U.S. Supreme Court Finds Disparate Impact Claims Timely

U.S. Supreme Court Finds Disparate Impact Claims Timely Years After City Adopts Original Employment Practice

By: Sarah Evans

The U.S. Supreme Court has issued a ruling that may create additional liability for employers whose policies have a disparate impact upon minorities.  On May 24, 2010, in Lewis v. City of Chicago, 560 U.S. _____ (2010), the Court held that a disparate impact discrimination claim may arise not only from the adoption of an employer policy which has a disparate impact upon individuals in a protected class, but also in all future implementations of the practice covered by the policy.  With recent studies exposing the potential disparate impact of common employer policies, such as using social media for background checks and recruiting, this case may have a far-reaching effect.

In 1995 the City of Chicago gave written examinations to individuals seeking firefighter positions.  In January of the following year, the City announced that it would draw candidates randomly from a list of those who scored at least 89 out of 100 points on the exam.  Those individuals were considered “well qualified.”  The City informed individuals who scored between 65 and 88 that they were “qualified” but it was unlikely that they would be called for further processing.  These “qualified” individuals would be kept on the eligibility list as long as it was used.  Anyone receiving a score below 65 was “not qualified,” and was so informed.  In May 1996, the City selected from the eligibility list its first round of applicants to advance and repeated this process nine more times over the next six years.  Minority individuals who were “qualified” but not hired ultimately sued the City, alleging that the policy negatively impacted them as a class.

At issue in the lawsuit was whether each of the City’s nine implementations of the policy over the next six years following its 1996 creation of the hiring eligibility list was an employment practice within the meaning of Title VII.  The Court held that it was, stating:  “[I]t does not follow that no new violation occurred-and no new claims could arise when the City implemented that decision down the road.”  Here, an EEOC charge filed within 300 days following any of the hiring decisions resulting from the creation of the hiring eligibility list were timely, and properly preserved the right to sue in Federal court – dramatically expanding the number of class members with standing to sue the City.  In so ruling, the U.S. Supreme Court established a precedent that each time an employer implements a policy that results in a disparate impact, a new event of discrimination occurs.

By way of background, a plaintiff alleging a disparate impact claim under Title VII must establish that an employer uses a particular employment practice that causes a disparate impact on the basis of race, color, religion, sex, or national origin.  Unless an employer demonstrates that the challenged practice is job related for the position in question and consistent with business necessity, the plaintiff will prevail.  As the Court succinctly stated, “[u]nless and until the employer pleads and proves a business necessity defense, the plaintiff wins simply by showing the stated elements.”

This decision exponentially increased the potential liability period for the City’s initial policy, and provides good learning points for employers.  One area in which employers may inadvertently create expanded liability is through the use of social media in background checks and recruiting.  According to a December 2009 Microsoft-commissioned study, which can be found at http://www.microsoft.com/privacy/dpd/research.aspx, 70 percent of U.S. human resources professionals have rejected a candidate based upon their online reputation.  Given the large percentage of U.S. human resources professionals and recruiters using social media to source and reject candidates there is an argument that racial minorities, whose presence on social media is disproportionate to their numbers in the general population, will be more negatively impacted by the use of social media searching in recruiting and hiring.  This fact provides fertile ground for potential disparate impact discrimination claims.  In the case of social media background checks, it may be difficult to prove the “business necessity” defense to such claims, leaving employers exposed to liability.

Employers should remember that disparate impact claims may arise not only from the introduction of a policy such as a social media background check policy which results in a disparate impact or discrimination, but also from each hiring decision relating to the implementation of that policy.  In light of this ruling, employers may want to consider these practical pointers:

1.         Examine your hiring, screening and promotion policies, including your social media background check and recruiting policies, to ensure they do not result in inequalities on the basis of protected classes, e.g., race, color, religion, sex, or national origin;

2.         If your policies do result in such inequalities, ensure that you have documentation which establishes the business necessity of the policies; or

3.         Reexamine your policies and implement new ones which do not result in disparate impact or discrimination, and ensure that social media is not the sole source for recruitment and background checks.

Dorsey & Whitney

Dorsey & Whitney

Dorsey is a business law firm, applying a business perspective to clients' needs. We make it our first priority to know the context in which you do business - your market, your competitors, your industry.

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