For the second time in a year, the United States Supreme Court has ruled on whether civil service tests given to firefighters are discriminatory. Although the two opinions arise in the contexts of big city fire departments, they are significant for all employers who rely on standardized testing in the hiring process.

What is Disparate Impact?

“Disparate impact” discrimination describes unintentional conduct that nevertheless is a violation of anti-discrimination laws. As explained in the 1971 case of Griggs v. Duke Power, the law “proscribes not only overt discrimination, but also practices that are fair in form but discriminatory in operation.” As phrased in the Civil Rights Act of 1991, an employee may complain that an employer “uses a particular employment practice that causes a disparate impact on the basis of” categories protected by the anti-discrimination laws (such as race, sex, religion, etc.).

The practice is “neutral” äóñ applied to everyone. Its effect is prima facie discriminatory if it has a statistically negative effect on members of one or more protected groups. For example, a minimum height requirement might screen out certain minorities or women at a statistically significant rate. As a rule of thumb, the Equal Employment Opportunity Commission is skeptical of any employment practice that results in a selection rate less than 80 percent for a protected group when compared to the group with the highest pass rate (sometimes called the 4/5ths rule).

The employer may defend the practice by showing that it is “job related for the position in question and consistent with business necessity.” For example, a weight-lifting requirement may screen out women in a disproportionate way. But if the employer shows that lifting a prescribed weight is sufficiently job-related (e.g., hoisting boxes in a warehouse), the requirement is lawful.

Chicago Fire Department’s Hiring Procedures Unintentionally Discriminatory

The City of Chicago gave a firefighter test in 1995. The City designated applicants who scored higher than 89 points “well-qualified,” and those applicants who scored between 65 and 89 as “qualified.” Applicants who scored less than 65 were “not qualified.”

The City announced it would offer jobs to the “well-qualified” candidates first, and only offer jobs to the “qualified” candidates if it ran out of “well-qualified” applicants. Over the years following the test, the City exhausted the “well-qualified” applicant pool and offered firefighter jobs to a few of the “qualified” applicants. A number of “qualified” black candidates complained that the decision to interview the “well-qualified” candidates first had a discriminatory effect.

The City had to concede the preference for applicants who scored above 89 eliminated a disproportionate number of black applicants. More than 12% of the white applicants were deemed “well-qualified” while only 2% of black applicants scored as “well-qualified.” Because the black applicants’ success rate was substantially less than 80% of the white applicants, the 89-point requirement had a disparate impact statute.

The district court also found the requirement was not “job related for the position in question and consistent with business necessity,” in part because it favored applicants who demonstrated skills that were not closely-related to actual firefighting. For example, the test heavily favored applicants with good skills at taking notes during a video presentation. However, note-taking was considered the least important job requirement for a firefighter in Chicago. Other cities, such as San Francisco, did not consider it a relevant job requirement at all.

Further, the designer of the test acknowledged there was no meaningful difference between applicants who scored 89 as opposed to 88 or 87. Therefore, even if the test was job-related and consistent with job necessity, the preference for applicants who scored 89 or better was not. Consequently, the trial court ordered the fire department to correct its discriminatory test by hiring a number of applicants who scored between 65 and 88.

The City appealed, arguing that the statute of limitations ran from the time the City informed the “qualified” applicants they would be considered after the “well-qualified” ones. The plaintiffs knew the test results would limit their chances of being hired as soon as the City announced the results, but did not do anything about it for over a year. The Seventh Circuit Court of Appeals agreed with the City, and ruled the lawsuit was untimely.

The Supreme Court weighed in to decide whether the discrimination claims were filed in the time period allowed under the applicable anti-discrimination law, Title VII of the Civil Rights Act of 1964. The Supreme Court did not review the lower courts’ ruling on the validity of the testing and the 89-points-or-better requirement.

The Supreme Court reversed the Seventh Circuit, essentially reinstating the judgment finding discrimination. In considering the statute of limitations applicable to the case, the high court relied on the fundamental difference between intentional discrimination and disparate impact discrimination. If the discrimination is intentional, the limitations period runs from the time that the employee or applicant becomes aware of the discriminatory intent. Because a disparate impact claim does not challenge a decision, but rather, the use of a policy or practice, the limitations period applies each time the policy is used.

In reaching its decision, the Supreme Court relied on its prior ruling in Ledbetter v. Goodyear Tire & Rubber. In that case, the Court held that an employee’s claim was time-barred when she complained about the effects of an intentionally discriminatory decision that had been made many years earlier. Ledbetter had complained that a discriminatory performance evaluation in the late 1970’s resulted in her having a smaller paycheck than her male colleagues, almost 25 years later, when she finally decided to sue. Because Ledbetter claimed intentional discrimination, the Supreme Court reached the opposite conclusion as it did in Lewis; her discrimination claims were untimely. (Congress, in response to Ledbetter, amended the law to allow claims based on past discriminatory practices if they have continuing effects.)

Ricci and Lewis Expand Disparate Impact Claims

In Ricci v. DeStefano, decided by the Supreme Court last year, the City of New Haven administered a test for promotion to Lieutenant and Captain. The test results caused few minority firefighters to be qualified for promotion.

New Haven threw out the test because it feared unsuccessful minority applicants would claim the test had an unlawful disparate impact. The Court found that decision to be intentional discrimination. Before New Haven could change the test requirements with the intent to increase the racial mix of the qualified applicants, the city had to have a “strong basis in evidence” that the original policy would result in liability for discrimination.

There is no doubt Ricci and Lewis will mean more disparate impact litigation. Lewis‘ practical effect will be to expand disparate impact lawsuits when applicants claim test results are discriminatory. That is because every time a facially neutral, but unlawful, practice is used, a new potential claim arises. Ricci‘s will curtail employers’ prophylactic efforts to mitigate potential disparate impact discrimination claims.

Using Tests

Although Ricci and Lewis highlight some of the perils of using skills or aptitude tests in making employment decisions, such tests they are widely and lawfully used. Both in civil service and in the private sector, testing may be an objective way to counter subjective or arbitrary decision making. Courts have held that subjective decision making may increase the risk that discriminatory motives will creep into the evaluator’s criteria. Indeed, Walmart faces the largest employment law class action in history based in part on allegations that its promotion decisions are based on subjective decisions, resulting in sex discrimination.

How may an employer use standardized testing to hire or promote qualified candidates and avoid discrimination, either intentionally or unintentionally? By carefully selecting a valid test structure that closely follows the actual requirements of the job to be filled.

“Validity” is a term of art, meaning there is a sufficient correlation between the test and the job. The Equal Employment Opportunity Commission has developed regulations interpreting the law regarding the use of tests and disparate impact claims. See 29 CFR §§ 1607.1-18. These regulations are also known as the Uniform Guidelines on Employee Selection Procedures. They contain standards for conducting proper scientific evaluations of validity.

In Ricci, the Supreme Court found “[t]here is no genuine dispute that the examinations were job-related and consistent with business necessity. . . assertions to the contrary are äóÖblatantly contradicted by the record.'” The Court went so far as to hold that the only motivation not to follow the test results could be to favor minority applicants, or what is sometimes called “reverse discrimination.” Although this is likely dicta, the plaintiffs seeking to make out a disparate impact claim will have to overcome the Supreme Court’s skepticism.

In Lewis, on the other hand, the district court held that the test was not as job-related as it could have been, but the finding of discrimination turned heavily on the arbitrary decision to cut off the applicants whose scores fell below 89 points. Essentially, the difference between these two cases came down to the scientific quality of the tests. Both employers got in trouble for deviating from a scientific approach and attempting to manipulate the test results, although for different reasons.

Advice for Employers

As stated, there are benefits to using standardized, objective criteria in making hiring or promotion decisions. Standardized tests like the one used by Chicago, given to 26,000 applicants and used to fill vacancies for five years, are not for every employer. But most employers can standardize interviews, job descriptions, and performance evaluations to create a fair basis for comparison and better documentation.

There are pitfalls, particularly when tests themselves are not properly validated. Therefore, employers using standardized criteria should ensure they are sufficiently relevant to the job duties under evaluation. It may pay to research whether there are better, more scientifically-validated tests available for a given position.