Labor: Avoiding discrimination class actions

Coming out of the recession, prudent employers will develop strategies to avoid systemic class claims in their hiring processes.

Since the economic decline that started in the fall of 2008, many companies have experienced reductions in force, frozen vacant positions and engaged in other attrition efforts all with the aim of cutting costs. With signs of possible economic recovery now on the horizon for certain industries, some companies will soon execute plans to grow their businesses and rebuild their workforces. Those employers with such hiring plans need to be wary of the traps and other pitfalls that could trigger discrimination class action claims by rejected applicants.

Many class claims filed by rejected applicants allege systemic discrimination in the hiring process. Although a number of theories have been used to litigate these types of class claims, plaintiffs typically file these claims alleging violations of Title VII of the Civil Rights Act of 1964 and other related civil rights statutes under two primary theories. First, disparate treatment claims alleging intentional discrimination on a class-wide basis have generally followed the pattern and practice theory first articulated by the Supreme Court in International Brotherhood of Teamsters v. United States, 431 U.S. 329 (1977), wherein the discrimination was alleged to be so pervasive that it was the standard operating procedure of the employer. If the class plaintiffs succeed in making a prima facie showing of a pattern and practice of discrimination, then the employer must rebut that showing with evidence showing that the class plaintiffs’ statistics were either inaccurate or insignificant.

Additionally, many class actions in this area of law are filed under disparate impact theory in line with Griggs v. Duke Power Co., 401 U.S. 424 (1971), in which a neutral practice or policy was alleged to have adversely impacted a protected group. Under this theory, the class plaintiffs must make a prima facie showing that an employer’s neutral practice has a disparate impact on racial minorities, women or other members of a protected group. Once the class plaintiffs make this statistical showing, the employer must show that the practice is job-related for the positions at issue and consistent with business necessity. The class plaintiffs would then have the opportunity to prove either (1) the practice is not job-related or (2) the availability of another selection procedure that does not have the same adverse impact on the protected group.

Oftentimes, these class discrimination cases, whether filed under the disparate treatment or disparate impact theory, will devolve into situations with dueling experts debating whether there has been a statistically significant showing of some type of adverse treatment or impact in the hiring process. Some employers have successfully obtained court orders to strike the plaintiff’s statistical expert because that expert failed to control for relevant, non-discriminatory explanations for the apparent statistical disparities such as educational background, work history, licensure, certifications and the proper labor market from which the employees at issue were drawn.

While many class action claims relating to the hiring process are filed by private plaintiffs, employers may also face enforcement actions by the EEOC (or its state equivalents) alleging similar theories. Indeed, through its Eradicating Racism and Colorism From Employment (E-RACE) and Systemic Initiatives, the EEOC has announced ambitious plans to bring enforcement actions against employers that use facially neutral criteria that have a disproportionate adverse impact on racial minorities. According to the EEOC, these include arrest and conviction records, employment and personality tests, credit scores, and computer programs that flag residential addresses and zip codes.

However, keep in mind that conviction records can be valid disqualifying criteria for certain positions of employment, depending on the nature of the job, the seriousness of the underlying criminal violation and length of time since the conviction. Additionally, an employment test may still be used, even if it has a disproportionate impact on a protected group, where the test has been professionally validated to ensure that it accurately predicts or correlates with successful job performance and there is no other alternative to the employment test that has less impact on the protected group. But if there is another test available that accurately predicts job performance and does not result in an adverse impact, that test should be used. In short, criteria to qualify or screen applicants must be job-related and consistent with business necessity to withstand a disparate impact challenge.

More recently, employers have adopted hiring policies that exclude individuals who are unemployed, or at least policies that favor presently employed applicants. Such policies can be vulnerable to disparate impact claims because statistics show that minorities have a higher rate of unemployment than non-minorities.

The EEOC, as part of its E-RACE initiative, also states that employers that rely on new technology, such as video resumes, could face discrimination claims based on appearance or where minorities, at a disproportionate rate, do not have access to Internet-equipped computers or video recorders to participate in the hiring process.

Although class claims under the Americans with Disabilities Act are difficult to certify under Fed. R. Civ. P. 23 due to the individualized inquiry to determine class member’s disability status, there are some viable class theories where disability status will not be the central focus, particularly if the EEOC (which is not even required to comply with Rule 23) files suit. For example, employers could face class claims under the ADA if they consistently ask disability-related questions during interviews, require applicants to report past occupational injuries or their workers compensation histories before conditional offers of employment are made, or conduct medical examinations before conditional offers of employment are made. The ADA also requires employers to provide reasonable accommodation in the hiring process, such as with an employment examination. The ADA also prohibits the use of employment tests that screen out disabled applicants at a disproportionate rate unless the test is shown to be job-related and consistent with business necessity.

Before the next wave of recruiting and hiring, the prudent employer coming out of the recession will develop strategies to avoid systemic class claims in the hiring process. Companies should update their recruiting and hiring policies, implement new objective criteria to qualify and screen applicants, professionally validate employment tests and establish a defined hiring practice that can pass legal muster if challenged by applicants. An employer should not embrace new technology in the hiring process unless it has fully analyzed that it would not have an adverse impact on racial minorities, women or other protected groups. Additionally, those involved with making hiring decisions, particularly those on the front line, should be trained to uniformly and consistently apply objective criteria to all applicants.

Managing Shareholder

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Steve Moore

Steve Moore is the managing shareholder of Ogletree Deakins' Denver office. In addition to litigating single- and multi-plaintiff cases, Moore has represented employers against class...

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