Washington D.C. Employment Law Update : Washington D.C. Employment Lawyer & Attorney : Littler Mendelson Law Firm : Virginia, Tyson's Corner

In this case, the City of Chicago had created a hiring list for its firefighters based on the results of a written exam. The results of this test were divided by score into three levels: “well qualified,” “qualified,” and “not qualified.” Only about 11 percent of the 1,782 applicants who fell into the “well qualified” category were African American. Although applicants whose scores landed them in the “qualified” tier would be placed on the eligible list for the jobs, over the next six years the City drew upon the “well qualified” pool in selecting candidates for employment before proceeding to the “qualified” applicants.

A class of approximately 6,000 African American applicants who fell into the “qualified” category filled suit against the City more than two years after the test was administered and the scores announced, claiming that the test had a disparate impact on minority candidates. A federal judge in Chicago initially ruled in favor of the plaintiffs. The Seventh Circuit reversed this decision, finding that the plaintiffs failed to file a claim with the EEOC within the statutorily-prescribed 300 days of the announcement of the test results. The City had argued that if anything, its use of the test results to create a hiring list was the discriminatory event, triggering the limitations period. The appellate court agreed, stating “[t]he first injury in this case was the classification of the black applicants as merely ‘qualified’ on the basis of a test that they contend was discriminatory.” The court therefore rejected the plaintiffs’ argument that the discriminatory event was the application of the test results – i.e., the failure to hire the affected African American candidates. The Seventh Circuit also rejected the plaintiff’s “continuing violation” theory, explaining that “the statute of limitations begins to run upon injury (or discovery of the injury) and is not restarted by subsequent injuries.”

In reversing and remanding this decision, the Supreme Court first ruled that the exclusion of most of the applicants deemed “qualified” from the possibility of advancement constituted a cognizable disparate impact claim under Title VII. As for the timeliness issue, the Court distinguished disparate treatment from disparate impact claims: “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 arriving at this conclusion, the Court recognized that:

Employers may face new disparate-impact suits for practices they have used regularly for years. Evidence essential to their business-necessity defenses might be unavailable (or in the case of witnesses’ memories, unreliable) by the time the later suits are brought. And affected employees and prospective employees may not even know they have claims if they are unaware the employer is still applying the disputed practice.

The Court, however, explained that it is its job to “give effect to the law Congress enacted. . . . Congress allowed claims to be brought against an employer who uses a practice that causes disparate impact, whatever the employer’s motives and whether or not he has employed the same practice in the past. If that effect was unintended, it is a problem for Congress, not one that federal courts can fix.”

In the second case released today – Hardt v. Reliance Standard Insurance Co. (pdf)  – the Court unanimously held that under the Employee Retirement Income Security Act (ERISA), workers covered by an employee benefit plan are entitled to recover attorneys’ fees in lawsuits over benefits even if they are not “prevailing parties,” so long as they have achieved “some degree of success on the merits.” According to the Court, ERISA’s fee-shifting provision entitles courts to award attorneys’ fee to either party at their discretion.

In this case, the Fourth Circuit, in an unpublished opinion, held that an employee who filed a claim in district court alleging that her denial of long-term disability benefits was unlawful was not entitled to an award of attorney’s fees. The lower court had agreed with the claimant and remanded the matter back to the insurance underwriter for reconsideration, which eventually granted her the benefits sought. The Fourth Circuit reasoned that only enforceable judgments on the merits and court-ordered consent decrees render a claimant a “prevailing party” for attorney’s fees purposes.

The Supreme Court disagreed, finding that section 1132(g)(1) of ERISA – the provision that governs attorney’s fees – “unambiguously allows a court to award attorney’s fees ‘in its discretion . . . to either party.’” The Court further pointed out that “the words ‘prevailing party’ do not appear in this provision.” Moreover, the Court determined that because the claimant “achieved far more than ‘trivial success on the merits’ or a ‘purely procedural victory,’” the lower court properly exercised its discretion in awarding her fees.
 

The first letter, dated March 9, 2010 and released March 29, was written in response to an individual’s request for legislation that would ban an employer’s use of credit checks to screen job applicants. EEOC Assistant Legal Counsel Dianna Johnston responded that while the EEOC has no authority to enact legislation to prohibit employer credit checks, it does enforce Title VII of the Civil Rights Act, which prohibits, among other things, an employment practice that disproportionately screens out racial minorities, women, or another protected group unless the practice is job-related and consistent with business necessity. Therefore, Johnston noted, if the employer’s use of credit information disproportionately excludes one of these protected classes, the practice would be unlawful unless the employer could establish that the practice is necessary for the safe and efficient operation of the business. Johnston emphasized that during an EEOC meeting on employment testing and screening in May 2007, an attorney testified that credit checks have not been shown to be a valid measure of job performance. She admitted, however, that some courts have ruled that such practices are appropriate for certain positions, particularly where an employee would be charged with handling a large amount of cash.

The second letter, also released on March 29 but dated February 19, 2010, was drafted in response to a question as to whether requiring a masters’ degree – without the possibility of substituting experience or other education – for a Public Health Director position would violate Title VII. The letter writer indicated that doing so would result in a significantly disproportionate exclusion of protected racial minorities. EEOC Attorney-Advisor Aaron Konopasky responded that if this result could be proven – most likely through statistical evidence – then adopting the requirement could subject the employer to liability for disparate impact discrimination unless (a) the employer could show that the requirement is job-related and consistent with business necessity, and (b) the plaintiff could not show that a less discriminatory requirement would have been equally effective in predicting job performance. Assuming the requirement has a disparate impact on racial minorities, the letter concludes by advising the employer to determine whether an equally effective alternative selection procedure is available that would have less of an adverse impact, and to adopt that alternative procedure.

Background

In 2003, the City of New Haven, Connecticut issued promotion-qualifying exams to 118 firefighters, as required by union contract. After certifying the test results, the City – pursuant to a municipal regulation – was to promote from the group receiving the top three scores. The City decided against certifying the test scores, however, after it was determined that no African American and only two Hispanic applicants qualified for an immediate promotion. The rationale for failing to certify the results was that the City would subject itself to claims of disparate impact race discrimination under Title VII of the Civil Rights Act. The 17 white and two Hispanic firefighters who comprised the pool of applicants earning the three highest exam scores – and thus would have been among those eligible to receive promotions had the results been certified – filed suit. These plaintiffs argued that the City’s failure to certify the results violated Title VII’s prohibition on racially-based disparate treatment, as well as the Constitution’s Equal Protection clause. The district court granted the City’s motion for summary judgment, finding that the City lawfully acted to insulate itself from charges of disparate impact discrimination. On appeal, a three-judge panel of the U.S. Court of Appeals for the Second Circuit affirmed the lower court’s decision. Judge Sonia Sotomayor – President Obama’s pick to replace Justice David Souter on the U.S. Supreme Court – was a member of that panel. The Second Circuit subsequently voted 7-6 to deny a rehearing en banc. In a 5-4 decision, the U.S. Supreme Court reversed and remanded.

Reasoning

Title VII of the Civil Rights Act prohibits both direct discrimination (disparate treatment) and in certain circumstances indirect discrimination (disparate impact). In the second scenario, an employer’s facially neutral act that has a disproportionate adverse effect on members of a protected class can be deemed discriminatory unless the employer can show that the action causing the disparate impact was job-related and consistent with business necessity. If such a showing is made, an employee can argue that the employer can use alternative means of achieving the same ends that will have less of a discriminatory impact. In the instant case, the City argued that its intent to avoid a disparate impact claim was a justifiable reason for throwing out the test results, even though doing so resulted in an act of “reverse” discrimination against the white and Hispanic applicants. The Supreme Court examined the interplay between the disparate treatment and impact language in Title VII, which makes it unlawful for employers to use employment practices that “that are fair in form, but discriminatory in operation,” while at the same time prohibits employers from taking adverse employment actions “because of” race. In reconciling these Title VII provisions, the Court held that the appropriate standard to use is the “strong basis in evidence standard” used in the context of Constitutional challenges to government actions to remedy past acts of discrimination. In essence, before engaging in an act for the purpose of avoiding or remedying an unintentional disparate impact on a protected class that would in turn discriminate against another group of employees on the basis of race, the employer “must have a strong basis in evidence” to believe it will be subject to disparate impact liability. In the instant case, the Court concluded that the City’s threshold showing of a significant statistical disparity in test results without more is insufficient to meet this “strong basis in evidence” standard. The qualifying exams were job-related and consistent with business necessity, and the City did not show that less-discriminatory alternatives were available that it refused to adopt. Fear of litigation alone could not save the City’s claim. The practical effect of this case for employers is that using qualifying exams has now become less legally precarious.

Justice Kennedy delivered this opinion. 

For more information on this decision and its implications, see Littler's ASAP:  Ricci v. DeStefano: Talk About a Rock and a Hard Place: Employers Required to Pick Between Disparate Treatment and Disparate Impact Claims  by:  Dionysia Johnson-Massie, Holly M. Robbins, Grady B. Murdock, and Cindy-Ann L. Thomas.