Ricci v. DeStefano, Supreme Court Ruling In Adverse Impact Case
Ricci v. DeStefano, Supreme Court Holds Employer Liable for Trying to Avoid Claims of Adverse Impact Discrimination
On June 29, the United States Supreme Court issued its highly-anticipated and highly-divisive decision in the “white firefighters case,” Ricci v. DeStefano, 557 U.S. __ (2009). This 5-4 decision may have significant implications for both “disparate impact” and “disparate treatment” discrimination claims.
Disparate-treatment claims present the traditional case of intentional discrimination. Disparate-impact claims attack a neutral policy or practice that has a disproportionately negative impact on the basis of race, gender, or some other statutorily-protected characteristic. Notably, disparate-impact claims do not require proof of an intent to discriminate. In Ricci, the Supreme Court held that actions influenced by race or some other protected characteristic, even if taken in a good-faith effort to avoid possible disparate-impact claims, will subject an employer to claims for disparate-treatment discrimination except in very narrow circumstances.
Justice Kennedy delivered the majority opinion in Ricci v. DeStefano, joined by Chief Justice Roberts and Justices Alito, Scalia, and Thomas. The majority held that actions taken to avoid possible disparate-impact discrimination claims – even if taken in good faith and with good cause – are nonetheless subject to disparate-treatment discrimination claims if the actions were influenced by race or some other protected characteristic.
The majority set a high standard (which the dissent described as “enigmatic”) for this sort of defense, stating: “[B]efore 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.”
Ricci involved a challenge to the refusal by the City of New Haven, Connecticut (“City”) to certify the results of a promotion examination because the test-passage results displayed a disparate impact on non-white applicants.
Under the City’s contract with the firefighters’ union, applicants for lieutenant and captain positions were screened using written and oral examinations. These examinations were developed by industrial/organizational consultants specializing in designing promotional examinations for police and fire departments.
The City administered the promotion examination to 118 firefighters who desired promotion. Of the 76 candidates who completed the lieutenant examination (43 whites, 19 blacks, and 15 Hispanics), 34 candidates passed – 25 whites, six blacks, and three Hispanics. The pass rate for white candidates was 58.1%, 31.6% for black candidates, and 20% for Hispanic candidates. The top ten candidates were eligible for immediate promotion to lieutenant, and all were white. Of the 41 candidates who completed the captain examination (25 whites, eight blacks, and eight Hispanics), 22 candidates passed – 16 whites, three blacks, and 3 Hispanics. The pass rate for white candidates was 64%, but only 37.5% for black and Hispanic candidates. The top nine candidates eligible for immediate promotion to captain were seven whites and two Hispanics.
After reviewing the test results, City officials became concerned that recognition of the test results might subject the City to claims of disparate-impact race discrimination. The City’s concern was not misplaced. Even the majority acknowledged that “[t]he racial adverse impact here was significant.” In fact, the results fell far short of the “80% Rule” recognized by the Equal Employment Opportunity Commission (“EEOC”). See 29 C.F.R. § 1607.4(D) (a selection rate that is less than 80% “of the rate for the group with the highest rate will generally be regarded by the Federal enforcement agencies as evidence of adverse impact”). This EEOC rule also has been recognized as a “rule of thumb for the courts.” See Watson v. Fort Worth Bank & Trust, 478 U.S., 995-96, n. 3 (plurality opinion). The City’s attorney also advised that there were significant legal risks of disparate-impact claims if the test results were certified.
The City held a series of public hearings on whether to recognize or set aside the results. Some firefighters argued the tests should be discarded because the results showed the tests were discriminatory against non-white candidates. This group threatened a disparate-impact race discrimination lawsuit if promotions were made based on the results. Another group of firefighters contended the examinations were neutral and fair, and threatened a disparate-treatment race discrimination lawsuit if the City relied on the statistical disparity to reject the test results and deny promotions to the high scorers. The atmosphere was highly charged politically, and, as the Court recognized, these hearings were “rancorous.” The City’s Civil Service Board deadlocked on whether to certify the test results, which had the effect of throwing out the examination results.
A group of 17 white firefighters and one Hispanic firefighter who passed the examinations but were not promoted sued the City (and certain officials, collectively referred to as the City to avoid confusion), alleging that the City intentionally discriminated against them on the basis of race, in violation of Title VII and the Equal Protection Clause of the Fourteenth Amendment. The City countered with the argument, bolstered by existing lower-court precedent, that it had a “good faith belief” that it would have violated the disparate-impact provision of Title VII had it certified the test results, and therefore could not be held liable for disparate-treatment discrimination. The District Court granted summary judgment to the City and the Second Circuit affirmed. At the Supreme Court, the U.S. Solicitor General sided with the City. Nonetheless, the Supreme Court reversed. Indeed, the majority did not even remand, but instead ordered that summary judgment be entered in favor of the plaintiffs.
The Court’s Legal Analysis
The claims before the Court included both a statutory disparate-treatment discrimination claim under Title VII, as well as a constitutional claim under the Equal Protection Clause of the Fourteenth Amendment. Following well-established precedent, the Court avoided the constitutional issue by first addressing the statutory claim. See Escambia County v. McMillan, 466 U.S. 48, 51 (1984) (per curiam) (“[N]ormally the Court will not decide a constitutional question if there is some other ground upon which to dispose of the case”).
However, the majority’s opinion seems to suggest that there could be constitutional limitations on disparate-impact claims. The standard which the majority adopted for its interpretation of Title VII was imported directly from the Court’s prior Equal Protection caselaw. In his concurring opinion, Justice Scalia was even more blunt in calling into question the constitutional validity of the disparate-impact provisions of Title VII, stating, for example, that “if the Federal Government is prohibited from discriminating on the basis of race, . . . then surely it is also prohibited from enacting laws mandating that third parties . . . discriminate on the basis of race” through Title VII’s disparate impact provisions, which “place a thumb on the scales, often requiring employers to evaluate the racial outcomes of their policies, and to make decisions based on (because of) those racial outcomes.” Assuming such constitutional limitations might be recognized in some future case, this obviously would prove a limitation on future Congressional action to limit or reverse Ricci, which Justice Ginsburg in her dissent (joined by Justices Stevens, Souter, and Breyer) essentially predicted, stating: “The Court’s order and opinion, I anticipate, will not have staying power.”
After dodging the constitutional issue, the issue before the Court, as viewed by the majority, was how to reconcile the disparate-treatment provisions of Title VII, which prohibit the use of race (or other protected characteristics) as a factor in employment decisions, with the disparate-impact provisions, which specifically contemplate consideration of race (or other protected characteristics). “Our task,” the majority wrote, “is to provide guidance to employers and courts for situations when these two prohibitions could be in conflict absent a rule to reconcile them.” The conclusion the majority reached was that “under 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” (emphasis added).
The Court found that the City’s decision not to certify the results was “because of the statistical disparity based on race – i.e., how minority candidates had performed when compared to white candidates,” and thus was prohibited disparate-treatment discrimination. The Court expressly rejected the City’s and the Solicitor General’s argument that an employer trying to comply with Title VII’s disparate-impact provisions does not engage in prohibited discrimination on the basis of race, noting that this argument improperly focused on the City’s ultimate objective, rather than its conduct in pursuing that objective. “The City rejected the test results solely because the higher scoring candidates were white,” the Court noted. Therefore, “[t]he question is not whether that conduct was discriminatory but whether the City had a lawful justification for its race-based action.”
Next, the Court examined whether “the purpose to avoid disparate-impact liability excuses what otherwise would be prohibited disparate-treatment discrimination.” The Court drew upon standards developed in the application of the Equal Protection Clause in cases involving government actions to remedy past racial discrimination (including race-based affirmative action). In such cases, governmental remedial actions “are constitutional only where there is a ‘strong basis in evidence’ that the remedial actions were necessary.”
“The standard leaves ample room for employers’ voluntary compliance efforts, which are essential to the statutory scheme and to Congress’s efforts to eradicate workplace discrimination. . . . And the standard appropriately constrains employers’ discretion in making race-based decisions: It limits that discretion to cases in which there is a strong basis in evidence of disparate-impact liability, but it is not so restrictive that it allows employers to act only when there is a provable, actual violation.”
The Court emphasized also that Title VII does not prohibit employers “from considering, before administering a test or practice, how to design that test or practice in order to provide a fair opportunity for all individuals, regardless of their race.”
Applying the new standard to the facts of the case, the Court noted the City was faced with a prima facie case of disparate-impact liability, which it characterized as “a threshold showing of a significant statistical disparity, and nothing more,” because the disparities fell well below the 80% disparate-impact rule set by the EEOC. But the Court remarked that the statistics were far from a strong basis in evidence that the City would have been liable under Title VII had it certified the results. That is because the City 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 but that the City refused to adopt.
The Court found no strong basis in evidence to establish the test was deficient in either respect. Finally, the Court clarified the scope of its holding that a “strong basis in evidence” can be a defense to a claim of discrimination: “ If, after it certifies the test results, the City faces a disparate-impact suit, then 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.”
Concurring Opinions And Dissent
The concurring opinions and dissent provide some insight into how the debate is likely to evolve in the future. Justice Scalia’s concurrence characterized the majority as holding “that Title VII not only permits but affirmatively requires [remedial race-based actions] when a disparate-impact violation would otherwise result.” This, he contended, amounts to government-compelled race-based discrimination, which “seemingly” would violate the Equal Protection Clause. In other words, as the dissent pointed out, Justice Scalia apparently would invalidate Title VII’s disparate-impact provisions as unconstitutional. At a minimum, Justice Scalia suggested, the use of statistics in discrimination cases should be “simply an evidentiary tool used to identify genuine, intentional discrimination – to ‘smoke out,’ as it were, disparate treatment.”
Justice Ginsburg vigorously dissented, joined by Justices Stevens, Souter, and Breyer. Justice Ginsburg argued that the Court should have considered the factual and legal contexts underlying the case, including historically-pervasive race discrimination in fire departments and Title VII’s approval of employer-driven remedial measures. The dissent urged that Title VII’s disparate-treatment and disparate-impact provisions “must be read as complementary,” such that “[a] reasonable endeavor to comply with [Title VII] and to ensure that qualified candidates of all races have a fair opportunity to compete is simply not what Congress meant to interdict.” The dissent suggested a better standard would be that an employer who discards a “device” based on statistically disparate results does not violate the disparate-treatment provisions if it had “good cause to believe the device would not withstand examination for business necessity.”
The hotly-contested decision promises to be controversial, and is likely to draw the attention of Congress and the EEOC in the future. It also promises to remain in the spotlight in the near future because Judge Sonia Sotomayor, President Obama’s first nominee to the Supreme Court, was one of the Second Circuit Judges who joined in the opinion the Supreme Court reversed.
Ricci involved a public employer in the relatively-unusual context of a written promotional examination. It is possible that the case ultimately may be limited in its impact, given this relatively-uncommon factual basis. There is nothing in the multiple opinions produced at the Supreme Court, however, or in the widespread the attention the case has received, to suggest that scenario is likely. Instead, the Court’s reasoning seems to extend much further, and the case is likely to affect all employers in any of a number of circumstances where there may be a conflict between potential disparate-impact and disparate-treatment discrimination claims. At least, that seems to be the clear intent of the majority. With this in mind, the following are a few practical “take-aways” from the decision.
• Reductions in Force. In today’s economic recession, reductions in force are quite common. The U.S. Bureau of Labor Statistics reported that through May of this year, there have been 13,544 “mass layoffs,” defined as involving at least 50 employees. Most employers do some sort of adverse-impact analysis as part of their process for selecting employees to be released. Under Ricci, any employer who changes its initial list of employees for layoff based on an adverse-impact analysis runs an increased risk of disparate-treatment discrimination claims from those employees not originally selected for layoff but who, because of some “adjustment” based on the adverse-impact analysis, ultimately lose their jobs. An employer in that circumstance would have to be able to meet the “strong basis in the evidence” test articulated in Ricci to avoid liability, which might be very difficult to do. Bear in mind, the Supreme Court in Ricci actually ordered summary judgment in favor of the plaintiffs. It is also noteworthy that the Equal Protection case from which the majority imported the “strong basis in the evidence test,” Wygant v. Jackson Bd. of Educ., 476 U.S. 267 (1986) (plurality), was itself a reduction-in-force case. In Wygant, the Supreme Court invalidated as unconstitutional a school district’s plan to layoff non-minority teachers while retaining minority teachers with less seniority. In short, employers will have to be much more thoughtful at the outset in developing their layoff criteria, and then much less willing to make adjustments based on adverse-impact analyses. It also may behoove employers to have any such adverse-impact analysis conducted by or under the direction of their attorneys, with the idea that such analysis and the advice based upon it will be subject to attorney-client or work-product privileges.
• Other policies, practices, procedures, and criteria. The holding in Ricci extends to any circumstance in which a policy, practice, procedure, test, or criteria are used that might be the subject of a disparate-impact claim. As with the development of reduction-in-force criteria, employers will have to invest much more time, attention, and thought into such employment practices and procedures, because their ability to modify their ultimate decisions may be more constrained after the fact. Ricci holds that once a process has begun, an employer may not deviate from that process or set aside the results unless there is a “strong basis in evidence” to believe that the process would not survive a disparate-impact lawsuit.
• Limitations of statistics. Ricci makes clear that a statistical disparity, even if very significant, is not sufficient in itself to meet the “strong basis in the evidence” test. Employers also will have to consider carefully the other elements of a disparate-impact claim, namely whether (1) the criteria leading to the statistical disparity are job related and consistent with business necessity, and (2) there was an equally effective, less-discriminatory alternative that could have been adopted. Unless there is “substantial evidence” that these other elements of a disparate-impact claim could be met, then the employer would not be able to rely on this defense to a disparate-treatment claim. Unfortunately, there are no bright line tests to guide this analysis (like the 80% rule adopted by the EEOC).
• Limitations of advice of counsel. The City attorney gave advice and counsel to the City of New Haven about the risks of disparate-impact claims if it were to certify the test results. Ultimately, however, the City lost the case, and the fact that it had relied upon advice of counsel provided no safe harbor or defense. This is not to suggest that there is no benefit in seeking advice of counsel, only that counsel’s advice ultimately may only provide protection if the advice is correct, underscoring the importance of seeking the advice of an attorney with specialized expertise in the area.
• Possible new defense to disparate-impact claims. The majority offers reassurance at the end of its opinion about possible disparate-impact claims, stating that “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 [of the testing], it would have been subject to disparate-treatment liability.” It follows, therefore, that other employers could likewise “avoid disparate-impact liability” in any instance where, based on Ricci, they decline to alter their course of action notwithstanding a significant statistical adverse impact. This may provide employers with a powerful additional defense against disparate-impact claims. Ricci might make summary judgment on such claims more likely, or provide the basis for a helpful jury instruction if the case must go to trial.
• Possible defense not asserted in Ricci. The dissent argued, in part, that the case should have been remanded. One reason justifying remand, according to the dissent, would have been to give the defense an opportunity to assert a defense based on 42 U.S.C. § 2000e-12(b), which the defendants had not asserted. See footnote 9 of dissent. Section 2000e-12(b) provides:
As the dissent further noted, the EEOC guidelines set out in 29 C.F.R. §§ 1608.3 and 1608.4 might provide the basis for a defense under Section 2000e-12(b). These EEOC guidelines recognize that employers may “take affirmative action based on an analysis which reveals facts constituting actual or potential adverse action.” “If ‘affirmative action’ is in order,” as the dissent notes, “so is the lesser step of discarding a dubious selection device.” Since the defendants in Ricci never raised this defense, the majority did not consider this possible argument. While Ricci would preclude such a defense going forward, any employer facing a claim like that in Ricci based on acts that occurred prior to the Supreme Court’s decision in Ricci should be sure to assert a defense under 42 U.S.C. § 2000e-12(b) – it might prove effective.