How employers can do their part to tackle and dismantle systemic racism

July 14, 2020

Employment Law Alert

Author(s): Andrew B. Prescott, Jade Butman

We discuss disparate impact discrimination and steps employers can take to ensure that their policies are neutral and do not disadvantage protected classes.

It is hard to imagine any person in this country, or even in this world, who has not been impacted by the most recent events in race relations. The fortuitous capture of video evidence documenting the most recent deaths of Black people at the hands of law enforcement officers has thrust to the forefront of our consciousness difficult questions about individual and systemic racism.

The executive leadership teams of employers are looking to their advisors—including their lawyers—to help guide their organizations’ efforts to contribute to a more just and equitable society. One critical step is to proactively analyze the existing workforce and to review policies and practices that may be causing disparate impact discrimination despite an employer’s best intentions.

What is “disparate impact” discrimination?

When people think of discrimination, generally they think of intentional discrimination—or, in legal parlance, “disparate treatment” discrimination. The law, however, also protects against subtler, and therefore insidious, forms of discrimination that occur when a policy or practice appears to be neutral, but in fact causes disadvantages to a protected class. This is called “disparate impact” discrimination.

In 1971, the United States Supreme Court recognized what came to be known later as “disparate impact” discrimination in the seminal case of Griggs v. Duke Power Co. The employer, Duke Power, had historically engaged in overt race discrimination against blacks in hiring and job placement. The plaintiffs claimed that although the company’s overt discrimination had ended, the company’s high school education and aptitude test requirements discriminatorily excluded black applicants and employees from the more desirable jobs. The trial court found that the company had not violated Title VII because there was no evidence that the company intended to discriminate when it adopted the requirements at issue. The United States Supreme Court, however, ruled that the lack of discriminatory intent was irrelevant. The Court declared that “the touchstone is business necessity,” and “an employment practice which operates to exclude [black applicants or employees] is prohibited.”

In the Civil Rights Act of 1991, Congress codified the basic burden of proof applicable to federal disparate impact claims. “An unlawful employment practice based upon disparate impact is established . . . if a complaining party demonstrates that a respondent uses a particular employment practice that causes a disparate impact on the basis of race, color, religion, sex, or national origin and the respondent fails to demonstrate that the challenged practice is job related for the position in question and consistent with business necessity.”[1]

A common and simple example of “disparate impact” discrimination is when an employer has a policy that it will only hire individuals who are a certain minimum height or who can lift a certain minimum weight. Courts have found height restrictions disproportionately impact women and certain races. The courts have struck down under the disparate impact theory policies and practices such as an all-white union’s requirement that new members be sponsored by an existing member, promotional exams in a city fire department where white employees received administrative experience that provided an advantage in the tests, and a personnel board’s use of certification exams for police and firefighter jobs.

To be clear, good faith or ignorance of the disproportionate and harmful impact are not valid defenses to a disparate impact claim. Thus, an employer must proactively avoid engaging in disparate impact discrimination.

What policies and practices are problematic?

The most common policies and practices that are challenged by employees, often as class action lawsuits, largely revolve around the following areas:

  • Hiring (including criminal background policies and practices)
  • Promotions
  • Compensation
  • Layoffs

How can employers avoid unwittingly discriminating against protected classes?

Analyze your workforce.

First, analyze your existing workforce, as a whole and throughout the various hierarchical levels. Does its diversity mirror the community? Are persons of color underrepresented? Consider what you can do to promote diversity in hiring, retention, and promotion of the underrepresented groups. Perhaps you need to advertise your job openings in different venues or on different platforms. Perhaps you need to increase the diversity of the persons making hiring decisions. Also, consider training in unconscious bias for persons responsible for interviewing candidates. These steps will contribute to better and less biased decisions and create a more inviting environment for diverse talent.

Part of your workforce analysis should include considering whether your employees who are members of protected classes are paid at rates that are equal to others. If not, does a business necessity or job-related reason justify the pay disparity? Sometimes the disparity may be the result of linking compensation at the time of hire to previous salary history, which can perpetuate discrimination by previous employers. Some states have enacted laws that restrict employers from asking candidates about their prior salary history in an attempt to end this type of unfairness. You should consult employment counsel about applicable restrictions in your state. Regardless of whether your state has salary history bans, disparate impact laws will apply and be used to analyze whether your policies and practices are lawful.

Analyze your policies and practices.

After you have analyzed your workforce, analyze your policies and practices—in particular, those related to hiring, firing, promoting, and compensation. Consider whether these policies and practices fairly treat all races and protected categories.

One particularly tricky area involves policies related to the hiring of individuals with criminal backgrounds. Various states have enacted laws to ensure individuals with criminal backgrounds, who are disproportionately represented by minority groups, are given the chance to be gainfully employed. For example, California has a “ban-the-box” law that prohibits employers with five or more employees from asking about a job applicant’s criminal conviction history prior to making a conditional offer of employment. Regardless of statutory protections directly on point, however, disparate impact discrimination laws will apply to an employer’s policies and practices related to hiring individuals with criminal backgrounds. Thus, adverse decisions made regarding criminal backgrounds are susceptible to disparate impact discrimination litigation because of their likelihood to have a disproportionate impact on minority groups. Employers should conform their policies to the EEOC’s 2012 guidance regarding background screening, and also consult an attorney about local laws about the use of criminal background checks in hiring decisions.

Layoff selection processes also require close examination. Financial duress is not a defense against a disparate impact lawsuit. Thus, employers considering layoffs must scrutinize the impacts of using facially neutral selection criteria. An employer should consider whether the criteria and process disproportionately affect members of protected classes. If so, is there a business justification for this particular selection process or could another process be used that would decrease the disparate impact?

Consider statistical and regression analysis

In disparate impact cases, plaintiffs use statistical analysis to demonstrate that a disparity exists regarding the impact of a challenged employment practice on those in a protected class and others. Multivariate or multiple regression analysis can be used to determine whether the disparity can reasonably be attributed to chance (as opposed to the challenged employment practice). Employers can in some circumstances use these methods to test their practices and correct any discrimination before claims arise. For example, these methods can be used in a pay audit at a large employer to determine whether employees’ gender or race impacts compensation. Businesses are sometimes reluctant to perform this analytical work for fear it will be used against them. As mentioned above, however, ignorance is not a defense against disparate impact claims. Also, if employers involve lawyers early in this analytical process, the attorney-client privilege or other protections may shield some of the findings from third parties.

Next steps

Employers who are motivated to meet the demands for racial equality can do their part, and protect themselves from liability in the process. They must proactively consider their policies and practices that may have a disproportionately negative impact on protected categories of employees and potential employees. When formulating short- and longer-term plans impacting employees, employers need to consider the legal exposure that will accompany their planned actions. Lawyers from Nixon Peabody’s Labor & Employment practice are available to help employers avoid, and if necessary defend, all types of employment-related litigation.

  1. 42 USCS § 2000e-2(k)(1)(A).
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