Supreme Court Narrows Circumstances in Which Employers May Modify Employment Decisions Based on Statistically Disparate Outcomes

June 30, 2009

In a much-watched employment discrimination case confronting the tension between the disparate treatment and disparate impact theories under Title VII of the Civil Rights of 1964, the Supreme Court has ruled that an employer may not resort to intentional discrimination in order to avoid an unintentional, disparate impact absent "a strong basis in evidence" to believe it will be subject to liability if it fails to take the race-conscious, corrective action.  Ricci v. DeStefano, No. 07-1428 (June 29, 2009).  The Court declined to recognize a blanket exception to the prohibition on disparate treatment in Title VII that would allow consideration of race or other protected characteristics whenever employers hold a good-faith belief that their actions are necessary to comply with Title VII’s disparate-impact provision.

New Haven’s Dilemma – Disparate Impact vs. Disparate Treatment Exposure

The City of New Haven commissioned a series of professionally developed examinations for New Haven firefighters seeking promotion to the rank of lieutenant or captain.  The plaintiffs were white and Hispanic firefighters who passed the examinations, rendering them eligible for consideration for promotion to officer positions as they became available.  Under the city charter, applicants who passed examinations such as the one given by the City in this case would be ranked.  The relevant hiring authority was then required under a "rule of three" to fill each vacancy by choosing one candidate from the top three scorers on the list.  White firefighters passed the examination at a higher rate than black or Hispanic firefighters.  Moreover, pursuant to the "rule of three," 17 of the 19 candidates who were eligible for immediate promotion either to captain or lieutenant were white, and 2 were Hispanic.  One group of firefighters threatened to file a Title VII lawsuit alleging disparate impact if the examination results were certified; another group threatened to file a Title VII lawsuit alleging disparate treatment if the examination results were not certified.  The City refused to certify the examination results, and a group of white and Hispanic firefighters sued.  The district court granted summary judgment for the City, holding that the City’s actions did not reflect discriminatory intent, and that those actions were not based on race, because no firefighters of any race were promoted.  The Second Circuit affirmed on appeal in a brief opinion adopting the district court’s reasoning.

The Supreme Court reversed the decision of the Second Circuit.  The decision, written by Justice Kennedy on behalf of a five-justice majority (Chief Justice Roberts and Justices Scalia, Thomas, and Alito), held that the refusal to certify the test results was plainly discriminatory, because it was based on the fact that the higher scoring candidates were white.  The Court recognized that Title VII permits employers to employ facially discriminatory measures to avoid disparate-impact liability in some circumstances.  However, it held that this was limited to circumstances "in which there is a strong basis in evidence of disparate-impact liability."  The Court expressly noted that even meeting the strong-basis-in-evidence standard is not necessarily sufficient to satisfy the Equal Protection Clause of the Fourteenth Amendment, reserving that question for a future case.  The Court held that because the examinations were job-related and consistent with business necessity, and because the City did not demonstrate an equally valid, less discriminatory testing alternative that it failed to adopt, the City lacked a strong basis in evidence to believe it would face disparate-impact liability if it certified the examination results.  Accordingly, the Court remanded the case for entry of summary judgment for the plaintiffs.

Justice Scalia and Justice Alito filed concurring opinions.  Justice Scalia highlighted his belief that, in the future, the Court would be forced to consider whether the disparate-impact provisions of Title VII are consistent with the Equal Protection Clause.  Justice Alito highlighted facts supporting the inference that the decision not to certify the results of the examinations was made not to avoid disparate-impact liability, but out of a "desire to placate a politically important racial constituency."

Justice Ginsburg filed a dissenting opinion, joined by Justices Stevens, Souter, and Breyer.  Justice Ginsburg argued that "an employer who jettisons a selection device when its disproportionate racial impact becomes apparent does not violate Title VII’s disparate-treatment bar automatically or at all," so long as the employer has "good cause to believe the device would not withstand examination for business necessity."  Justice Ginsburg argued that the City had met that standard in this case, in part based on a conclusion that written tests are not the best method to select firefighters for promotion.

The Broader Implications of Ricci for Employers

The majority’s decision in Ricci turned in large part on what is required to establish Title VII liability under a disparate impact theory.  As the majority observed, "a significant statistical disparity . . . and nothing more . . . is far from a strong basis in evidence" establishing that a defendant faces liability for disparate impact.  Here, the City had engaged a professional consultant who employed a thorough process to design written and oral examinations specific to the City’s needs.  On the basis of this and other facts, the Court found considerable evidence that the tests were job-related and consistent with business necessity.  Moreover, the record contained little evidence to suggest that there existed ready alternatives to the tests that would have yielded equally valid but less discriminatory results.  Elements of the Court’s decision arguably provide a helpful "roadmap" for employers to construct a defense to disparate impact claims notwithstanding statistically disparate results, although the decision rested in part on practices and provisions of Title VII concerned with employment tests that will be less relevant to other employer practices that may produce a disparate impact.  Moreover, the majority suggests that a decision not to abandon a properly developed selection tool simply because of a statistical disparity will be relevant to the employer’s disparate impact defense – "in light of our holding today it should be clear that the City would avoid disparate-impact liability based on the strong basis in evidence that, had it not certified the results, it would have been subject to disparate treatment liability."

Ricci distinguishes between steps taken in the design of employment selection tools and steps taken in response to the results those tools may yield.  Thus, the decision makes clear that employers may freely take affirmative steps to ensure that all employee groups have a fair opportunity to pursue advancement and may consider, before a test or practice is administered, how to design it in order to promote opportunities for all individuals.  In contrast, however, once the selection tool has been administered, Ricci constrains what steps an employer may take to address statistical disparities produced by the tool.  This distinction raises a number of significant and potentially far-reaching issues in connection with common employer practices.  For example, employers regularly test significant employment actions – including hiring tools, promotion selection standards, and layoff lists – for potential "adverse impact."  Ricci is relevant in all of these contexts, and not merely in hiring.  Moreover, the Court’s distinction between the design of selection tools and the testing of their outcomes reinforces the importance for employers who adopt voluntary diversity initiatives to focus on enhancing employment and advancement opportunities rather than placing undue emphasis on statistical results alone.

The majority in Ricci also strongly reiterated that Title VII will not be construed to permit employer conduct that amounts to a de facto quota system, noting, as it had in Watson v. Fort Worth Bank & Trust, 487 U.S. 977, 992 (1988), that a "focus on statistics . . . could put undue pressure on employers to adopt inappropriate prophylactic measures."  Indeed, the Court observed that "Title VII is express in disclaiming any interpretation of its requirements as calling for outright racial balancing."  Such statements are significant given the efforts in recent years of many class action plaintiffs and counsel to premise large scale challenges to employer practices based on little more than statistical disparities in aggregate outcomes between protected groups.

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