By Yendelela Neely

On March 31, 2008—almost three years to the day of the United State’s Supreme Court’s 2005 ruling in Smith v. City of Jackson—the Equal Employment Opportunity Commission (“EEOC” or the “Agency”) issued a notice of proposed rulemaking announcing the Agency’s intent to amend its age discrimination regulations to reflect the issues addressed by the Court in that decision.  The proposed rules both implement aspects of the decision as well as also go beyond the Smith v. City of Jackson decision to rule on an issue of disagreement among the circuits.  

In Smith v. City of Jackson, 544 U.S. 228 (2005), several police officers challenged a City of Jackson, Mississippi’s pay plan alleging that less-tenured officers received larger percentage pay increases than officers with more years service.  The plaintiffs argued that the City’s pay plan disparately impacted older officers because they tended to have more years service.  The Fifth Circuit Court of Appeals decision dismissed the plaintiffs’ case on the grounds that disparate impact claims were “categorically unavailable under the” Age Discrimination in Employment Act (“ADEA”); the officers summarily appealed.  The Supreme Court disagreed with the Fifth Circuit’s reasoning and recognized plaintiffs’ ability to challenge facially neutral employment policies that disparately impact older workers.  In doing so, however, the Court noted that the “scope of disparate-impact liability under the ADEA is narrower than under Title VII,” in that employers are not liable when the impact is attributable to a reasonable factor other than age.  

The Supreme Court’s ruling that disparate-impact claims are cognizable under the ADEA is consistent with the EEOC’s current age discrimination regulations.  Indeed, the Court relied on the fact that the EEOC, “the agency charged by Congress with responsibility for implementing the statute…[has] consistently interpreted the ADEA to authorize relief on a disparate-impact theory.”  It was the Court’s application of its ruling that differed from the EEOC’s prior approach and which is the basis for the revision of the Agency’s regulations. 

Although recognizing the Smith plaintiffs’ claim, the Court found that their allegation of age discrimination was fatally flawed due to the plaintiffs’ failure to identify “any specific test, requirement, or practice within the pay plan that had an adverse impact on older workers.”  Had the plaintiffs’ allegations been sufficiently sufficient, their claim would still fall due to the employer’s articulation of a reasonable factor other than age in support of the pay plan.  The Court found it immaterial that the employer could have reached its goal through other measures that would not have disparately impacted the older workers as such was not a requirement of the reasonableness test. 

The Court’s reasonableness ruling is contrary to the EEOC’s current regulations that provide when an employment practice disparately impacts older workers “it can only be justified as a business necessity.”  29 C.F.R. § 1625.7(d).  The Court when adopting the reasonableness test specifically stated that it is “[u]like the business necessity test, which asks whether there are other ways for the employer to achieve the goals that do not result in a disparate impact.”  Accordingly, the Agency’s proposed rule removes the business necessity test from Section 1625.7(d).  The proposed rule provides that “[a]ny 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.’”  The proposed Section 1625.7(d) also includes a requirement that any person challenging an allegedly discriminatory practice isolate and identify the “specific employment practice that is allegedly responsible for any observed statistical disparities.” 

The amendments to Section 1625.7(d) are based on exact language extracted from the Smith v. Jackson decision and thus, merely align the EEOC’s regulations with that decision.  However, the EEOC’ proposed rule also reiterates the Agency’s longstanding position that the ADEA’s reasonable factor other than age provision creates an affirmative defense that the employer must establish.  As a result, the Agency amended Section 1625.7(e), which sets forth this position, to apply both to disparate treatment and disparate impact cases.  The burden of proof of the “reasonable factor other than age” element was not discussed in Smith v. Jackson.  There is a split among the circuits as to whether it is an affirmative defense to which the employer bears the burden of proof or whether the employee bears the burden of establishing that no reasonable factor other than age exists. 

However, the EEOC’s amendment to Section 1625.7(e) may be premature.  On January 18, 2008, the Supreme Court granted certiorari in Meacham v. Knolls Atomic Power Laboratory to decide whether the employee alleging disparate impact bears the burden of persuasion regarding the reasonable factor other than age.  Oral arguments are scheduled for April 23, 2008.  The Supreme Court will issue a ruling in the case at some point prior to the close of the Court’s 2007-08 terms on June 30, 2008.  Since the comment period for the EEOC’s proposed rule does not end until May 30, 2008, it is unlikely that the Agency will promulgate a final rule before the Court issues a ruling in Meacham.  Should the Court determine that employees bear the burden of persuasion with regard to the reasonable factor other than age, Section 1625.7(e) will be meaningless with regard to disparate impact cases.