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EEOC Informal Discussion Letter

The U.S. Equal Employment Opportunity Commission

EEOC Office of Legal Counsel staff members wrote the following informal discussion letter in response to an inquiry from a member of the public. This letter is intended to provide an informal discussion of the noted issue and does not constitute an official opinion of the Commission.

ADEA: Liability Insurance

July 25, 2002

Dear :

This is in reply to your request for an opinion letter from the Equal Employment Opportunity Commission (EEOC) under the Age Discrimination in Employment Act of 1967 (ADEA). You wish to know whether a business that employs couriers can limit employment of the couriers to individuals age 65 or younger to avoid a sharp increase in automobile liability insurance rates that begins at age 65.

We must decline to issue an opinion letter in this matter. The issues you raise are based upon unique facts and cannot be resolved outside the context of a full investigation. Pursuant to EEOC regulations at 29 C.F.R. § 1626.17(c), we are providing informal advice that does not have the effect of a formal opinion.

Section 4(a)(1) of the ADEA prohibits employment discrimination against an individual because of such individual's age. Because, according to your letter, the increased insurance rates are based solely upon the age of the couriers, not their driving records or physical skills, the decision not to employ a courier who is age 65 or over would constitute a distinction based on age within the meaning of Section 4(a)(1). It does not appear that you could effectively contend that the distinction is based upon cost and not on age because age is the only criterion used by the insurance companies in setting automobile insurance rates. Cf., Hazen Paper Co. v. Biggins, 507 U.S. 604 (1993)(it is not intentional age discrimination to base employment decisions on a factor that is not age -- such as pension eligibility - even if the factor correlates with age; but result may differ if age were one of the requirements for pension eligibility). Thus, refusing to employ couriers over the age of 65 is lawful only if a specific statutory defense applies.

Section 4(f)(1)'s "reasonable factor other than age," (RFOA) defense appears to be inapplicable because, as previously noted, age is the sole criterion for raising the insurance rate. As the Supreme Court observed in an analogous context, "one cannot say that an actuarial distinction based entirely on sex is 'based on any other factor other than sex;' [s]ex is exactly what it is based on." City of Los Angeles, Dept. of Water and Power v. Manhart, 435 U.S. 702 (1978) (rejecting contention that the greater pension contributions required of women were based on longevity; only sex was used to calculate the contributions and life expectancy is based on a number of factors, of which sex is only one). See also E.E.O.C. v. Johnson & Higgins, Inc. 91 F.3d 1529 (2nd Cir. 1996) (under § 623(f)(1) an employer has a defense only if his policy is based on reasonable factors "other than age," not if the policy is reasonably based on age).

Commission regulations also make clear that cost is not a "reasonable factor other than age." 29 C.F.R. § 1625.7(f) specifies that "[a] differentiation based on the average cost of employing older employees as a group is unlawful except with respect to employee benefit plans which qualify for the section 4(f)(2) exception to the Act." The higher cost of automobile liability insurance does not fall within the section 4(f)(2) exception. Citing this regulation, the 11th Circuit held that it was unlawful to terminate a bus driver when the insurance company refused to insure because he was over age 65. Tullis v. Lear School, Inc., 874 F.2d 1489 (11th Cir. 1989).

The increased cost of liability insurance also does not constitute a bona fide occupational qualification under the ADEA. The BFOQ defense is extremely narrow and is met only where the job qualification is reasonably necessary to the essence of his business and the employer shows either that it had a "factual basis for believing that all or substantially all [persons over the age qualifications] would be unable to perform safely and efficiently the duties of the job involved" or that it is " 'impossible or highly impractical' to deal with the older employees on an individualized basis." Western Air Lines, 472 U.S. 400, 414 (1985). See Tullis v. Lear School, Inc., 874 F.2d 1489 (11th Cir. 1989) (employer did not prove that age was a BFOQ for driving a school bus). The extra cost of employing members of a protected group does not provide a defense for terminating such employees, with the possible exception of situations in which the "costs would be so prohibitive as to threaten the survival of the employer's business." United Auto Workers of America v. Johnson Controls, Inc., 499 U.S. 187, 210-11 (1991).

We hope this information has been useful. Please note, however, that this letter does not constitute an opinion or interpretation of the Commission within the meaning of 29 C.F.R. § 1626.18.


Dianna B. Johnston
Assistant Legal Counsel

This page was last modified on April 27, 2007.