The recent Supreme Court case of Ricci v. DeStefano, No. 07-1428 (June 29, 2009), teaches employers the legal perils of designing and administering a promotion test and then ignoring the results in favor of minority employees.

In the case, the City of New Haven hired an outside company to create an objective test to administer to firefighters seeking promotion. When the results came back, they showed that white candidates had scored better than most of their minority counterparts. A public debate ensued, with some minority firefighters threatening to sue if the results were used, and some white firefighters threatening to sue if the results were thrown out, and they were not promoted. Stuck between a political “rock and a hard place,” the City eventually decided to throw out the results and not make promotions based on the test. This was based on the stated belief that minority firefighters would sue for discrimation. In doing so, however, the City prompted a lawsuit by white firefighters for intentional race discrimination.

The case garnered national attention more for the decision-makers than the decision itself, but the Supreme Court’s holding is based on the common sense notion that employers cannot use a promotion test, and then disregard the results, especially for racial reasons.

The Court concluded that the decision to throw out the results was unlawful under Title VII of the Civil Rights Act of 1964. Not wanting to kill affirmative action outright, the Court also ruled that the explicit use of race to favor minorities – or avoid a threatened lawsuit my minority employees – is permitted only where the employer can demonstrate a “strong basis in evidence” that, had it not taken the action, it would have been liable for discrimination against minority employees who fared poorly on the promotional examination. The Court concluded that the City had not met that standard.

The Court’s decision imparts the following lessons for employers:

  • Make sure your promotion requirements – whether based on tests or other job functions – are job-related and consistent with business necessity.
  • Before disregarding the results of any employment test for racial or affirmative action reasons, employers must first determine that the test actually discriminated against minority employees. This usually requires a statistical analysis showing significant disparities by race, which demonstrates that skewed test results are the result of discrimination, not mere chance.

Finally, good faith is not a legally sufficient reason for departing from the results of employer tests. Your organization therefore needs to think through the possible implications of testing procedures before the test is designed or administered, preferably in a context covered by the attorney-client privilege.