Putting Out the Fire Created by Ricci

Ricci's Fire

The practical effect of the Ricci decision is to make employment decisions based on tests or other factors that can lead to claims of disparate impact more difficult for the employer.

If an employer's selection criteria have a statistically adverse impact on a protected group, the employer is stuck between the proverbial rock and a hard place. If an employer decides to stick with the selection criteria, the employer may be forced to prove that it is job-related and consistent with business necessity (and survive allegations that it has refused to adopt equally valid less discriminatory alternatives) in order to avoid disparate impact liability. If the employer attempts to change the selection criteria or decision, the employer risks disparate treatment liability unless the employer can prove that there is a strong basis in evidence of disparate impact liability. The employer faces a no-win situation if its goal is to avoid costly litigation.

Balancing between two unsavory positions is not an unusual place for employers who are often faced with decisions in which they must teeter on a narrow beam between one law and another. Consider, for example, the employer who is faced with the decision of whether to remove a potentially dangerous employee from the workplace who may have a disability and face a disability discrimination claim or allow the employee to remain and potentially face wrongful death or other litigation when the employee causes harm to himself or others in the workplace. Or the employer who has a complaint of severe harassment and the employer is left to decide whether to believe the complainant and fire the alleged harasser (possibly facing a sex discrimination claim from the male) or believe the alleged harasser and retain him only to face a harassment claim by the complaining woman. As in these and many other similar situations, each set of unique circumstances requires careful counsel and consideration.

Ricci's Guidance

The Ricci decision is a problem for employers who wisely review the effects of their decisions to avoid disparate impact litigation. Although the Court is correct that statistics alone cannot sustain a disparate impact case, statistics alone often are the only, or primary, basis for the filing of large, costly class action lawsuits. Moreover, while an employer may defeat such claims and, as discussed below, the Court's decision may aid in this effort, the sheer cost of defending such large actions can be as harmful for an employer as losing an ordinary disparate treatment claim.

What is clear after Ricci is the importance that must be placed on planning and analyzing employment standards, tests and decisions before they are made. Any decision, test or standard that will be applied to or affect multiple employees and, therefore, could spark a disparate impact claim should be established with caution. Review and analysis of the selection criteria before a decision is made will be critical. The Court's decision makes it difficult for employers to attempt to self-correct disparate impact statistics once the results are known.

Employers should avoid setting hard and fast rules for decisions before analyzing whether the standards will have an unlawful disparate impact. In Ricci, the promotions were based on the test results, pre-determined standards. The Supreme Court determined that if an employer changes its mind after seeing the results, it creates the potential for disparate treatment liability.

Standards for selection, therefore, should be carefully reviewed, evaluated and validated before proceeding with using the standards. Compliance with the EEOC's Uniform Guidelines on Employee Selection Procedures, continues to provide a defense for employers.

After Ricci, reductions in force and layoff selections may present more of a challenge for employers. Preliminary selections are often made and then reviewed for disparate impact. Under Ricci, the practice of changing these decisions if an impact is discovered may well violate Title VII. Layoff selections and the process for making them should be carefully considered and reviewed with counsel before final decisions are made.

If an employer must revise results or change its procedure as a result of disparate impact concerns, the employer should consider less discriminatory alternatives. A refusal to use a less discriminatory alternative can result in disparate impact liability. Therefore, if a less discriminatory alternative is available that can achieve the same purpose an employer will have a stronger argument against a disparate treatment claim.

Is There a Silver Lining for Employers?

Although much of the analysis of the Ricci case has focused on the problems it creates for employers, employers and employment litigators should not ignore the admittedly small, but potentially beneficial, silver lining contained within the decision.

The Ricci decision begins to chip away at the disparate impact theory of liability. In fact, Justice Scalia, in his concurring opinion, goes so far as to suggest that the disparate impact prohibition may be unconstitutional. Regardless, the Court's analysis that there was no disparate impact liability under the facts in Ricci and that the facts did not even meet the lesser “strong basis in evidence” standard will aid employers who are faced with disparate impact claims.

Disparate impact claims based in large part, if not exclusively, on statistics often form the basis for costly class action litigation. The Ricci decision reinforces that statistics even statistics which establish a “significant” racial impact are not sufficient to establish even a “strong basis” for liability (a lesser standard than actually proving liability). As the Court stated: “a prima facie case of disparate impact liability ' essentially, a threshold showing of a significant statistical disparity, and nothing more ' is far from a strong basis in evidence that the City would have been liable under Title VII had it certified the results.” Id. at 2678.

The Court explicitly approved the use of employment tests by employers, one of the tools most often challenged by class action plaintiff attorneys. The Court recognized that “[e]mployment tests can be an important part of a neutral selection system that safeguards against the very racial animosities Title VII was intended to prevent.” Id. at 2676.

The Court's analysis also provides employers with guidance for developing tests that are job related and consistent with business necessity such that they can survive a disparate impact attack. In Ricci, a third-part testing company designed the test after analyzing the positions for which it was to be used. The testing company interviewed individuals in the positions, observed the positions to identify the essential skills, knowledge and abilities and performed job analyses. The test was written at a 10th-grade reading level and study time and study guides were built into the process. The oral exam required participants to answer questions before a three-person panel, two of whom were minorities. The testing company had also developed a technical report concluding that the tests were valid. Under these facts, the Court concluded the exam in Ricci was job-related and consistent with business necessity. The Court noted there was broad racial participation in the design and administration of the test.

The Court also concluded that there was no equally valid less discriminatory alternative. The city argued it could have weighted the score differently. How a test is scored is often the basis for employees to claim there were less discriminatory alternatives. The Court rejected the city's argument concluding there was no evidence the weighting used was arbitrary.

Finally, although this case centered around using the risk of disparate impact liability as a defense for disparate treatment claims, the Court also recognized that the converse is true. An employer may also defend a disparate impact case by establishing a strong basis in evidence that it would have been subject to disparate treatment liability if it had changed its decision. Id. at 2681.

Conclusion

The Ricci decision is a reminder for all employers: Employment decisions cannot be made based on race, regardless of whatever good intentions the employer may have. Even though the Court confirmed that employers can take “affirmative efforts to ensure that all groups have a fair opportunity to apply for promotions and to participate in the process by which promotions will be made,” the actual decisions cannot be tainted by racial consideration.

The Ricci decision places the employer squarely in the middle of a potentially dangerous fire. The Court has made clear that an employer has multiple legal responsibilities, including complying with Title VII's disparate treatment and disparate impact obligations and, in some cases, complying with additional affirmative action obligations, and all of them must be met. Crawling through the smoke and fire left by the Ricci decision will require careful counsel and planning before decisions are made.

Patricia Anderson Pryor, a member of this newsletter's Board of Editors, is a partner in the Labor and Employment Department at Taft, Stettinius & Hollister LLP. Ms. Pryor represents and advises employers in all forms of litigation, and dispute resolution, including mediation and arbitration, and in managing all aspects of the employment relationship. She is a frequent speaker at legal seminars and to employers and professional groups and has been featured on the radio broadcast, Employment Straight Talk.

For employment attorneys and human resource professionals, the phrase “no good deed goes unpunished” applies all too often. The Supreme Court recently affirmed this adage in Ricci v. DeStefano , 129 S. Ct. 2658 (2009).

In Ricci, the city employer refused to certify the results of a promotional exam for its firefighters because of fear that doing so would result in disparate impact discrimination and liability. The African-American pass rate was half that of white test takers. The city received political pressure and threats of litigation if it certified the results. Consequently, the city decided not to promote anyone, including the white and hispanic employees who otherwise would have been promoted as a result of the exam. The employer argued it acted in good-faith compliance with Title VII. The Supreme Court recognized that the employer's objective was to avoid disparate impact discrimination (and liability), nevertheless, the Court concluded “whatever the city's ultimate aim ' however, well intentioned and benevolent it might have seemed ' the city made its employment decision because of race.” Id. at 2674.

The Court recognized the conflict an employer may face when its decision results in a significant statistical disparity adversely affecting a particular race. Nevertheless, the Court held that an employer may not make a decision based on race in order to avoid disparate impact liability without running afoul of Title VII's disparate treatment prohibition. The Court concluded that a mere good faith fear of disparate impact liability is not a defense to claims of disparate treatment discrimination. An employer can only take advantage of such a defense if there is a strong basis in evidence of disparate impact liability.

Ricci's Fire

The practical effect of the Ricci decision is to make employment decisions based on tests or other factors that can lead to claims of disparate impact more difficult for the employer.

If an employer's selection criteria have a statistically adverse impact on a protected group, the employer is stuck between the proverbial rock and a hard place. If an employer decides to stick with the selection criteria, the employer may be forced to prove that it is job-related and consistent with business necessity (and survive allegations that it has refused to adopt equally valid less discriminatory alternatives) in order to avoid disparate impact liability. If the employer attempts to change the selection criteria or decision, the employer risks disparate treatment liability unless the employer can prove that there is a strong basis in evidence of disparate impact liability. The employer faces a no-win situation if its goal is to avoid costly litigation.

Balancing between two unsavory positions is not an unusual place for employers who are often faced with decisions in which they must teeter on a narrow beam between one law and another. Consider, for example, the employer who is faced with the decision of whether to remove a potentially dangerous employee from the workplace who may have a disability and face a disability discrimination claim or allow the employee to remain and potentially face wrongful death or other litigation when the employee causes harm to himself or others in the workplace. Or the employer who has a complaint of severe harassment and the employer is left to decide whether to believe the complainant and fire the alleged harasser (possibly facing a sex discrimination claim from the male) or believe the alleged harasser and retain him only to face a harassment claim by the complaining woman. As in these and many other similar situations, each set of unique circumstances requires careful counsel and consideration.

Ricci's Guidance

The Ricci decision is a problem for employers who wisely review the effects of their decisions to avoid disparate impact litigation. Although the Court is correct that statistics alone cannot sustain a disparate impact case, statistics alone often are the only, or primary, basis for the filing of large, costly class action lawsuits. Moreover, while an employer may defeat such claims and, as discussed below, the Court's decision may aid in this effort, the sheer cost of defending such large actions can be as harmful for an employer as losing an ordinary disparate treatment claim.

What is clear after Ricci is the importance that must be placed on planning and analyzing employment standards, tests and decisions before they are made. Any decision, test or standard that will be applied to or affect multiple employees and, therefore, could spark a disparate impact claim should be established with caution. Review and analysis of the selection criteria before a decision is made will be critical. The Court's decision makes it difficult for employers to attempt to self-correct disparate impact statistics once the results are known.

Employers should avoid setting hard and fast rules for decisions before analyzing whether the standards will have an unlawful disparate impact. In Ricci, the promotions were based on the test results, pre-determined standards. The Supreme Court determined that if an employer changes its mind after seeing the results, it creates the potential for disparate treatment liability.

Standards for selection, therefore, should be carefully reviewed, evaluated and validated before proceeding with using the standards. Compliance with the EEOC's Uniform Guidelines on Employee Selection Procedures, continues to provide a defense for employers.

After Ricci, reductions in force and layoff selections may present more of a challenge for employers. Preliminary selections are often made and then reviewed for disparate impact. Under Ricci, the practice of changing these decisions if an impact is discovered may well violate Title VII. Layoff selections and the process for making them should be carefully considered and reviewed with counsel before final decisions are made.

If an employer must revise results or change its procedure as a result of disparate impact concerns, the employer should consider less discriminatory alternatives. A refusal to use a less discriminatory alternative can result in disparate impact liability. Therefore, if a less discriminatory alternative is available that can achieve the same purpose an employer will have a stronger argument against a disparate treatment claim.

Is There a Silver Lining for Employers?

Although much of the analysis of the Ricci case has focused on the problems it creates for employers, employers and employment litigators should not ignore the admittedly small, but potentially beneficial, silver lining contained within the decision.

The Ricci decision begins to chip away at the disparate impact theory of liability. In fact, Justice Scalia, in his concurring opinion, goes so far as to suggest that the disparate impact prohibition may be unconstitutional. Regardless, the Court's analysis that there was no disparate impact liability under the facts in Ricci and that the facts did not even meet the lesser “strong basis in evidence” standard will aid employers who are faced with disparate impact claims.

Disparate impact claims based in large part, if not exclusively, on statistics often form the basis for costly class action litigation. The Ricci decision reinforces that statistics even statistics which establish a “significant” racial impact are not sufficient to establish even a “strong basis” for liability (a lesser standard than actually proving liability). As the Court stated: “a prima facie case of disparate impact liability ' essentially, a threshold showing of a significant statistical disparity, and nothing more ' is far from a strong basis in evidence that the City would have been liable under Title VII had it certified the results.” Id. at 2678.

The Court explicitly approved the use of employment tests by employers, one of the tools most often challenged by class action plaintiff attorneys. The Court recognized that “[e]mployment tests can be an important part of a neutral selection system that safeguards against the very racial animosities Title VII was intended to prevent.” Id. at 2676.

The Court's analysis also provides employers with guidance for developing tests that are job related and consistent with business necessity such that they can survive a disparate impact attack. In Ricci, a third-part testing company designed the test after analyzing the positions for which it was to be used. The testing company interviewed individuals in the positions, observed the positions to identify the essential skills, knowledge and abilities and performed job analyses. The test was written at a 10th-grade reading level and study time and study guides were built into the process. The oral exam required participants to answer questions before a three-person panel, two of whom were minorities. The testing company had also developed a technical report concluding that the tests were valid. Under these facts, the Court concluded the exam in Ricci was job-related and consistent with business necessity. The Court noted there was broad racial participation in the design and administration of the test.

The Court also concluded that there was no equally valid less discriminatory alternative. The city argued it could have weighted the score differently. How a test is scored is often the basis for employees to claim there were less discriminatory alternatives. The Court rejected the city's argument concluding there was no evidence the weighting used was arbitrary.

Finally, although this case centered around using the risk of disparate impact liability as a defense for disparate treatment claims, the Court also recognized that the converse is true. An employer may also defend a disparate impact case by establishing a strong basis in evidence that it would have been subject to disparate treatment liability if it had changed its decision. Id. at 2681.

Conclusion

The Ricci decision is a reminder for all employers: Employment decisions cannot be made based on race, regardless of whatever good intentions the employer may have. Even though the Court confirmed that employers can take “affirmative efforts to ensure that all groups have a fair opportunity to apply for promotions and to participate in the process by which promotions will be made,” the actual decisions cannot be tainted by racial consideration.

The Ricci decision places the employer squarely in the middle of a potentially dangerous fire. The Court has made clear that an employer has multiple legal responsibilities, including complying with Title VII's disparate treatment and disparate impact obligations and, in some cases, complying with additional affirmative action obligations, and all of them must be met. Crawling through the smoke and fire left by the Ricci decision will require careful counsel and planning before decisions are made.

Patricia Anderson Pryor, a member of this newsletter's Board of Editors, is a partner in the Labor and Employment Department at Taft, Stettinius & Hollister LLP. Ms. Pryor represents and advises employers in all forms of litigation, and dispute resolution, including mediation and arbitration, and in managing all aspects of the employment relationship. She is a frequent speaker at legal seminars and to employers and professional groups and has been featured on the radio broadcast, Employment Straight Talk.