. 

65 Id. at 987; see also id. at 998 (factors such as 

cost of alternative relevant to ‘‘whether the 

challenged practice has operated as the functional 

equivalent of a pretext for discriminatory 

treatment’’); accord Wards Cove Packing Co. v. 

Atonio, 490 U.S. 642, 660 (1989); Albemarle Paper 

Co., 422 U.S. at 425. 

66See 29 U.S.C. 623(f)(1); Smith, 544 U.S. at 239. 

67 Durante v. Qualcomm, Inc., 144 Fed. Appx. 

603, 606 (9th Cir. 2005) (unpublished) (quoting 

place. Although training is not a 

required element of the RFOA defense, 

it is a key component of efforts to 

provide a workplace free from 

discrimination. The Commission urges 

employers to educate all employees on 

their rights and responsibilities under 

all anti-discrimination laws. 

Section 1625.7(e)(2)(iii) 

Paragraph 1625.7(b)(2) of the 

proposed rule noted that, in the typical 

disparate-impact case, an employer has 

used an objective, non-age factor and 

the inquiry focuses on reasonableness. 

Relying on Watson v. Fort Worth Bank 

and Trust,60 however, it also said that 

employers are subject to liability under 

disparate-impact analysis for granting 

supervisors unchecked discretion to 

engage in subjective decision making 

because the unchecked discretion 

allows conscious or unconscious agebased stereotypes to infect the decisionmaking process and, as such, is not 

‘‘other than age.’’ It listed three factors 

relevant to whether an employment 

practice was ‘‘other than age’’: the 

extent to which the employer gave 

supervisors unchecked discretion to 

assess employees subjectively, the 

extent to which supervisors evaluated 

employees based on factors known to be 

subject to age-based stereotypes, and the 

extent to which supervisors were given 

guidance or training. 

Three commenters supported the 

proposed rule’s approach to subjective 

decision making. They noted that 

subjective decision making frequently 

disadvantages older workers and raises 

the risk of age-based disparate impact. 

Other commenters who addressed this 

issue opposed the approach and argued 

that subjective decision making is not 

inherently based on age. They asserted 

that the proposed rule conflicted with 

Meacham’s statement that the RFOA 

defense assumes that a non-age factor is 

at work, misconstrued Watson, and 

conflated disparate impact and 

disparate treatment. Some commenters 

asked for more guidance on the meaning 

of ‘‘unchecked discretion.’’ 

The preamble to the proposed rule 

noted that criteria such as flexibility, 

willingness to learn, and technological 

skills are particularly susceptible to agebased stereotyping. One commenter 

argued that it is appropriate for an 

employer to consider these qualities, 

which are relevant to today’s workplace. 

Another commenter asserted that the 

factor was too broad and could 

encompass such criteria as ‘‘ ‘energy,’ 

‘flexibility,’ ‘adaptability,’ ‘long-term 

commitment to company,’ ‘success 

driven,’ ‘tolerance,’ [and] ‘creativity.’ ’’ 

The commenter argued that the factor 

would cause parties to focus on whether 

a criterion was subject to stereotypes 

rather than on whether an employer 

evaluated employees negatively because 

of age. 

The rule continues to recognize that 

giving supervisors unchecked discretion 

to engage in subjective decision making 

may result in disparate impact and that 

employers should take reasonable steps 

to ensure supervisors exercise their 

discretion in a manner that does not 

violate the ADEA. To prevent the 

misunderstanding reflected in the 

comments, however, the Commission 

has revised the rule. First, as noted 

above, the rule no longer addresses 

‘‘reasonable’’ and ‘‘other than age’’ in 

separate paragraphs, but discusses 

‘‘reasonable factor other than age’’ in a 

single paragraph. Second, the factors 

listed under ‘‘other than age’’ in the 

NPRM have been integrated into 

1625.7(e)(2)(ii) and (e)(2)(iii). Section 

1625.7(e)(2)(ii) addresses the extent to 

which the employer defined the 

employment criterion—such as a 

subjective factor—and provided 

supervisors with guidance on how to 

apply it. The Commission also has 

combined two ‘‘other than age’’ factors 

into a single consideration addressing 

subjective decision making and the use 

of criteria susceptible to age-based 

stereotypes. Section 1625.7(e)(2)(iii) 

makes clear that the extent to which the 

employer attempts to minimize 

subjectivity and avoid age-based 

stereotyping is relevant to whether or 

not it acted reasonably, particularly 

where the criteria are known to be 

subject to age-based stereotypes. 

The Commission disagrees with 

commenters’ assertions that the 

proposed rule was inconsistent with the 

Supreme Court’s decisions in Meacham 

and Watson and believes that the rule is 

consistent with those decisions. First, 

Meacham did not say that a practice is 

‘‘without respect to age’’ in every impact 

case, but only that such is the case in 

the typical disparate-impact case.61

Second, although ‘‘[i]t is true * * * that 

an employer’s policy of leaving * * * 

decisions to the unchecked discretion of 

lower level supervisors should itself 

raise no inference of discriminatory 

conduct,’’ 62 this does not mean ‘‘that 

the particular supervisors to whom this 

discretion is delegated always act 

without discriminatory intent.’’ 63 As 

the Supreme Court recognized in 

Watson, disparate-impact analysis may 

be the only way to combat ‘‘the problem 

of subconscious stereotypes and 

prejudices’’ that may affect subjective 

decision making.64 Thus, although 

employers may sometimes deem it 

necessary to use subjective criteria to 

assess employees, it is not reasonable to 

leave the supervisors’ discretion 

unconstrained. 

Contrary to some commenters’ 

assertions, the rule does not improperly 

conflate disparate-treatment and 

disparate-impact claims. It is not 

surprising, however, that disparatetreatment and disparate-impact claims 

may overlap in the context of subjective 

decision making. As the Supreme Court 

has noted, ‘‘the necessary premise of the 

disparate impact approach is that some 

employment practices, adopted without 

a deliberately discriminatory motive, 

may in operation be functionally 

equivalent to intentional 

discrimination.’’ 65 As noted above, the 

final rule’s reference to a ‘‘non-age 

factor’’ reflects the language of the 

statutory RFOA defense and the Smith 

decision.66 It also reflects the Watson 

decision’s endorsement of disparateimpact analysis to address the problem 

of stereotypes and prejudices that 

impede the elimination of employment 

discrimination. 

The proposed rule used the term 

‘‘unchecked’’ discretion, which was also 

used by the Court in Watson. 

Nevertheless, to address commenters’ 

confusion about the term, we have 

eliminated it. The rule now refers to 

whether the employer ‘‘limited 

supervisors’ discretion.’’ 

One commenter, noting that the 

identification of a specific employment 

practice is part of a plaintiff’s prima 

facie case, argued that the issue of 

subjective decision making is not 

relevant to the RFOA defense. As noted 

above, the final rule expressly states that 

the individual challenging the practice 

is responsible for isolating and 

identifying the specific employment 

practice causing the adverse impact. As 

courts have recognized, however, 

plaintiffs may challenge an overall 

decision-making process ‘‘if the 

employer utilizes an ‘undisciplined 

system of subjective decision 

making.’ ’’ 67 If an individual establishes 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 77, No. 62 / Friday, March 30, 2012 / Rules and Regulations 19089 

Watson, 487 U.S. at 990); see also Meacham v. 

Knolls Atomic Power Lab., 461 F.3d 134, 139 (2d 

Cir. 2006) (unaudited reliance on supervisors’ 

subjective judgment of employees’ flexibility and 

criticality constituted a specific employment 

practice), vacated on other grounds, 554 U.S. 84 

(2008). 

68Smith, 544 U.S. at 243. 69 487 U.S. at 998. 

70Smith, 544 U.S. at 241–42. 

71Cf. Restatement (Second) of Torts, 298 cmt. b 

(1965) (‘‘The greater the danger, the greater the care 

which must be exercised.’’). 

72 Meacham v. Knolls Atomic Power Lab., 461 

F.3d 134, 145 (2d Cir. 2006), vacated, 544 U.S. 84 

(2008). 

that an employer’s use of subjective 

decision making had an age-based 

disparate impact, then the burden shifts 

to the employer to prove that the 

practice is a reasonable factor other than 

age. The extent to which the employer 

limited supervisors’ discretion in a 

manner that minimized the likelihood 

that age-based stereotypes would infect 

the process is one of a number of factors 

relevant to whether the employer’s 

practice is a reasonable, non-age factor. 

Sections 1625.7(e)(2)(iv) and (v) 

The proposed rule listed three factors 

that some commenters interpreted as 

imposing Title VII’s business-necessity 

test on ADEA disparate-impact claims. 

One factor addressed the extent to 

which an employer assessed the impact 

of its practice on older workers, and 

another factor concerned the severity of 

harm to individuals in the protected age 

group and the extent to which the 

employer took steps to minimize the 

harm. The remaining factor looked at 

whether other options were available 

and the reasons the employer chose the 

option it did. Quoting the Smith 

statement that the RFOA inquiry does 

not require employers to adopt a less 

discriminatory alternative,68 a footnote 

explained that the factor did not mean 

that an employer must adopt a practice 

that has the least severe age-based 

impact. The footnote also quoted a 

Restatement of Torts (Second) comment 

concerning unreasonable risk. 

Some commenters argued that the 

factors conflate the concepts of impact 

and reasonableness, which are 

analytically distinct. They asserted that 

the factors improperly impose an 

affirmative duty to monitor selection 

procedures for adverse impact, that 

employers will not have data to conduct 

mandated impact analyses because they 

do not collect and report statistics on 

the ages of employees and applicants, 

that conducting impact analyses would 

be too costly for small employers, and 

that the factors penalize employers that 

do not conduct analyses. In addition, 

noting that plaintiffs have the burden of 

establishing that an employment 

practice has a disparate impact, some 

commenters argued that the factors 

inappropriately place the burden of 

disproving impact on employers. They 

also argued that the factor concerning 

consideration of other options conflicts 

with the Smith statement. Some 

commenters noted that, under Title VII, 

plaintiffs, not employers, have the 

burden of identifying less 

discriminatory alternatives. One 

commenter who opposed the factor 

argued that, if the Commission retains 

the factor, it should refer to ‘‘other 

known options’’ because employers 

should not be expected to know all 

potential employment practices. The 

commenter also argued that the Smith 

and Restatement quotes in the footnote 

were contradictory. Another commenter 

expressed concern that an alternative 

designed to minimize a practice’s agebased impact might have an adverse 

impact on another protected group. 

Two commenters supported the factor 

concerning consideration of other 

options. They noted that, as the 

Supreme Court stated in Watson, 

evidence that the employer ignored 

equally effective less discriminatory 

alternatives suggests that the challenged 

practice was the ‘‘functional equivalent 

of a pretext for discriminatory 

treatment.’’ 69

In response to comments, and to 

emphasize that the rule reflects a 

standard that is less stringent than Title 

VII’s business-necessity test, the 

Commission has revised the rule to 

make clear that none of the 

considerations is a required element of 

the RFOA defense. As noted above, the 

rule now refers to a non-exhaustive 

description of ‘‘relevant considerations’’ 

and expressly states that no specific 

consideration need be present for a 

differentiation to be based on reasonable 

factors other than age. The importance 

of each consideration will necessarily 

vary according to the facts of each 

particular situation. 

The final rule retains the impactassessment and harm considerations, 

which have been redesignated 

1625.7(e)(2)(iv) and 1625.7(e)(2)(v). The 

Commission has deleted the reference to 

‘‘took steps’’ from 1625.7(e)(2)(iv) to 

make clear that the consideration 

focuses on the extent to which the 

employer actually assessed the impact 

rather than on the steps the employer 

took to do so. What an employer 

reasonably should do to assess impact 

depends on the facts of the particular 

situation. For example, an employer that 

assesses the race- and sex-based impact 

of an employment practice would 

appear to act unreasonably if it does not 

similarly assess the age-based impact. A 

small employer that does not generally 

conduct impact analyses on any basis, 

however, may well be able to show that 

its RIF decisions were reasonable even 

if it did not conduct a formal disparateimpact analysis during the RIF. 

Similarly, evidence that a policy was 

not the type normally subject to 

disparate-impact analysis would 

support an employer’s argument that it 

should not reasonably be expected to 

conduct such analysis. Whether or not 

a formal disparate-impact analysis is 

done, if the impact is sufficiently large 

that the employer was or should have 

been aware of it, a failure to have taken 

reasonable steps to avoid or mitigate the 

impact is relevant to whether the 

employer’s actions were based on 

reasonable factors other than age. 

For purposes of clarity, section 

1625.7(e)(2)(v) now refers to the 

‘‘degree’’ rather than ‘‘severity’’ of the 

harm and the ‘‘extent’’ of injury. The 

final rule also changes the term 

‘‘minimize’’ to ‘‘reduce’’ with respect to 

the assessment of the harm caused by 

different options to make clear that the 

rule does not require the adoption of the 

least discriminatory alternative. 

Consideration of the degree of harm 

on individuals is measured both in 

terms of the scope of the injury to the 

individual and the scope of the impact, 

i.e., the number of persons affected. 

Smith exemplifies negligible harm in 

terms of injury and impact. In Smith, 

the injury was relatively minor as the 

raises affecting older workers were 

actually higher in dollar terms, although 

lower in percentage terms.70 The 

number of older workers affected was 

also relatively small. 

In contrast, the more severe the harm, 

the greater the care that ought to be 

exercised.71 The Meacham case 

exemplifies significant injury and 

impact from the loss of jobs affecting a 

‘‘startlingly skewed’’ group of older 

workers.72 In light of such significant 

injury and impact, it would be 

reasonable for an employer to 

investigate the reasons for such results 

and attempt to reduce the impact as 

appropriate. 

The extent to which the employer 

took steps to reduce the harm to older 

workers in light of the burden of 

undertaking such steps is relevant to 

reasonableness. Whether an employer 

knew or reasonably should have known 

of measures that would reduce harm 

informs the reasonableness of the 


sroberts on DSK5SPTVN1PROD with RULES
19090 Federal Register / Vol. 77, No. 62 / Friday, March 30, 2012 / Rules and Regulations 

73Cf. Restatement (Second) of Torts 292 cmt. c 

(1965) (‘‘If the actor can advance or protect his 

interest as adequately by other conduct which 

involves less risk of harm to others, the risk 

contained in his conduct is clearly unreasonable.’’). 

74 544 U.S. at 243. 

75 42 U.S.C. 2000e–2(k)(1)(A)(ii), 2000e–2(k)(1)(C) 

(adopting pre-Wards Cove approach to ‘‘alternative 

employment practice’’). The RFOA standard does 

not require the employer to select the least 

discriminatory option. Smith, 544 U. S. at 243. 

76 In addition, the failure to adopt a less 

discriminatory alternative may be evidence of 

pretext under certain circumstances. Watson, 487 

U.S. at 998; see also Wards Cove Packing Co. v. 

Atonio, 490 U.S. 642, 660–61 (1989) (refusal to 

adopt less discriminatory alternative ‘‘would belie 

a claim [that challenged] practices are being 

employed for nondiscriminatory reasons’’). 

77 42 U.S.C. 2000e–2(k)(1)(A)(i). 

78Executive Order 12866 refers to ‘‘those matters 

identified as, or determined by the Administrator of 

OIRA to be, a significant regulatory action within 

the scope of section 3(f)(1).’’ Id. The Office of 

Management & Budget states that ‘‘Executive Order 

12866 requires agencies to conduct a regulatory 

analysis for economically significant regulatory 

actions as defined by Section 3(f)(1).’’ Circular A– 

4 (Sept. 17, 2003), available at http:// 

www.whitehouse.gov/omb/circulars_a004_a-4. 

79Exec. Order No. 12866, 58 FR 51735 (Oct. 4, 

1993), available at http://www.whitehouse.gov/ 

sites/default/files/omb/inforeg/eo12866.pdf. 

80Exec. Order No. 13563, 76 FR 3821 (Jan. 21, 

2011). 

81 544 U.S. 228 (2005). 

82 554 U.S. 84 (2008). 

83The ADEA applies to employers with 20 or 

more employees, labor organizations, employment 

agencies, and government entities. There are 

approximately 639,288 businesses with 20 or more 

employees. United States Small Bus. Ass’n, 

Employer Firms, Establishments, Employment, and 

Annual Payroll Small Firm Class Sizes, 2007, Table 

in Firm Data, http://archive.sba.gov/advo/research/ 

us_07ss.pdf (last visited Feb. 15, 2012). There are 

approximately 17,000 employment agencies. Am. 

Staffing Ass’n., Staffing FAQs, http:// 

www.americanstaffing.net/statistics/faqs.cfm (last 

visited Feb. 15, 2012). 

employer’s choices.73 Thus, the RFOA 

includes consideration of the 

availability of measures to reduce harm, 

and the extent to which the employer 

weighed the harm to older workers 

against both the costs and efficiencies of 

using other measures that will achieve 

the employer’s stated business purpose. 

Given the relevance of the availability 

of measures to reduce harm 

contemplated by this consideration, the 

Commission has deleted the last factor 

concerning the availability of options. In 

addition, commenters misconstrued the 

consideration of options as requiring 

employers to search out every possible 

alternative and use the least 

discriminatory alternative, comparable 

to the Title VII’s requirement, which the 

Supreme Court in Smith reasoned is not 

mandated by the RFOA defense.74

The Commission disagrees with 

commenters’ views that Smith means 

that the consideration of alternative or 

equally effective practices is irrelevant. 

Smith stated that the RFOA does not 

impose Title VII’s ‘‘requirement’’ that 

the employer must adopt a less 

discriminatory alternative.75 This 

statement does not mean that options or 

alternatives are irrelevant to the 

determination of reasonableness. As 

previously explained, the availability of 

options is manifestly relevant to the 

issue of reasonableness.76 A chosen 

practice might not be reasonable if an 

employer knew of and ignored an 

equally effective option that would have 

had a significantly less severe impact on 

older workers. Whereas Title VII 

requires an employer to adopt an 

equally effective, even marginally less 

discriminatory alternative, an 

employer’s choice not to use an 

alternative that only marginally reduces 

the impact might be reasonable under 

the ADEA. 

The changes to 1625.7(e) clarify that 

the RFOA standard is lower than Title 

VII’s ‘‘business necessity’’ standard.77

They also clarify that the considerations 

relevant to the RFOA determination are 

not required elements of the RFOA 

defense. These changes ensure that 

employers may continue to make 

reasonable business decisions that do 

not arbitrarily limit the employment 

opportunities of older workers. 

Regulatory Procedures 

Executive Orders 13563 and 12866 

This final rule has been drafted and 

reviewed in accordance with Executive 

Order (‘‘E.O.’’) 13563 and E.O. 12866. 

Executive Order 13563 directs agencies 

to propose or adopt a regulation only 

upon a reasoned determination that its 

benefits justify its cost (recognizing that 

some benefits and costs are difficult to 

quantify); tailor its regulations to 

impose the least burden on society, 

consistent with obtaining regulatory 

objectives; and select, in choosing 

among alternative regulatory 

approaches, those approaches that 

maximize net benefits (including 

potential economic, environmental, 

public health and safety, and other 

advantages; distributive impacts; and 

equity). Executive Order 12866 directs 

agencies to submit a regulatory impact 

analysis for those regulatory actions that 

are ‘‘economically significant’’ within 

the meaning of section 3(f)(1).’’78 A 

regulatory action is economically 

significant under section 3(f)(1) if it is 

anticipated (1) to ‘‘[h]ave an annual 

effect on the economy of $100 million 

or more,’’ or (2) to ‘‘adversely affect in 

a material way the economy, a sector of 

the economy, productivity, competition, 

jobs, the environment, public health or 

safety, or State, local, or tribal 

governments or communities.’’ 79

Executive Order 13563 reaffirms the 

principles established by E.O. 12866, 

and further emphasizes the need to 

reduce regulatory burden to the extent 

feasible and permitted by law.80

As reported in the February 2010 

NPRM, the Commission determined that 

the rule is not economically significant 

under this standard, and therefore that 

a full regulatory impact analysis was not 

required. However, some comments 

received during the notice and comment 

period suggested, without specifically 

mentioning the Commission’s 

determination under E.O. 12866, that 

the rule would impose greater costs on 

regulated entities than the Commission 

anticipated. To ensure that regulatory 

burdens are minimized, the Commission 

reexamined its basis for determining 

that the rule is not economically 

significant in light of the comments. It 

concluded that the determination did 

not need to be changed, and that the 

commenters’ stated concerns about costs 

reflected a misunderstanding of the rule. 

The final rule has been revised to 

obviate such misunderstanding. For the 

record, the Commission presents its 

analysis of the impact of the rule on 

regulated entities and responds to the 

public comments below. 

Analysis 

The purpose of the rule is to help 

explain the implications of the Supreme 

Court’s decisions in Smith 81 and 

Meacham 82 and the type of conduct 

that would support an RFOA defense in 

court. It therefore does not require any 

action on the part of covered entities.83

Rather, it provides assistance to covered 

entities regarding what they can do to 

ensure that their practices are based on 

reasonable factors other than age. The 

rule does not expand the coverage of the 

ADEA to additional employers or 

employees. It also does not include 

reporting, recordkeeping, or other 

requirements for compliance. 

Accordingly, the Commission 

concluded that efforts to comply with 

the rule 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. 

However, the Commission recognizes 

that some covered entities may choose 

to modify their business practices in 

light of the recent Supreme Court 

decisions reflected in the rule, and the 

provisions in the rule itself, to avoid 

disparate-impact liability. Therefore, in 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 77, No. 62 / Friday, March 30, 2012 / Rules and Regulations 19091 

84While the Commission is not aware of data on 

the number of job actions performed per year that 

may give rise to a disparate-impact claim, there is 

research on the number of disparate-impact cases 

filed in federal court under all of the employment 

discrimination laws. An analysis of 1,788 randomly 

selected employment discrimination cases filed in 

federal court, and reported between 1987–2003, 

showed that only 4% raised disparate-impact 

claims. Laura Beth Nielsen et al., Contesting 

Workplace Discrimination in Court: Characteristics 

and Outcomes of Federal Employment 

Discrimination Litigation 1987–2003 11 (2008), 

http://www.americanbarfoundation.org/uploads/ 

cms/documents/ 

nielsen_abf_edl_report_08_final.pdf. ADEA 

disparate-impact claims are only a subset of this 

4%, as ADEA cases only comprised 20% of the total 

number of cases studied. Id. at 9. 

85As previously noted, the percentage of federal 

employment discrimination cases raising disparateimpact claims is approximately 4%. Id. at 11. A 

review of the ADEA disparate-impact cases 

available on Westlaw reveals that approximately 

70% failed to reach the RFOA issue altogether, 

because the Plaintiff could not establish impact, 

leaving only 1.2% of cases. 

addition to determining that the rule 

imposes no requirements that have an 

economic impact, the Commission 

investigated whether this type of 

voluntary, precautionary behavior 

would have a significant impact on the 

economy. 

Cost of Disparate-Impact Analyses 

Because paragraph 1625.7(e)(2)(iv) of 

the rule states that ‘‘[t]he extent to 

which the employer assessed the 

adverse impact of its employment 

practice on older workers’’ is relevant to 

the RFOA defense, some covered 

entities may perform additional 

disparate-impact analyses in response to 

the rule. The first step of the 

Commission’s inquiry was therefore to 

determine the economic consequences 

of performing additional analyses. 

The Commission does not anticipate 

that this final rule will motivate large 

numbers of employers to perform 

additional disparate-impact analyses for 

the following reasons. First, the current 

regulation assumed that employers 

would routinely analyze job actions 

susceptible to disparate-impact claims 

for potential adverse effects on older 

workers, and many employers, 

especially larger ones, already do so. 

Some do so to reduce potential liability 

for ADEA claims; others simply wish to 

avoid disproportionately negative 

treatment of older workers. 

Second, few job actions would be 

subject to disparate-impact analysis.84

For example, voluntary terminations 

and individual terminations for cause 

generally will not be subject to 

disparate-impact analysis. Third, even 

actions that involve practices amenable 

to disparate-impact analysis do not 

always require such analysis to ensure 

that a practice is reasonable. The rule 

states that, to demonstrate the RFOA 

defense, a covered entity needs to show 

only that it acted as would a prudent 

employer mindful of the requirements 

of the ADEA. In many cases, a prudent 

employer may reasonably decide that a 

formal disparate-impact analysis is 

unnecessary, for example because— 

—The number of affected employees is 

relatively small, making impact 

readily ascertainable without formal 

analysis; or 

—The employer has reason to believe 

that the practice will not negatively 

impact older workers, and no 

employees or applicants have alleged 

that it would have such impact. 

Further, where the covered entity 

determines that a disparate-impact 

analysis is warranted, the associated 

costs will generally be minimal. Larger 

businesses already routinely employ 

sophisticated methods of detecting 

disparate impact on the basis of race, 

ethnicity, or gender, and therefore 

already possess the expertise and 

resources required to analyze age data 

for impact. Because performing an 

additional analysis using these preexisting resources takes little time, the 

associated costs will be minimal. 

Although smaller entities may be less 

familiar with disparate-impact analysis, 

such entities are even less likely to 

incur costs for performing formal 

analyses, for two reasons. First, the 

average small entity’s involuntary 

termination or other selection decisions 

will most often involve such a small 

number of employees that impact will 

be readily ascertainable without formal 

analysis. Second, where the numbers 

are large enough to warrant a more 

formal analysis, the RFOA defense only 

requires an entity to take steps that are 

reasonable under the circumstances to 

uncover potential impact. A small entity 

without many resources will likely be 

able to show that it acted reasonably by 

using the same methods it uses to detect 

disparate impact on the basis of race, 

ethnicity, or gender, which can often be 

carried out using free, readily available 

Internet tools. By conducting a Web 

search for the term ‘‘online disparateimpact analysis calculator,’’ a small 

entity may find and use an online 

calculator that can be easily used by lay 

people. This tool would enable the 

entity to test for adverse impact in less 

than 10 minutes. Additional steps to 

evaluate adverse impact would be 

reasonable only if, in light of the 

circumstances and available resources, a 

prudent employer mindful of ADEA 

requirements would take such steps. 

Moreover, if a small entity determines 

that it requires assistance to perform 

these or other efforts to prevent age 

discrimination in employment, it may 

rely on free outreach materials from the 

Commission. The Commission expects 

to issue free small-business-oriented 

guidance materials discussing this rule, 

including technical assistance 

specifically designed to instruct small 

entities how to perform disparateimpact analyses and interpret the 

results. 

Cost of Taking Steps To Reduce Harm 

Paragraph 1625.7(e)(2)(v) states that 

‘‘[t]he degree of the harm [to older 

workers], in terms of both the extent of 

injury and the numbers of persons 

adversely affected, and the extent to 

which the employer took steps to reduce 

the harm, in light of the burden of 

undertaking such steps’’ is relevant to 

the RFOA determination. 

Steps to reduce harm to older 

individuals only become relevant to the 

RFOA defense where the employer 

knew or reasonably should have known 

of measures to reduce such harm while 

effectively achieving its stated business 

purpose. Again, the Commission’s 

analysis is limited by the paucity of data 

that currently exist. However, because 

so few job actions involve neutral 

employment practices that 

disproportionately harm older 

workers,85 only a small percentage of 

employer decisions will even present 

the opportunity for employers to 

consider steps to reduce harm to older 

individuals. Of these cases, only a 

subset will be ones in which the 

employer knew or reasonably should 

have known of measures to reduce such 

harm while effectively achieving its 

stated business purpose. Thus, such 

considerations will be relevant only in 

a very small percentage of cases. 

Further, as stated expressly in the 

consideration, the determination 

whether steps are relevant to the RFOA 

defense is made in light of the burdens 

associated with such steps. Therefore, a 

business would not be required to take 

steps that were overly burdensome. 

Cost of Instruction and Guidance 

Paragraph 1625.7(e)(2)(ii) states that 

‘‘[t]he extent to which the employer 

defined the factor accurately and 

applied the factor fairly and accurately, 

including the extent to which managers 

and supervisors were given guidance or 

training about how to apply the factor 

and avoid discrimination’’ is relevant to 

the RFOA determination. Paragraph 

1625.7(e)(2)(iii) states that ‘‘[t]he extent 

to which the employer limited 

supervisors’ discretion to assess 


sroberts on DSK5SPTVN1PROD with RULES
19092 Federal Register / Vol. 77, No. 62 / Friday, March 30, 2012 / Rules and Regulations 

86See, e.g., Equal Employment Opportunity 

Comm’n, The ADA: A Primer for Small Business, 

http://www.eeoc.gov/ada/adahandbook.html. 

87See supra notes 53–57. 

88See Impact of Economy on Older Workers: 

Meeting of the Equal Employment Opportunity 

Comm’n (2010) (written testimony of William E. 

Spriggs, Ph.D.), available at http://www.eeoc.gov/ 

eeoc/meetings/11–17–10/spriggs.cfm (citing Bureau 

of Lab. Statistics, Unemployed Persons by Age, Sex, 

Race, Hispanic or Latino Ethnicity, Marital Status, 

and Duration of Unemployment, http:// 

www.bls.gov/web/empsit/cpseea36.pdf (last visited 

Mar. 12, 2011); Bureau of Lab. Statistics, Displaced 

Workers Summary (Aug. 26, 2010, 10 a.m.), http:// 

www.bls.gov/news.release/disp.nr0.htm). 

89 Id. (citing Bureau of Lab. Statistics, 

Employment Projections (Dec. 10, 2009, 10 a.m.), 

http://www.bls.gov/news.release/ecopro.nr0.htm 

(reporting that the number of persons in the labor 

force age 55 years and older is expected to increase 

by 43 percent by 2018). 

90 544 U.S. 228 (2005). 

91 554 U.S. 84 (2008). 

92See 29 CFR 1625.7(d), 46 FR 47724 (Sept. 29, 

1981) (amended herein) (‘‘When an employment 

practice, including a test, is claimed as a basis for 

different treatment of employees or applicants for 

employment on the grounds that it is a ‘factor other 

than’ age, and such practice has an adverse impact 

on individuals within the protected age group, it 

can only be justified as a business necessity.’’). 

employees subjectively, particularly 

where the criteria that the supervisors 

were asked to evaluate are known to be 

subject to negative age-based 

stereotypes’’ is relevant. Therefore, the 

rule may motivate some employers to 

provide additional instruction, 

guidance, and training to their 

supervisors. 

In many cases, no instruction will be 

required to avoid age discrimination. As 

noted, voluntary resignations do not 

raise a question of disparate impact. 

Even where the employment action 

involves application of selection or 

termination criteria, instruction will not 

always be needed. For example, 

instruction to avoid age-based 

stereotyping will be unnecessary if the 

selection criteria are objective. 

Where instruction is needed, the 

associated costs will generally be de 

minimis. Larger employers will not 

incur significant costs because they 

already provide regular training for 

supervisors, including regular EEO 

training. Any instructions necessary to 

avoid age-biased applications of 

selection or termination criteria may 

easily be incorporated into this regular 

training. 

Smaller businesses are even less 

likely to incur additional training costs. 

Because of the small number of people 

involved, many layoff decisions made 

by small entities are relatively 

straightforward, making instruction 

unnecessary to avoid age-biased 

applications of employment criteria. 

Further, even where some instruction is 

appropriate, entities small in size can 

typically provide such instruction 

informally, thereby avoiding costs 

associated with formal training. In 

addition, a small business wanting help 

with its training, or with other efforts to 

reduce adverse impact on older workers, 

may rely on the Commission’s 

assistance. Each year, the Commission 

performs a very large number of free 

outreach presentations for employers, 

human resource managers, and their 

counsel, as well as fee-based training 

sessions offered at approximately $350. 

In fiscal year 2009 alone, the 

Commission offered 1,889 no-cost 

outreach events that addressed ADEA 

compliance, reaching more than 127,000 

people, many of whom were from small 

businesses, and offered approximately 

300 fee-based private-sector trainings 

that reached more than 13,000 people. 

In addition, the Commission expects to 

issue small-business-oriented guidance 

materials discussing the rule, as it has 

done in other contexts.86

Benefits of the Rule 

Under E.O. 13563, the Commission 

must assess not only the rule’s negative 

effects on the economy but also its 

positive effects. Here again, the 

Commission’s assessment was 

necessarily limited by the data that 

currently exist. Indeed, doing this 

assessment highlights the need for more 

focused research on the economic costs 

and benefits of ensuring equal 

employment opportunity. Nevertheless, 

on the basis of the general 

considerations below, the Commission 

determined that the rule will have 

modest positive effects on the economy. 

—Providing additional instruction about 

how to implement employment 

practices in a manner that is free from 

age bias carries the benefit of 

obtaining more accurate employee 

evaluations. As stated in the sectionby section analysis above, research 

demonstrates that negative age-based 

stereotypes are not only harmful to 

older individuals but also 

inaccurate—a large number of 

empirical studies and research 

reviews indicate that there is a 

nonexistent or slightly positive 

relationship between job performance 

and older age.87 These data suggest 

that taking measures to eliminate age 

bias in selection and termination can 

actually improve the employer’s 

bottom line. 

—Data show that older individuals who 

become unemployed have more 

difficulty finding a new position and 

tend to stay unemployed longer than 

younger individuals.88 To the extent 

that the difficulty in finding new 

work is attributable to neutral 

practices that act as barriers to the 

employment of older workers, the 

regulation should help to reduce the 

rate of their unemployment and, thus, 

help to reduce these unique burdens 

on society. This effort is likely to 

become increasingly important as the 

Baby Boom Generation grows older, 

raising the number of older 

individuals in the workforce.89

—Encouraging employers to avoid 

practices that adversely affect older 

workers will reduce employers’ 

litigation costs. In a disparate-impact 

case, the plaintiff has the initial 

burden of demonstrating that the 

challenged practice has a 

disproportionately negative effect on 

the protected group. If an employer 

less frequently uses practices that 

have a disproportionately negative 

effect on older workers, older 

individuals will less frequently have 

reason to allege discrimination. 

—The rule will also reduce employers’ 

litigation costs by eliminating the 

considerable uncertainty left after the 

Supreme Court’s decisions in Smith 90

and Meacham.91 Although the Court 

clearly held that employers asserting 

the RFOA defense do not need to 

demonstrate that the practice is a 

business necessity, as required by the 

current regulations,92 it did not 

provide guidance on the application 

of the RFOA standard. Because 

employers bear the burden of proving 

that their actions were based on 

reasonable factors other than age, they 

will benefit from a greater ability to 

assess their own liability as a result of 

the rule, and therefore to avoid 

litigation. 

The Commission also concludes that 

a wide range of qualitative, dignitary, 

and related intrinsic benefits must be 

considered. These benefits include the 

values identified in E.O. 13563, such as 

equity, human dignity, and fairness. 

Specifically, the qualitative benefits 

attributable to the final rule include but 

are not limited to the following: 

—Reducing discrimination against older 

individuals promotes human dignity 

and self-respect, and diminishes 

feelings of exclusion and humiliation. 

—Reducing discrimination against older 

individuals also yields third-party 

benefits such as a reduction in the 

prevalence of age-based stereotypes 

and associated stigma. 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 77, No. 62 / Friday, March 30, 2012 / Rules and Regulations 19093 

93Some commenters interpreted the February 

2010 NPRM as asserting that employers should not 

assess employee qualities such as flexibility, 

willingness to learn, and technological skills 

(qualities that are often assessed subjectively). 

These commenters objected that the rule would 

deprive employers of their ability to seek out 

employees with these qualities, which are valuable 

in the workplace. The Commission does not assert 

that employers should not seek out employees with 

these qualities, or that they are not valuable. It does 

maintain, however, that if employers assess 

qualities such as flexibility, willingness to learn, 

and technological skills, they should take 

reasonable steps to ensure that the assessments are 

accurate and not influenced by common age-based 

stereotypes. Such steps may include providing an 

objective means of assessing the desired quality and 

instructing managers how to be fair in their 

evaluations. 94See supra note 87. 

—Increased participation in the 

workforce by older individuals 

benefits both employers and 

coworkers in ways that may not be 

subject to monetary quantification, 

including increasing diversity, 

understanding, and fairness in the 

workplace. 

—Reducing discrimination against older 

individuals benefits workers in 

general and society at large by 

creating less discriminatory work 

environments. 

Public Comments 

The comments suggesting that the 

rule will impose economic burdens 

were as follows: 

—Six commenters stated that the rule 

would require employers to monitor 

or analyze employment decisions for 

adverse impact on older workers. One 

of these commenters stated more 

specifically that the rule would 

require employers to compare the 

impact of each practice on employees 

of every age with its impact on 

employees of every other age. Another 

commenter thought that disparateimpact analysis would require 

employers to collect age information 

about its applicants and employees. 

—Four commenters asserted that the 

rule would require employers to 

search for and evaluate alternative 

means of achieving their business 

goals. One stated more specifically 

that the number of alternatives that 

employers must evaluate under the 

rule is ‘‘potentially infinite.’’ 

—One commenter asserted that the rule 

imposed a duty on employers to 

provide training, instruction, or 

guidance to its supervisors. Other 

commenters asserted that the rule 

required employers to provide 

training to supervisors in order to 

limit the discretion that they exercise 

when assessing employees 

subjectively, particularly with respect 

to factors known to be susceptible to 

age-based stereotypes.93

—One commenter stated that the rule 

would require employers to hire 

consultants to determine whether 

their practices are ‘‘common business 

practices.’’ 

—One commenter asserted that the rule 

would make it much harder for 

employers to win even the most 

frivolous of age discrimination claims 

at the summary judgment stage. The 

same commenter asserted that the rule 

would require litigants to engage in 

extensive discovery to determine 

whether each of the listed factors had 

been met, including whether the 

employer considered alternatives and 

whether it took steps to minimize 

harm to older workers. 

Commission Response 

The comments do not alter the 

Commission’s conclusion that the rule 

will not impose unacceptable or 

unreasonable costs on society. As 

previously noted, the comments were 

based on a misunderstanding of the 

proposed rule, and the final rule was 

revised to obviate such 

misapprehension. As shown above, any 

costs associated with the rule will be 

minimal. 

Response to Comments Regarding the 

Cost of Disparate-Impact Analyses 

The comments overstate the number 

of disparate-impact analyses that will be 

performed by employers as a result of 

the rule. As explained above, a 

disparate-impact analysis is appropriate 

in only a small proportion of job 

actions, is already done by many 

employers pursuant to existing 

regulations and case law, and, even 

where the practice is amenable to 

disparate-impact analysis, such analysis 

is not always required to ensure that a 

practice is reasonable. If an impact 

analyses is done, neither existing law 

nor this regulation would require it to 

compare the practice’s impact on 

individuals of every age with its impact 

on individuals of every other age. The 

RFOA defense requires only such steps 

as would be taken by a prudent 

employer mindful of the requirements 

of the ADEA. 

The Commission disagrees with the 

assertion of one commenter that 

obtaining the required age data would 

be burdensome. Generally, employees’ 

birth dates are available to employers 

because they are recorded in personnel 

files. 

Response to Comments Regarding the 

Cost of Evaluating Alternatives 

As explained above, the Commission 

has deleted the factor discussing the 

availability of other ways for the 

employer to achieve its stated business 

purpose, because commenters 

misunderstood the factor to mean that 

employers must search out every 

possible alternative (or, in the words of 

one commenter, a ‘‘potentially infinite’’ 

number of alternatives) and use the one 

that is least discriminatory. Of course, 

as also explained above, the deletion of 

the factor does not mean that the 

availability of other measures to achieve 

the employer’s purposes is irrelevant to 

the defense. Whether an employer knew 

or reasonably should have known of 

measures that would reduce harm 

informs the reasonableness of the 

employer’s choices. 

Because so few job actions involve 

neutral employment practices that 

disproportionately harm older workers, 

only a small percentage of employer 

decisions will even present the 

opportunity for employers to consider 

the relative harm of various options.94

Only a subset of these actions will be 

ones in which the employer knew or 

reasonably should have known of 

measures that would reduce harm to 

older individuals. Further, when an 

employer does decide to evaluate 

whether another option would reduce 

harm to older individuals, it may do so 

using the same low-cost methods that 

were described above in the discussion 

of the cost of disparate-impact analyses. 

Overall costs are therefore likely to be 

extremely low. 

Response to Comments Regarding the 

Cost of Instruction and Guidance 

The comments assert generally that 

the additional training will be 

burdensome. As explained in the 

analysis above, training costs associated 

with the rule will be minimal. 

Response to Comments Regarding the 

Cost of Determining Whether a Business 

Practice Is Common 

The Commission has deleted the 

factor concerning whether a business 

practice is common from the 

considerations. Therefore, the 

Commission need not discuss the 

commenter’s assertion that this factor 

requires businesses to hire consultants 

to determine whether their practices are 

common. 

Response to Comments Regarding the 

Cost of Frivolous Litigation 

The Commission disagrees with one 

commenter’s assertion that the rule 

would increase employers’ vulnerability 

to frivolous litigation or make it more 

difficult for employers to win against 

frivolous claims at the summary 


sroberts on DSK5SPTVN1PROD with RULES
19094 Federal Register / Vol. 77, No. 62 / Friday, March 30, 2012 / Rules and Regulations 

95The rule covers all employers with at least 20 

employees, labor organizations, employment 

agencies, and state and local governments. 

According to 2007-based statistics from the Small 

Business Administration, there were 620,977 

businesses with 20 or more employees and fewer 

than 500 employees. United States Small Bus. 

Ass’n, Employer Firms, Establishments, 

Employment, and Annual Payroll Small Firm Class 

Sizes, 2007, Table in Firm Data, http:// 

archive.sba.gov/advo/research/us_07ss.pdf (last 

visited Jan. 22, 2011). 96See supra note 94, and the accompanying text. 

judgment stage. Of course, individuals 

may file frivolous litigation regardless of 

the underlying law. Further, even 

without the rule, determining whether a 

practice is a based on reasonable factors 

other than age is a fact-specific inquiry; 

the commenter provided no reason to 

conclude that the considerations in the 

final rule are any more complicated 

than other facts relevant to the RFOA 

analysis. Indeed, as noted, the 

Commission concludes the rule is likely 

to reduce employers’ litigation costs. 

Conclusion 

For the foregoing reasons, the 

Commission has determined that the 

final rule 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. 

Regulatory Flexibility Act 

The purpose of the Regulatory 

Flexibility Act (RFA), 5 U.S.C. 601–612, 

is to ensure that statutory goals are 

achieved without imposing unnecessary 

and unjustifiable regulatory burdens on 

small businesses and other small 

entities, which may have few resources 

to devote to regulatory compliance. To 

achieve this purpose, the RFA requires 

federal agencies to conduct a series of 

analyses on proposed rules. The 

analyses are designed to ensure that the 

agency considers ways of minimizing 

any significant regulatory burdens 

imposed on small entities by the rules. 

The goal of the analysis is to 

determine whether the proposed rule 

will have a significant economic impact 

on a substantial number of small 

entities. If it will, the agency must 

consider alternative regulatory 

approaches that may minimize the 

impact. If the rule will not have a 

significant impact on a substantial 

number of small entities, it may so 

certify under 5 U.S.C. 605(b). 

In the February 2010 NPRM, the 

Commission certified under 5 U.S.C. 

605(b) that the proposed rule would not 

have a significant economic impact on 

a substantial number of small entities, 

and therefore did not include an initial 

regulatory flexibility analysis. Although 

the final rule covers a substantial 

number of small entities,95 the 

Commission’s threshold analysis 

indicated that, for the reasons discussed 

in detail in the section on Executive 

Order 12866 above, the costs imposed 

by the rule generally are de minimis and 

therefore would not significantly impact 

small business. 

Public Comments 

Two commenters disagreed with the 

Commission’s decision to certify the 

rule, and therefore requested further 

analysis under the RFA. One of these 

commenters asserted that the rule 

would economically impact small 

entities by suggesting that they keep 

track of alternative employment 

practices and the reasons for their 

choices, and that they give supervisors 

additional guidance and training. In 

light of these comments and the 

comments discussed above regarding 

E.O. 12866, the Commission reexamined 

the factual basis for its certification. 

Commission Response 

The comments provide no reason to 

alter the Commission’s initial 

conclusion that the rule will not impose 

unnecessary or unjustifiable regulatory 

burdens on small entities. The 

comments did not include any factual 

basis for their assertions and, for reasons 

specifically discussed in the E.O. 12866 

analysis above, the Commission has 

determined that small entities are 

unlikely to incur costs as a result of this 

rule. 

As explained above, the rule will 

seldom be implicated in actions by 

small employers because issues of agebased disparate impact are most likely 

to arise in the context of mass 

terminations, hiring based on tests, or 

other practices involving significant 

numbers of individuals. Although there 

are no data available that speak 

specifically to this issue, the 

Commission estimates that the average 

small entity is unlikely to be involved 

in even one such practice. If a small 

employer were to engage in such a 

practice, moreover, the number of 

individuals affected is likely to be so 

small that impact can be ascertained 

without resort to formal disparateimpact analysis. If the employer wants 

to do such analysis, free and easy to use 

tools are available on the Internet. 

Therefore, the Commission disagrees 

with the commenter that small entities 

will be significantly burdened by 

additional impact analyses performed as 

a result of the rule. 

The Commission also disagrees that 

small entities will be significantly 

burdened by the need to keep track of 

alternative employment practices and 

the reasons for their choices. As 

explained above, consideration of 

alternative employment practices would 

be relevant only in a very small 

percentage of cases.96 Further, if a small 

employer undertook a neutral practice 

that disproportionately harmed older 

workers, the determination of the 

reasonableness of the factor it used 

would be made in light of its resources. 

The entity’s resources also inform the 

determination of whether it would be 

reasonable for it to take, or not to take, 

further steps to reduce harm. Therefore, 

small employers will not be 

disproportionately burdened by this 

aspect of the rule. 

For the reasons explained above, the 

Commission disagrees with the 

commenter’s assertion that small 

entities will be significantly burdened 

by additional guidance and training 

performed as a result of the rule. Indeed, 

the rule is likely to have little impact on 

small employers. 

Conclusion 

For the foregoing reasons, the 

Commission certifies pursuant to 

section 605(b) of the Regulatory 

Flexibility Act, 5 U.S.C. 605(b), that this 

rule will not have a significant 

economic impact on a substantial 

number of small entities. 

Paperwork Reduction Act 

This final rule contains no new or 

revised information collection 

requirements subject to review by the 

Office of Management and Budget under 

the Paperwork Reduction Act (44 U.S.C. 

chapter 35). 

Unfunded Mandates Reform Act of 1995 

This final 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. 

Congressional Review Act 

To the extent that this rule is subject 

to the Congressional Review Act, the 

Commission has complied with its 

requirements by submitting this final 

rule to Congress prior to publication in 

the Federal Register. 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 77, No. 62 / Friday, March 30, 2012 / Rules and Regulations 19095 

List of Subjects in 29 CFR Part 1625 

Advertising, Age, Employee benefit 

plans, Equal employment opportunity, 

Retirement. 

Dated: March 7, 2012. 

For the Commission. 

Jacqueline A. Berrien, 

Chair. 

For the reasons set forth in the 

preamble, the Equal Employment 

Opportunity Commission 29 CFR 

chapter XIV part 1625 is amended 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. In § 1625.7, revise paragraphs (b) 

through (e) to read as follows: 

§ 1625.7 Differentiations based on 

reasonable factors other than age (RFOA). 

* * * * * 

(b) When an employment practice 

uses age as a limiting criterion, the 

defense that the practice is justified by 

a reasonable factor other than age is 

unavailable. 

(c) 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 

allegedly causes any observed statistical 

disparities. 

(d) Whenever the ‘‘reasonable factors 

other than age’’ defense is raised, the 

employer bears the burdens of 

production and persuasion to 

demonstrate the defense. The 

‘‘reasonable factors other than age’’ 

provision is not available as a defense 

to a claim of disparate treatment. 

(e)(1) A reasonable factor other than 

age is a non-age factor that is objectively 

reasonable when viewed from the 

position of a prudent employer mindful 

of its responsibilities under the ADEA 

under like circumstances. Whether a 

differentiation is based on reasonable 

factors other than age must be decided 

on the basis of all the particular facts 

and circumstances surrounding each 

individual situation. To establish the 

RFOA defense, an employer must show 

that the employment practice was both 

reasonably designed to further or 

achieve a legitimate business purpose 

and administered in a way that 

reasonably achieves that purpose in 

light of the particular facts and 

circumstances that were known, or 

should have been known, to the 

employer. 

(2) Considerations that are relevant to 

whether a practice is based on a 

reasonable factor other than age include, 

but are not limited to: 

(i) The extent to which the factor is 

related to the employer’s stated business 

purpose; 

(ii) The extent to which the employer 

defined the factor accurately and 

applied the factor fairly and accurately, 

including the extent to which managers 

and supervisors were given guidance or 

training about how to apply the factor 

and avoid discrimination; 

(iii) The extent to which the employer 

limited supervisors’ discretion to assess 

employees subjectively, particularly 

where the criteria that the supervisors 

were asked to evaluate are known to be 

subject to negative age-based 

stereotypes; 

(iv) The extent to which the employer 

assessed the adverse impact of its 

employment practice on older workers; 

and 

(v) The degree of the harm to 

individuals within the protected age 

group, in terms of both the extent of 

injury and the numbers of persons 

adversely affected, and the extent to 

which the employer took steps to reduce 

the harm, in light of the burden of 

undertaking such steps. 

(3) No specific consideration or 

combination of considerations need be 

present for a differentiation to be based 

on reasonable factors other than age. 

Nor does the presence of one of these 

considerations automatically establish 

the defense. 

* * * * * 

[FR Doc. 2012–5896 Filed 3–29–12; 8:45 am] 

BILLING CODE 6570–01–P 

DEPARTMENT OF DEFENSE 

Office of the Secretary 

[Docket ID: DOD–2012–OS–0031] 

32 CFR Part 322 

Privacy Act; Implementation; 

Correction 

AGENCY: Office of the Secretary, DoD. 

ACTION: Direct final rule with request for 

comments; correction. 

SUMMARY: On March 16, 2012 (77 FR 

15595–15596), Department of Defense 

published a direct final rule titled 

Privacy Act; Implementation. This rule 

corrects the paragraph identification in 

the added text. 

DATES: This rule is effective on May 25, 

2012. 

FOR FURTHER INFORMATION CONTACT: 

Patricia Toppings, (571) 372–0485. 

SUPPLEMENTARY INFORMATION: On March 

16, 2012, Department of Defense 

published a direct final rule titled 

Privacy Act; Implementation. 

Subsequent to the publication of that 

direct final rule, Department of Defense 

discovered that paragraphs (l)(2) 

through (l)(5) in § 322.7 should have 

read paragraphs (l)(1) through (l)(4). 

Correction 

In the direct final rule (FR Doc. 2012– 

6170) published on March 16, 2012 (77 

FR 15595–15596), make the following 

corrections: 

§ 322.7 [Corrected] 

On page 15596, in § 322.7, in the 

second column, paragraphs (l)(2) 

through (l)(5) are corrected to read 

paragraphs (l)(1) through (l)(4). 

Dated: March 26, 2012. 

Aaron Siegel, 

Alternate OSD Federal Register Liaison 

Officer, Department of Defense. 

[FR Doc. 2012–7596 Filed 3–29–12; 8:45 am] 

BILLING CODE 5001–06–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 165 

[Docket No. USCG–2012–0121] 

RIN 1625–AA87 

Security Zone; USCGC STRATTON 

Commissioning Ceremony, Alameda, 

CA 

AGENCY: Coast Guard, DHS. 

ACTION: Temporary final rule. 

SUMMARY: The Coast Guard is 

establishing a temporary security zone 

in the navigable waters of the San 

Francisco Bay, Alameda, CA within the 

San Francisco Captain of the Port 

(COTP) Zone. The security zone is 

necessary to ensure the safety of the 

USCGC STRATTON commissioning 

ceremony. 

DATES: This rule is effective from 12 

p.m. on March 30, 2012 to 4 p.m. on 

March 31, 2012. 


sroberts on DSK5SPTVN1PROD with RULES