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The City Develops A Test

At a cost of $100,000, the City of New Haven, Connecticut, (the “City”) hired Industrial/Organizational Solutions (“IOS”) to develop and administer promotion examinations for its firefighters. Under the terms of the City’s collective bargaining agreement with its firefighters’ union, applicants for lieutenant and captain positions were to be screened using written and oral examinations, with the written exam accounting for 60 percent and the oral exam 40 percent of an applicant’s total score. Once engaged, IOS engaged in an elaborate test design process, which included performing in-depth job analyses, interviewing incumbent lieutenants, and riding along with and observing other on-duty officers to develop job-analysis questionnaires which were then administered to most of the incumbent battalion chiefs, captains, and lieutenants. At each stage, IOS deliberately oversampled minority firefighters in an attempt to ensure the results would not unintentionally favor white candidates. 

Based on the information gathered, IOS then developed written examinations. For each test, IOS compiled a list of training manuals, department procedures, and other source materials and presented them to the chief and assistant fire chief for approval. IOS then developed a 100 multiple choice question test for each position, written at the 10th grade reading level and based on the information and materials gathered. IOS also developed oral examinations, which concentrated on job skills and abilities using hypothetical situations. Once the tests were prepared, IOS assembled a pool of 30 assessors to review the tests. All of the assessors were superior in rank to the positions being tested, and all came from outside Connecticut to ensure no test information was leaked in advance. Sixty-six percent of the assessors were minorities, and each of the nine three-member assessment panels contained two minority members. The tests were then finalized and administered.

The Test Produces A Disparate Impact

Seventy-seven candidates took the lieutenant examination: 43 whites, 19 blacks, and 15 Hispanics. Of those, 34 candidates passed: 25 whites, six blacks, and three Hispanics. There were eight lieutenant positions vacant, which under the City’s rule of three (which required the City to fill any vacancy by choosing one candidate from the top three scorers on the list) meant the top 10 scorers would be eligible for the eight open spots. All 10 were white.

Forty-one candidates completed the captain examination: 25 whites, eight blacks, and eight Hispanics. Of those, 22 passed: 16 whites, three blacks, and three Hispanics. Seven captain positions were open, which under the City’s rule of three meant the top nine scorers would be eligible for promotion into those seven vacancies. Seven of the top nine were white, and two were Hispanic.

The City Makes A Choice

Based on the outcome of the test, the City became concerned that it would face disparate impact liability if it certified the test results and then filled the positions on the basis of same. The City held a series of meetings to hear from the designers of the tests, the takers of the tests (who did not yet know whether they had individually passed or failed), and various resource witnesses. Although the hearings produced agreement that the test produced a disparate impact (and would almost certainly result in litigation), there was no agreement as to why it produced a disparate impact or whether there were alternate tests available that would meet the City’s needs while producing a less disparate result. Ultimately, the City council deadlocked 2 to 2 on a vote on whether to certify the test results, which caused the results not to be certified. Firefighters who would have received promotions based on the test results had the test results been certified then filed suit.

The Supreme Court Makes A Mess

The district court granted summary judgment against the firefighters and in favor of the City, reasoning that the City’s attempt to avoid potential disparate impact liability did not amount to intentional discrimination. The circuit court affirmed. On review, the Supreme Court disagreed, holding: (1) the City’s decision not to certify the test results based on concern about potential disparate impact liability amounted to intentional discrimination on the basis of race; and (2) the City’s “good faith” fear of potential disparate impact liability could not excuse its intentional discrimination on the basis of race.

The Court explained, “[U]nder Title VII, 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.” The Court then held that there was no evidence that the City had an objective, strong basis in evidence to find the tests inadequate, with some consequent disparate-impact liability under Title VII.

Specifically, the Court held there was no evidence that the tests were not job related and consistent with business necessity and no evidence that there was an equally valid, less-discriminatory alternative that served the City’s needs but that the City refused to adopt. As the Court explained, “Fear of litigation alone cannot justify an employer’s reliance on race to the detriment of individuals who passed the examinations and qualified for promotions.” 

Rather, even when there is a statistically significant disparate impact, the employer must show a “strong basis in evidence” that either: (1) the process producing the disparate impact was not job related or consistent with business necessity; or (2) a less-discriminatory alternative that served the employer’s needs existed and the employer refused (or would have refused) to adopt it. Given its holding that there was no evidence of either of these, the Court not only reversed judgment in favor of the City but actually rendered judgment in favor of the firefighters.

Real Challenges for Employers

The Ricci opinion places employers in a very difficult position. Setting aside the issue of what exactly will constitute a “strong basis in evidence” in any given situation, Ricci’s holding that the City’s decision not to certify the test results constituted intentional discrimination means an employer must carefully consider its reasons for revisiting any process that is later determined to produce a disparate impact. If the reason for revisiting the process is the disparate impact it produces, the employer must carefully evaluate the true potential for disparate impact liability before attempting to modify the process in any way that is arguably conscious of any protected characteristic. Quite literally, under Ricci, fixing that which “ain’t” broke can lead to liability.

Strangely, an employer who is less studied in its initial attempt to adopt an employment practice is given more freedom to abandon the process if it is later found to produce a disparate impact than is the employer who carefully and deliberately designs an intelligent and highly defensible process. Unlike the careless employer, the careful employer must stand by its process, even if it means facing the cost, disruption, and negative publicity associated with a disparate impact lawsuit.

In this connection, it is important to recognize the point at which an employer loses its ability to revise a process without fear of Ricci liability. As the Court explained, “[O]nce [a] process has been established and employers have made clear their selection criteria, they may not then invalidate the test results, thus upsetting an employee’s legitimate expectation not to be judged on the basis of race.” In short, once an employer publishes a process to employees, the employer must be prepared either to defend the process in event of a disparate impact challenge or, alternatively, concede that there is a “strong basis in evidence” for believing the process was illegal (so the employer may make use of the Ricci defense).

The myriad ways in which Ricci will affect employers (pending an almost certain response from Congress) remains to be seen, but certain effects are immediately discernible. For example, if an employer studies its reduction in force data and notices a statistically significant disparate impact, it must be mindful of Ricci before making changes to its reduction in force selection process that are designed to eliminate the disparate impact. Similarly, if an employer reviews its compensation practices (for example, to guard against potential liability under the Lilly Ledbetter Act) and notices a disparity along the lines of a protected characteristic, it must take care before making any adjustments designed to eliminate that disparity. Under Ricci, if the employer makes changes designed to address the result without first deciding whether the process itself would actually lead to disparate impact liability, the employer faces significant exposure to disparate treatment claims by those disfavored by the new system.

In addition, uncertainty regarding the exact definition of the group of employees who will be included in any statistical disparate impact analysis now hits employers coming and going. Even without Ricci, employers already face the very real risk that a disparate impact plaintiff’s lawyer or expert will define the group of affected employees differently than the employer did during its review, producing potentially significant differences in terms of statistical analysis. Now, with Ricci, an employer has to worry that a disparate treatment plaintiff’s lawyer or expert will define the group of affected employees differently than the employer did during its review, potentially eliminating any statistical differences and thus compromising the employer’s ability to rely on the Ricci defense.

Silver Linings for Employers

The Ricci opinion is filled with useful statements for those seeking to defend against a disparate impact claim. Indeed, in the course of its opinion, the Court dismisses as a matter of law a series of asserted deficiencies related to the City’s tests, their creation, and their administration, as well as testimony and argument regarding potentially less discriminatory alternatives. Indeed, these statements may prove to be particularly useful in defending against disparate impact claims, even if Congress amends Title VII to overrule Ricci’s central holding. 

Moreover, the Court closes its opinion by noting that the Court’s finding that the City engaged in disparate treatment discrimination gives it more than a “strong basis in evidence” for fearing disparate treatment liability, thus immunizing the City from disparate impact liability, suggesting the defense runs both ways (i.e., a “strong basis in evidence” for fear of disparate treatment liability is a defense disparate impact liability). If an employer is actually immune to disparate impact liability based on a “strong basis in evidence” for believing that correcting the disparate impact will result in disparate treatment liability (because the employer has a “strong basis in evidence” for believing the process that produced the disparate impact is job related and consistent with business necessity and that no less discriminatory alternatives exist), Ricci may be argued to effectively reduce an employer’s evidentiary burden for responding to a disparate impact claim. Specifically, Ricci may be read to mean an employer must only show that it had a “strong basis in evidence” for believing its process was job related and consistent with business necessity and that no less discriminatory alternatives existed (such that making a change would subject it to disparate treatment liability under Ricci), not that the process was in fact job related with business necessity or that in fact no other less discriminatory alternatives existed. It seems obvious that this is at most an unintended result of the opinion, and lower courts will almost certainly bristle at any such reading of Ricci, but the opinion does appear to support the argument (at least until Congress responds).

Questions

The foregoing is not intended as legal advice. If you have specific questions regarding the interaction of disparate impact and disparate treatment liability under Title VII or any other employment law, please contact one of our attorneys.