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Statement of Need: Current EEOC regulations interpret the ADEA as prohibiting an employment practice that has a disparate impact on individuals within the protected age group unless it is justified as a business necessity. The Supreme Court's holding in Smith v. City of Jackson validated the Commission's position that disparate impact analysis applies in ADEA cases. The holding, however, differed from the Commission's position that the business necessity test was the appropriate standard for determining the lawfulness of a practice that had an age-based disparate impact. The EEOC is revising its regulation to reflect the Smith decision. Moreover, as noted above, a related item (RIN #3046-AA87) entitled "Reasonable Factors Other Than Age Under the Age Discrimination in Employment Act" has been merged with this item. In this final rule, the EEOC is also revising its regulations to address the scope of the RFOA defense.

Summary of the Legal Basis: The ADEA authorizes the EEOC "to issue such rules and regulations it may consider necessary or appropriate for carrying out this chapter ...." 29 U.S.C. section 628.

Alternatives: The Commission has considered all alternatives proposed by the public comments.

Anticipated Costs and Benefits: Based on the information currently available, the EEOC does not anticipate that the rule will have significant economic effects. The purpose of the rule is to help explain the implications of recent Supreme Court decisions and the type of conduct that would support an RFOA defense in court. It therefore does not directly require any action on the part of covered entities. The regulation makes clear that the employer's burden is to prove the RFOA, rather than the more stringent business necessity, defense. Further, the rule instructs covered entities what to do if they want 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, and does not include reporting, recordkeeping, or other requirements for compliance. Costs would result primarily from voluntary modifications to covered entities' business practices made to protect against disparate-impact liability. Modifications may include performing disparate impact analyses of business practices before they are adopted, providing guidance to decisionmakers on how to implement the practice, and evaluating other options to mitigate harm. The costs will be minimal, because these actions are required, for purposes of establishing the RFOA defense, only to the extent that a reasonable employer would perform them under the circumstances. Many covered entities already routinely perform them. To the extent that the regulation motivates employers to take additional actions, free resources minimize the cost of doing so. This revision, informed by the comments of stakeholders, will be beneficial to courts, employers, and employees seeking to interpret, understand, and comply with the ADEA.

Risks: The rule does not affect risks to public health, safety, or the environment.