Disparate impact case creates more confusion

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Almost a year after ruling in Ricci v. DeStefano that an employer cannot simply ignore entrance exam results that exclude a large percentage of minority job applicants, the U.S. Supreme Court has handed down another decision allowing a disparate impact claim to be brought by black applicants who say they were excluded based on the results of an application test.

The ruling in Lewis v. Chicago is being hailed by employee and civil rights advocates who say it will help ensure that applicants of color are not excluded from the workplace.

According to John Payton, president and director-counsel of the NAACP Legal Defense and Educational Fund, who argued the Lewis case on behalf of the applicants, the decision "should ensure that no other fire department or employer uses a discriminatory test."

But other attorneys say the opinion makes it even harder for employers to know how to test job applicants without opening themselves up to employment discrimination liability.

Disparate impact claims don't focus on "concrete examples of bias by identifiable agencies or individuals," noted Joshua Thompson, counsel for the Pacific Legal Foundation, who filed an amicus brief on the city's behalf. "Disparate impact is all about statistics."

Employers are in a bind, he said, if courts can "infer discrimination if the results of a test or policy don't line up with the racial mix in the larger community."

A 'new violation'

The plaintiffs in the Lewis case had taken an entrance exam given to Chicago firefighter applicants.

Exam results were rated in three categories: "well qualified," "qualified" and "not qualified." The city sent a letter to applicants who scored as "qualified," informing them that due to the large number of "well qualified" test scores, it was unlikely that they would be offered positions, but that their applications would remain on file.

About 6,000 black applicants who scored "qualified" but were ultimately not offered jobs filed a class action alleging disparate impact under Title VII.

The city moved to dismiss, claiming that the action was time-barred because the EEOC charge was filed 430 days after the test scores were announced, well outside the 300-day filing limit.

But the applicants argued that the charge was timely because it was filed 181 days after the round of hiring in which they were denied positions.

A U.S. District Court concluded that a new limitations period began to run each time a hiring decision was made based on the test scores, and thus the action was timely. The 7th Circuit reversed, but the justices agreed to hear the case.

In a unanimous decision, the court reversed. In an opinion by Justice Antonin Scalia, it rejected the city's contention that the only actionable employment practice at issue was the establishment of different categories of test scores.

The court concluded that the plaintiffs could bring a disparate impact claim challenging the application of an employment practice even if they did not file a timely charge challenging the adoption of that practice.

"It may be true that the [initial] decision to adopt the cutoff score (and to create a list of the applicants above it) gave rise to a freestanding disparate-impact claim," Scalia wrote. "[T]he City is correct that since no timely charge was filed attacking it, the City is now entitled to treat that past act as lawful. But it does not follow that no new violation occurred – and no new claims could arise – when the City implemented that decision down the road. …

"If [the plaintiffs] could prove that the City 'use[d]' the 'practice' that 'causes a disparate impact,' they could prevail," Scalia concluded, quoting the language of Title VII.

The court remanded for a determination of whether the class had made out a prima facie disparate impact case.

Another Catch-22?

When the court granted certiorari in this case, it immediately drew comparisons to the Ricci case, in which the justices ruled that the decision by New Haven city officials to throw out firefighter entrance exam results because too few minorities passed was unlawful unless the city could show a "strong basis in evidence" that it would be subject to disparate impact liability if it failed to do so.

After that ruling, employment defense attorneys feared that companies would be caught in an impossible situation – unable to accept entrance test results that excluded too many applicants of color for fear of opening themselves up to disparate impact liability, but also unable to set aside those results for fear that that move could also be seen as race based.

The current ruling creates a similar problem for employers.

"The employer is placed in a Catch-22," said Mara Georges, Chicago's Corporation Counsel. "Use the exam results, which have an adverse impact, and risk lawsuits from the group adversely impacted. Or disregard the exam results, and risk lawsuits from those who stand to benefit from the results."

According to Georges, claims by applicants who are now ineligible for hire due to age or other circumstances could expose the city to up to $45 million in damages.

Thompson complained that employers will now be hamstrung by test results whenever they don't result in a certain racial mix – something he suggested is discriminatory in itself.

"Real life isn't color-coded," he said. "It's simplistic to assume that a test or policy is unfair if it doesn't meet a predetermined racial outcome."

There are some steps employers can take to minimize the risk of liability exposure while still promoting applicant diversity. For example, the city of Chicago now uses a pass/fail system for grading job applicants, according to a statement released by Mayor Richard M. Daley.

The city also enlisted an outside expert to help administer its exam, and is boosting recruitment efforts aimed at increasing the number of minority applicants, the statement said.

Kimberly Atkins can be reached at [email protected].