On June 30, 2009, the United States Supreme Court rendered a much-anticipated, 5 to 4 decision in Ricci v. DeStefano, 557 U.S. ___ (2009), a case involving a challenge by a group of white and Hispanic firefighters to the City of New Haven, Connecticut’s decision to disregard the results of a written and oral examination for promotional decisions. The City of New Haven administered written and oral examinations to determine which firefighters would be eligible for promotion to the rank of lieutenant or captain. When the test results revealed that white candidates significantly outperformed minority candidates and would have resulted in no African-American firefighters being promoted to any of the vacant lieutenant or captain positions, the City of New Haven, fearing a threatened disparate-impact lawsuit from minority firefighters, elected to discard the test results and promote no one. Seventeen white and one Hispanic firefighters filed suit in federal court, claiming that they had been subjected to disparate treatment on account of their race in violation of Title VII of the Civil Rights Act of 1964, as amended (Title VII). Ultimately, a majority of the Supreme Court sided with the firefighters, finding that the City of New Haven had engaged in unlawful disparate treatment. Although this case involved a public employer, the decision reached by the Supreme Court in Ricci is equally applicable to private employers as well.
The Supreme Court’s decision will be the subject of countless talk shows, human resources updates, and law firm client alerts, and undoubtedly will gain additional attention as the named plaintiff in the case, Frank Ricci, is called upon to testify as a witness at the Senate hearings on the nomination of Judge Sonia Sotomayor for the Supreme Court. (Judge Sotomayor joined in the lower appellate court’s decision, finding in favor of the City of New Haven, that was reversed by the Supreme Court.) While most discussions of Ricci have tended to focus primarily on the facts of that case, few have offered any substantive guidance to employers on how to avoid liability under Title VII if they want to continue using testing as part of their hiring and promotional practices. Recognizing that the decision has left many employers, attorneys, and quite likely many lower courts befuddled on how to strike the appropriate balance between the disparate-impact and the disparate-treatment provisions of Title VII, this client alert is intended to assist employers in that endeavor by outlining below the Supreme Court’s decision and by offering employers several practical considerations in the wake of the Ricci decision.
The Dual Provisions of Title VII
Title VII, which prohibits employment discrimination on the basis of race, color, religion, sex and national origin, applies to both intentional acts of discrimination (known as “disparate treatment”) as well as to practices that are not intended to discriminate but in fact have a disproportionately adverse effect on minorities (known as “disparate impact”). As enacted in 1964, Title VII’s principal nondiscrimination provision held employers liable only for disparate treatment. Disparate treatment occurs when an employer treats an individual employee less favorably than others because of a protected trait. In 1991, the United States Congress amended Title VII, in part, to prohibit disparate impact based on a protected trait, in addition to its existing prohibition of disparate treatment. The disparate-impact amendment reflected a body of case law prohibiting disparate impact. Title VII now provides, “notwithstanding any other provision . . . it shall not be an unlawful employment practice for . . . an employer to give and to act upon the results of any professionally developed ability test provided that such test, its administration or action upon the results is not designed, intended or used to discriminate because of race, color, religion, sex or national origin.”
The Equal Employment Opportunity Commission (EEOC), the federal agency responsible for enforcing Title VII, has adopted a four-fifths rule to guide its analysis of disparate impact claims. Under this rule, if a pass rate for minority applicants or employees is less than 80% of the pass rate for non-minority applicants or employees, the EEOC presumes that the test has an adverse impact on the minority applicants or employees. An employer, however, may still use these results consistent with Title VII, but the employer bears the burden of demonstrating that the test is business related and that no alternative procedure with a lesser disparate impact exists.
The charter for the City of New Haven, which had been sued in the past due to the racial disparity in its fire department, requires the City to fill vacancies within its fire department with the most qualified individuals, as determined by job-related examinations. Following each examination, the New Haven Civil Service Board (CSB) certifies a ranked list of applicants who passed the test. Pursuant to the charter’s “rule of three,” vacancies must be filled by choosing a candidate from the top three scorers on the list. In addition, the City’s contract with the firefighters’ union required that applicants for lieutenant and captain positions be screened using written and oral examinations, with the written examination accounting for 60 percent and the oral exam accounting for 40 percent of the applicant’s total score.
The City had engaged the services of an outside contractor that specializes in designing entry-level and promotional examinations for fire and police departments to create the examinations for its fire department. To ensure that the examinations appropriately reflected job requirements and skills, the contractor began its test-design process by performing job analyses to identify the tasks, knowledge, skills, and abilities essential to the lieutenant and captain positions. At every stage, the outside contractor deliberately “over sampled” minority firefighters to ensure that the results would not unintentionally favor white candidates. The outside contractor, in a further effort to remove any unintentional racial bias from the examinations, also ensured that two-thirds of the outside panelists used to administer the oral examinations were minorities and that each of the nine-member assessment panels contained two minority members. Following the development of these tests, the City opened a three-month study period and provided the candidates with a list that identified the source materials for the questions, including the specific chapters from which the questions were taken.
Seventy-seven candidates completed the lieutenant examination, including 43 whites, 19 African-Americans, and 15 Hispanics. Of those, 34 candidates passed, including 25 whites, 6 African-Americans and 3 Hispanics. The top 10 candidates who passed were eligible for an immediate promotion to a lieutenant position. Each of those candidates was white. With respect to the captain examination, forty-one candidates completed the examination, including 25 whites, 8 African-Americans and 3 Hispanics. Of these, 22 candidates passed, including 16 whites, 3 blacks and 3 Hispanics. Nine of the candidates who passed, 7 whites and 2 Hispanics, were eligible for an immediate promotion to the rank of captain.
Concerned by the fact that the pass rate for African-American candidates on both the lieutenant and the captain examinations was about one-half the rate for the white candidates and the fact that no African-American candidates would be eligible for an immediate promotion based upon these test results, the CSB conducted a series of meetings to determine whether the test results should be certified. Confronted with arguments both for and against certifying the test results, and threats of litigation from both African-American and white candidates, CSB members split evenly on how to proceed, resulting in no certification of the test results and no promotions. The white and Hispanic firefighters who were denied promotions because the results were not certified brought suit against the City and some of its officials for race discrimination. The City sought to defend itself in that suit by arguing that, if the results had been certified, the City would have faced liability under Title VII for adopting a practice that had a disparate impact on minority firefighters.
Agreeing with the City, the federal district court rejected the firefighters’ claims of race discrimination on summary judgment. On appeal, the United States Court of Appeals for the Second Circuit, summarily affirmed the district court’s opinion, holding that the City’s actions were protected because the City was “simply trying to fulfill its obligations under Title VII when confronted with test results that had a disproportionate racial impact.”
The Supreme Court’s Analysis
In the majority opinion written by Justice Kennedy and joined in by Chief Justice Roberts and Justices Scalia, Thomas and Alito, the Supreme Court, after noting the dual prohibitions of Title VII, found that the City of New Haven’s decision to discard the test results would constitute disparate treatment of the white and Hispanic firefighters in violation of Title VII absent some valid defense. As the Court observed, “Whatever the City’s ultimate aim – however well intentioned or benevolent it might have seemed – the City made its employment decision because of race. The City rejected the test results because the higher scoring candidates were white.”
The ultimate question thus faced by the Supreme Court was whether the purpose of avoiding disparate-impact litigation – which the City of New Haven set forth as its primary defense – excuses disparate treatment. Drawing upon holdings in equal protection cases, the Court concluded that an appropriate balance could be achieved between the disparate-treatment and disparate-impact provisions of Title VII by requiring an employer to show a “strong basis in evidence” that a particular action is necessary to avoid violating the disparate-impact provision, whenever that action will result in disparate treatment. As the Court stated, “before an employer can engage in intentional discrimination for the asserted purpose of avoiding or remedying an unintentional disparate impact, the employer must have a strong basis in evidence to believe it will be subject to disparate-impact liability if it fails to take the race-conscious, discriminatory action.”
Applying the “strong basis in evidence” standard, the Court held that the City of New Haven failed to meet its burden. While acknowledging that the disparate impact of the test based on race was significant and that the City of New Haven was faced with a prima facie case of disparate-impact liability, the Court nevertheless concluded that there was not a strong basis in evidence to establish that the City ultimately would have been deemed liable for any disparate-impact action under Title VII had it certified the results. In reaching that conclusion, the Court pointed out that, notwithstanding the prima facie case against the City, the City of New Haven could be liable for disparate-impact discrimination only if the examinations were not job related and consistent with business necessity, or if there existed an equally valid, less-discriminatory alternative that served the City’s needs that the City refused to adopt. Based upon its review of the record, the Court found that there was not a strong basis in evidence that the test was deficient in either of these respects.
Noting the detailed and painstaking steps taken by the contractor in developing and administering the examinations for the City of New Haven, the Court found there was no evidence – let alone the requisite “strong basis in evidence” – that the tests were not job-related. Despite arguments that the City of New Haven could have adopted a different composite-score calculation (weighing the written and oral examination scores 30/70 rather than 60/40) or a different interpretation of the “rule of three,” the Court concluded that there was no evidence that other, equally valid and less discriminatory tests were available. With respect to the “60/40 weighting,” the Court observed that, “because that formula was the result of a union-negotiated collective-bargaining agreement, we presume the parties negotiated that weighting for a rational reason,” and that the record did not contain any evidence that an alternative weighting would have been “equally valid.” In the final analysis, the primary justification the City offered for its actions was the fear of litigation, which the Court held could not justify the use of an action that discriminated against individual firefighters on the basis of race. “Fear of litigation alone,” the Court maintained, “cannot justify an employer’s reliance on race to the detriment of individuals who passed the examinations and qualified for promotions.”
Further, because the Court found that there was no genuine dispute that the City of New Haven lacked a strong basis in evidence to believe that it would face actual liability in a disparate-impact action, the Court ruled that the City’s actions were impermissible under Title VII and directed that summary judgment be entered on the firefighters’ disparate-treatment claim. The Court added that, if the City should face a disparate-impact suit after it certifies the test results, the City will be able to avoid disparate-impact liability based upon the strong basis in evidence that, had it not certified the results, it would have been subject to disparate-treatment liability.
In a dissent joined in by Justices Stevens, Souter and Breyer, Justice Ginsburg maintained that “an employer who jettisons a selection device when its disproportionate racial impact becomes apparent” should not be found to have violated Title VII, if the employer had “good cause to believe the device would not withstand examination for business necessity.” Such an approach, Justice Ginsburg reasoned, would be consistent with prior decisions of the Court that emphasized that Title VII should not be read to thwart efforts at voluntary compliance.
The Ricci decision undoubtedly will elicit a variety of responses from employers. For some, Ricci provides a sense of security that their employment examinations will survive disparate-impact challenges. For others, Ricci fails to resolve when facially suspect examination results may be disregarded under the “strong basis in evidence” standard. As Justice Ginsburg observed in her dissenting opinion:
As a result of [the Court’s] decision, an employer who discards a dubious selection process can anticipate costly disparate-treatment litigation in which its chances for success–even for surviving a summary-judgment motion–are highly problematic. Concern about exposure to disparate-impact liability, however well grounded, is insufficient to insulate an employer from attack. Instead, the employer must make a “strong” showing that (1) its selection method was “not job related and consistent with business necessity,” or (2) that it refused to adopt “an equally valid, less-discriminatory alternative.” It is hard to see how these requirements differ from demanding that an employer establish “a provable, actual violation” against itself.
For still others, Ricci presents a more fundamental question: Should written employment examinations be adopted or used in the first instance?
Despite all the questions and reservations created by this decision, Ricci appears, at the very least, to provide a roadmap for the development of written and oral examinations that might withstand a disparate-impact challenge. The majority in Ricci based its decision in large part on what it regarded as a careful, diligent test development process utilized by the City. In reaching its decision, the majority noted with approval the use of an outside test developer to complete: (i) job analyses; (ii) interviews of an employer’s incumbent leaders; (iii) on-the-job observations; (iv) administration of questionnaires to an employer’s incumbent leaders and supervisors; and (v) over-sampling of minority employees at “every stage” to “ensure that the results … would not unintentionally favor white candidates.” With these analyses, the test developer in Ricci identified the sources for the written examinations, drafted the written examinations, opened a 3-month study period, and provided candidates a list specifically identifying the materials on which the written examinations were based. After development of an oral examination based on on-the-job skills and leadership abilities, the test developer assembled and trained a pool of 30 outside assessors to administer and score the oral examinations. Because the test developer had put sufficient effort into validating the tests as job-related and race-neutral, the majority of the Court concluded that the City of New Haven legally could have and should have relied on the results of those tests, even if the results seemingly favored white candidates. The Court’s holding in Ricci, thus, suggests that good faith and diligent efforts in the design of employment-related tests may be rewarded as a defense to disparate-impact liability if the employer simply accepts and follows the results.
Ricci, as such, presents at least four important, practical considerations for employers. First, employers – especially those using written and oral examinations – need to approach the development and design of hiring and promotional processes with great caution. Even though the City of New Haven still faced litigation despite using caution in developing its examinations and ironically undermined its position before the Supreme Court by doing so, employers generally will be better served by undertaking a careful, documented development of its hiring and promotional processes that is geared towards complying with Title VII and satisfying fundamental notions of fairness. Employers who have employees that are represented by a union should consider adopting a similar approach whenever negotiating with the union over the development and implementation of any hiring or promotional processes.
Second, in the design and development of hiring and promotional processes, employers must ensure that any written and oral examinations, along with the overall processes, are “job-related and consistent with business necessity.” While the City of New Haven found itself arguing before the Supreme Court that its own written tests were not job-related – a curious position to be in, and one that was squarely rejected – employers should carefully evaluate whether the testing materials reflect the realities of the position in question, taking into consideration the day-to-day responsibilities and duties of that particular position.
Third, employers must comprehensively evaluate the myriad of options available for the design and development of hiring and promotional processes in order to determine whether an “equally valid, less discriminatory alternative” exists. In an effort to reduce the possibility of any disparate impact, employers may want to consider the design and use of hybrid promotional processes, such as those that incorporate written and oral examinations, assessment centers, and/or peer reviews to identify qualified applicants without ranking or selecting such applicants for hiring or promotion. In many instances, the assistance of counsel will be helpful in order to identify and evaluate the potential exposure associated with various alternatives.
Finally, in the event that a carefully designed process leads to unexpected results that demonstrate a potentially unlawful disparate impact based on a protected trait such as race, an employer cannot simply dismiss the results based solely on the racial disparity. To do so, as the Supreme Court held in Ricci, contravenes “the promise of Title VII” as a decision based solely on a protected trait. In these circumstances, the assistance of counsel is essential to evaluate the risks of accepting or discarding the test results in an effort to minimize the employer’s potential liability.
For assistance in obtaining more information about this decision and its implications, developing effective hiring and promotional policies and practices, or arranging for training of your Human Resource and/or supervisory personnel, please do not hesitate to contact: