7th Cir: ADEA disparate impact only applies to employees, not applicants

Not official use. 

In Kleber v. CareFusion Corp., the Seventh Circuit (en banc) held that "that Congress, while protecting employees from disparate impact age discrimination [under the ADEA], did not extend that same protection to outside job applicants." Woah, that's big, right? How did they get there?

The Court focused on the statutory text. The disparate impact provision of the ADEA makes specific reference to protecting one's "status as an employee." Welp, an applicant is not an "employee," right? The Court also contrasted the disparate impact provision with the disparate treatment provision, which makes it unlawful for an employer "to fail or refuse to hire . . . any individual . . . because of such individual's age."

This is a controversial ruling, and the Court split with four judges dissenting. I would not be surprised to see a circuit split on this issue and/or Supreme Court review.

Circuit split: 3d Cir. recognizes ADEA subgroup disparate impact claims

The ADEA protects employees over the age of 40 from age discrimination. In Karlo v. Pittsburgh Glass Works, LLC, the Third Circuit analyzed whether a subgroup of employees older than 40 can bring a disparate impact claim:

Disparate-impact claims in ADEA cases ordinarily evaluate the effect of a facially neutral policy on all employees who are at least forty years old—that is, all employees covered by the ADEA. In this case, plaintiffs claim to have identified a policy that disproportionately impacted a subgroup of that population: employees older than fifty.

Not official use.

If you counted the employees older than 40 but younger than 50, it "washed out the statistical evidence of a disparity."

The Court provided in depth analysis of the issue, but one of the primary factors was the specific protection provided by the ADEA. "[T]he ADEA proscribes age discrimination, not forty-and-over discrimination." The Court relied heavily on the Supreme Court's determination that a 56 year old employee could file a discrimination claim if he was fired and replaced by a significantly younger worker... even if that comparitor was over 40. See, O'Connor v. Consolidated Coin Caterers Corp.

Ultimately, the Third Circuit concluded that plaintiffs may bring disparate impact claims where a policy disproportionately impacts a subgroup of employees older than 40 (e.g. employees odler than 50), even if the statistical evidence would not support a disparate impact theory when applied to the entire class of employees over 40. This creates a circuit split, as multiple other circuit courts have reached the opposite conclusion. Circuit splits often draw SCOTUS attention - we'll see if this is the case that gets the issue to SCOTUS.

DOJ Sues PA State Police for Fitness Test

The United States Department of Justice (DOJ) filed a lawsuit on Tuesday against the Pennsylvania State Police. You can read the Complaint here.

The police use a fitness test as part of their hiring process. The actual test is not clear from the Complaint, but apparently includes a 300-meter run, sit-ups, push-ups, vertical jump, 1.5-mile run, and "new elements" added in 2009. DOJ alleges that since 2009, 98% of male applicants have passed the fitness test but only 72% of female applicants passed. Thus, the test has a statistically significant disparate impact.

Disparate impact does not require discriminatory animus. In other words, DOJ does not have to establish that the Police are intentionally excluding women. Here's the fly-over view of disparate impact analysis:

Under Title VII's disparate impact theory of liability, plaintiffs establish a prima facie case of disparate impact by demonstrating that application of a facially neutral standard has resulted in a significantly discriminatory hiring pattern. Once the plaintiffs have established a prima facie case, the burden shifts to the employer to show that the employment practice is “job related for the position in question and consistent with business necessity....” 42 U.S.C. § 2000e–2(k). Should the employer meet this burden, the plaintiffs may still prevail if they can show that an alternative employment practice has a less disparate impact and would also serve the employer's legitimate business interest. 

Lanning v. Se. Pennsylvania Transp. Auth. (SEPTA), 181 F.3d 478, 485 (3d Cir. 1999).

I suspect the police can establish a need for some physical fitness requirements. However, DOJ alleges alternatives to the current test exist that "have less disparate impact on women and would serve [their] legitimate interests."

HT: My McQuaide Blasko colleague, Jaime Bumbarger.

Sixth Circuit Goes Hard on EEOC Background Check Litigation

Remember when a district court rejected the EEOC's use of "race raters" in a disparate impact claim against Kaplan? And discovery revealed that the EEOC itself used the same background checks that it based its lawsuit on? Here's a refresher.

For some reason, the EEOC decided to appeal to the Sixth Circuit - you can now read the Sixth Circuit's opinion here. Let's just say it did not go well. You can read the whole thing for yourself, but I think you can get the flavor from my masterful selection of excerpts along with my commentary:

In this case the EEOC sued the defendants for using the same type of background check that the EEOC itself uses. 

[That's the first sentence!? Oh well, it can only get better for the EEOC from here, right?] . . . . 

The EEOC’s case goes downhill from there. 

[How is that possible?] . . . . 

We need not belabor the issue further. The EEOC brought this case on the basis of a homemade methodology, crafted by a witness with no particular expertise to craft it, administered by persons with no particular expertise to administer it, tested by no one, and accepted only by the witness himself. 

[oh.] 

The district court’s judgment is affirmed. 

[Ya don't say.]

The EEOC has targeted criminal and credit background checks as having a disparate impact on racial minorities. It didn't go very well in this case.

EEOC Targets Criminal Background Checks

Last week, the EEOC issued a press release announcing lawsuits against two employers for using criminal background checks. The first lawsuit:

In the suit against BMW, the EEOC alleges that BMW disproportionately screened out African Americans from jobs, and that the policy is not job related and consistent with business necessity . . . . The policy is a blanket exclusion without any individualized assessment of the nature and gravity of the crimes, the ages of the convictions, or the nature of the claimants' respective positions.

And, the second lawsuit:

In Illinois, the Chicago office of the EEOC filed a nationwide lawsuit based on discrimination charges filed by two rejected black applicants. That lawsuit charges that Dollar General conditions all of its job offers on criminal background checks, which results in a disparate impact against blacks.

Both lawsuits are disparate impact lawsuits, meaning that the criminal background check policies are not necessarily intended to discriminate based on race. But the policies disproportionately harm employees/applicants based on race. Employers can defend against such claims by establishing that the policy is job-related and consistent with a "business necessity."

If you'd like some guidance about how to avoid the EEOC's wrath, check out last year's enforcement guidance: Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964.

HT: Friend and employee benefits attorney, Mike Chittenden via email.

Image: EEOC seal. Not official use.

"Race Raters" Inadmissible - COTW #145

This Case of the Week goes back a few months, but it's an interesting issue so I decided to drop it in here.

The EEOC filed a disparate impact lawsuit against Kaplan Higher Learning Education Corp. for its use of credit reports in background checks. To establish a disparate impact based on race, the EEOC proffered statistics - but they didn't have the actual race of each applicant. Instead, the EEOC relied on "race raters" to identify the race of each individual using his or her driver's license photos:

In order to determine the race of a particular applicant, the EEOC subpoenaed records from the Departments of Motor Vehicles (“DMVs”) from 38 states and the District of Columbia. Fourteen states and the District of Columbia provided records that identified an applicant's race. The remaining 24 states provided copies of the driver's license photos pertaining to the applicants. In order to determine the race of applicants from these states, Dr. Murphy assembled a team of five “race raters,” who were asked to review each photograph and determine whether the individual is “African–American,” “Asian,” “Hispanic,” “White,” or “Other.” Individuals considered “multi-racial” were adjudged “Other.” Dr. Murphy required that four of the five “race raters” agree (80%) in order to consider that applicant's race. In all, the “race raters” were shown 891 photographs. In 11.7% of the photographs, the “race raters” were unable to achieve an 80% consensus with regard to the applicant's race.

Equal Opportunity Employment Comm'n v. Kaplan Higher Learning Edu. Corp., 1:10 CV 2882, 2013 WL 322116 (N.D. Ohio Jan. 28, 2013) reconsideration denied, 1:10 CV 2882, 2013 WL 1891365 (N.D. Ohio May 6, 2013).

The Court granted the defendant's motions to exclude the evidence and enter summary judgment.

An interesting sidenote: discovery revealed that the EEOC itself used credit checks for 84 of its 97 positions. Per the EEOC handbook, the EEOC uses credit checks because "overdue just debts increase temptation to commit illegal or unethical acts as a means of gaining funds to meet financial obligations."

HT: My McQuaide Blasko colleague, Janine Gismondi.

EEOC Issues Final Rule on "Reasonable Factors Other than Age" Defense

The EEOC issued its final rule on the "Reasonable Factors Other than Age" defense. The defense is used in ADEA (age discrimination) cases where a facially neutral policy or practice has a significant disparate impact on workers over 40 on the basis of older age.

Some of the highlights:

[A]n 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.

The EEOC also provided some considerations that are relevant, though no single consideration is determinative:

(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.

You can also check out the EEOC's press release or their Questions and Answers on the final rule.

Image: EEOC logo used in commentary on EEOC. Not official use.

Statistical Analysis of Adverse Impact: A Practitioner's Guide

Disparate impact claims are a particularly interesting area of employment law. Employment law often involves a collaboration of HR day-to-day folks with employment law lawyer folks. With disparate impact claims, however, there is a third component that is often not within the expertise of HR or lawyers: statistical analysis.

Stephanie Thomas, who my readers may remember as a guest-blogger here (ex. Statistical Analysis of the Twombly Era) has published a new book that helps to bridge the gap between the three disciplines mentioned above: Statistical Analysis of Adverse Impact: A Practitioner's Guide. Ms. Thomas was kind enough to provide a copy (pictured). The book provides a great introduction into the law and statistical analysis regarding adverse impact.

For the math-averse, it starts with simple and easy to follow examples of coin toss games. While some of the statistical analysis gets into scary equations with unrecognizable symbols, Ms. Thomas does a nice job of providing the "gist" of the various tests. If you need the mathy stuff (is mathy a word?) it's there, but you don't need to perform the calculations yourself to get the point of the discussion.

The book covers the basics, from hiring to promotions to reductions in force. It also includes some discussion of current events. For example, there is a discussion on recruiting in social media. And, particularly timely (though always relevant), a chapter on using unemployment status as a screening tool.

All told, it's a helpful resource for HR and employment lawyers who want a handy reference on the topic. As Ms. Thomas bills it: "A non-technical guide to assist HR professionals and legal counsel in working proactively with statistical consultants."

Note: You may also recognize Ms. Thomas as the host of The Proactive Employer podcast, which I've appeared on a number of times. Most recently for discussion of third party retaliation.

Posted by Philip Miles, an attorney with McQuaide Blasko in State College, Pennsylvania in the firm's civil litigation and labor and employment law practice groups.

Lewis and Ledbetter Distinguished

Why did Lewis come out differently from Ledbetter? Lawffice Space readers are already aware of Lewis v. City of Chicago (Opinion | Overview | Lewis and Ricci Combined | More Thoughts). And anyone who follows employment law is aware of Ledbetter v. Goodyear.

Lewis held that a disparate impact claim accrues upon the application of an employment practice or policy - in other words, the limitations period does not begin solely upon the initial adoption of the practice, but resets upon the application of that practice.

By contrast, Ledbetter held that the statute of limitations for a disparate treatment claim does not reset upon the application of a prior discriminatory act. Specifically, the limitations period does not reset upon the issuance of a paycheck that is lower - effectively tainted - because of past discrimination. It was a controversial decision which was essentially mooted by the enactment of the Fair Pay Act.

So why did Arthur Lewis win, while Lilly Ledbetter lost? Some (apparently including Congress) would argue that Ledbetter was just wrong. The Supreme Court, however, offered this explanation in Lewis:

For disparate-treatment claims—and others for which discriminatory intent is required—that means the plaintiff must demonstrate deliberate discrimination within the limitations period. But for claims that do not require discriminatory intent, no such demonstration is needed.

In short, the Court points out that the gravamen of a disparate treatment claim is intent; so, subsequent effects are irrelevant if there's no discriminatory intent (such as upon the routine issuance of a paycheck). Meanwhile, a disparate impact claim is based on effects. Hence, disparate impact claims can occur upon the mere application of a practice, even absent discriminatory intent, because it's the effects that matter.

Posted by Philip Miles, an employment lawyer with McQuaide Blasko in State College, Pennsylvania.

The Combined Lesson of Lewis and Ricci

My latest entry on ELinfonet is up: Learning Lewis but Remembering Ricci. In this post, I combine the Supreme Court's opinions in Lewis v. City of Chicago and Ricci v. DeStefano (Lawffice Space series on each opinion) into a comprehensive game plan for employers.

Court-watchers may recall that the Supreme Court faulted the fire department in Ricci for not following through on its testing despite racial disparities in the results. Then in Lewis, the Court faulted another fire department because it kept using the test results despite the disparate impact.

My new post helps sort out when to GO and when to STOP.

See also, my other posts on ELinfonet.

Posted by Philip Miles, an employment lawyer with McQuaide Blasko in State College, Pennsylvania.

More Thoughts on SCOTUS Lewis v. Chicago

Last week, I blogged about the Supreme Court's opinion in Lewis v. City of Chicago. The Supreme Court held that disparate impact claims arise upon the application of an employment practice as opposed to the practice's initial adoption.

I spoke with Judy Greenwald of Business Insurance magazine regarding the case and she published a pair of articles featuring a quote from that conversation.

First, in Black Firefighter Applicants Can Sue Chicago: Court; and then, in High Court Lowers Bar on Discrimination Suits:

Philip K. Miles III, an associate with State College, Pa.-based McQuaide Blasko Attorneys at Law, said the ruling "should serve as a reminder to employers that they need to look at their practices, even if they've been using them for years, to make sure they're not having a disparate impact now."

I think that is the main takeaway for employers: assess your practices for disparate impact.

This week I have a few more posts on Lewis planned. Specifically: Combining Lewis and Ricci (last year's famous white New Haven firefighters case ); and explaining why Lewis and Ledbetter (controversial case that spawned the Fair Pay Act) are consistent.

Posted by Philip Miles, an employment lawyer with McQuaide Blasko in State College, Pennsylvania.

Supreme Court: Disparate Impact Arises Upon Application of Employment Practice

The Supreme Court issued an opinion in Lewis v. City of Chicago today. Although the Court is often divided on employment law issues, the Supreme Court was unanimous in today's holding by Scalia, J. that:

A plaintiff who does not file a timely charge challenging the adoption of a practice may assert a disparate-impact claim in a timely charge challenging the employer’s later application of that practice as long as he alleges each of the elements of a disparate-impact claim.

(Syllabus). So what brought about this decision?

It started with a written examination administered to applicants for firefighter positions (hmmm, where have I heard this setup before?). The applicants took the test in 1995 and the City divided them into categories in 1996. The categories were "Well Qualified" scoring 89+; "Qualified," scoring 65-88; and everyone scoring below 65 failed. The City then began to hire from the "well-qualified" pool for about six years until they depleted the "well-qualifieds" and dipped into the mere "qualifieds."

Starting in 1997, several African-American applicants filed charges with the EEOC, alleging discrimination. The City argued that the discriminatory act was the classification of applicants into the different pools. And that the application of that classification, the various hiring decisions made in subsequent years, did not reset the statute of limitations. Per today's 9-0 decision: Wrong!

The employment practice in question here was, "the City’s practice of picking only those who had scored 89 or above on the 1995 examination." If that application of the test scores constituted a disparate impact claim, then the date of that application should be used in analyzing the statute of limitations.

The City and its amici (individuals or groups not directly involved in the case but providing input in friend of the court briefs) had argued that today's holding "will result in a host of practical problems for employers and employees alike." Justice Scalia offered an interesting rebuke:

In all events, it is not our task to assess the consequences of each approach and adopt the one that produces the least mischief. Our charge is to give effect to the law Congress enacted.

He'll no doubt keep that one in his back pocket for a rainy day.

The bottom line: Disparate impact may occur upon the application of a previously adopted practice.

Posted by Philip Miles, an employment lawyer with McQuaide Blasko in State College, Pennsylvania.

Ricci II - Disparate Impact

I'm sure you remember Ricci v. DeStefano, the New Haven white firefighters case. In that case, the white firefighters filed a Title VII disparate treatment claim when the fire department refused to certify the results of a promotion test. The City argued it was afraid of a disparate impact claim because the results were statistically skewed against the black firefighters that took the test.

The Court held that skewed stats were no reason to ignore the results of the announced process for promotion. Instead the City needed a "strong basis in evidence to believe it will be subject to disparate-impact liability." The Court found that no such "strong basis in evidence existed" and granted summary judgment for the white firefighters. Well, guess what? Now, one of the black firefighters filed a lawsuit. Wanna guess his theory? Yup, disparate impact.

According to the New York Times, Michael Briscoe alleges the test was "was unfair because it undervalued the oral portion of the test, on which he did better." The promotion test was 60% written and 40% oral. Due to the high profile of the original case, I'm sure this one will get significant media attention if it gets any traction in Court.

UPDATE (10/17/09): A copy of the Complaint is available online (via Law Professor Blogs Network).

Additional Resources

Lawffice Space Coverage of Ricci v. DeStefano

• Ricci - The Majority
• Ricci - Ginsburg's Dissent
• Scalia, Equal Protection, and the Future of Disparate Impact
• Alito, the Reverend, and Sotomayor

Media Coverage of Briscoe's Suit

• Business Insurance Magazine
• Yale Daily News

Ricci - The Majority

On Monday, the Supreme Court issued its opinion in Ricci v. DeStefano... or, as the media calls it, the New Haven white firefighters "reverse discrimination" case. Today, I will provide an objective summary of only the majority opinion. Frankly, there seems to be a dearth of commentary from people who both understand the issues and aren't attempting to make Ricci about Sotomayor's racism/mainstreamism/incompetence/essentialness.

The Background

The New Haven fire department administered a test in order to identify candidates for promotion to officer positions. The City made efforts to ensure the test was race neutral including hiring outside consultants. When the results came back, however, everyone who would have been promoted was white (and two Hispanics).

The Inherent Conflict

Deciding not to promote the pool of candidates because they are "too white" is discriminatory... but only promoting white people and no black candidates is also discriminatory. Either way, the City might violate Title VII.

Why? Title VII prohibits, among other things, racial discrimination that results in "disparate treatment"... it also prohibits "disparate impact." In other words, employers must treat individuals the same way regardless of race. At the same time, employers' policies must not impact races disproportionately.

To some extent, therefore, Title VII requires both equal treatment and equal results. Here, the employer got different results... but the only way to try to get more balanced results is to deny promotions to candidates based on race (aka "treat them differently").

A major technicality here is that the disparate impact is justified where the policy is "job related for the position in question and consistent with business necessity," and the employer has not rejected an alternative that would yield less disproportionate results.

The City's Decision

New Haven chose not to promote the white firefighters. The City hoped it could avoid liability based on its justification that it was avoiding "disparate impact" liability.

This sets up the major issue: Can an employer treat individuals differently because of their race, if the employer's goal is to avoid impacting entire classes of people differently? Can fear of a "disparate impact" claim justify "disparate treatment"?

The Extremes

The Court explicitly rejects two potential holdings, both of which were pretty extreme.

At one end: Attempting to avoid "disparate impact" is never a defense to treating individuals differently.

At the other end: Any time an employer thinks it will be liable for "disparate impact" it can go ahead and discriminate away.

The Middle Ground

For all of the yelling from opposite ends of the political spectrum, the Court actually took a rather middle-of-the-road approach. And remarkably, stated the holding in a rather plain English manner:

"We hold only that, under Title VII, before an employer can engage in intentional discrimination for the asserted purpose of avoiding or remedying an unintentional disparate impact, the employer must have a strong basis in evidence to believe it will be subject to disparate-impact liability if it fails to take the race-conscious, discriminatory action."

In even plainer English: You can treat individuals differently, but only if there's really good evidence that you must do it to avoid "disparate impact."

Application

The Court held that there was no evidence, let alone the "substantial evidence" required by their new rule, that the City would face liability for "disparate impact" if it promoted the white firefighters. Although the stats clearly showed a disparate impact, the Court held that the City should have analyzed the "business necessity" justification (and the less-discriminatory-alternative element). Summary judgment for the plaintiffs.

Conclusion

Jay Shepherd, author of Gruntled Employees, tweeted, "The bigger Ricci moral is: you can't discriminate in employment, even if avoiding discrimination is your rationale." I mostly agree but would add the exception: Unless you have "substantial evidence" that you will be liable for "disparate impact."