On June 29, 2009, the U.S. Supreme Court issued its much anticipated decision regarding the firefighter promotional exams used by the City of New Haven, Connecticut. (Ricci v. DeStefano, U.S. No. 07-1428, 6/29/09). The Court found that the City’s decision to bow to public pressure and ignore the test results because they had a disparate impact on African Americans constituted unlawful reverse discrimination under Title VII of the Civil Rights Act of 1964. Overturning the Second Circuit Court of Appeals decision written by soon-to-be Justice Sonia Sotomayor, the Court ruled that selection criteria that have a disproportionate negative impact on one group can only be ignored where there is a “strong basis in evidence” that the selection criteria violate Title VII’s disparate impact provisions. The fact that an examination or other selection procedures exclude large numbers of females or minorities isn’t a sufficient reason to throw out the criteria. The employer must also demonstrate with “strong evidence” that the criteria it used should be scrapped in favor of alternative selection criteria that have less impact on females or minorities. Ricci places the employer in the uncomfortable position of demonstrating that its own selection criteria likely violate Title VII’s disparate impact prohibition.

We advise employers to revisit their reduction-in-force, hiring, promotion, and related HR policies for compliance before implementation. If the test or employment process has an adverse impact on a protected class, the employer may not rely solely on that fact in determining to abandon the test or process, but must weigh carefully the decision to abandon the test or process. In other words, the data analysis may inform the process, but should not drive the process. The Ricci case affirms the importance of buttressing any data analysis that identifies adverse impact with a rigorous assessment of impact of the policy, procedure, or initiative on the adversely impacted groups protected by Title VII.

Ricci v. DeStefano

The New Haven City charter requires that vacancies in classified civil service positions be filled with the most qualified individuals as determined by job-related examinations. To fill a number of vacancies for lieutenant and captain positions in its fire department, the City hired a consultant to develop and administer the exam. The consultant developed the exam by conducting extensive job-analysis questionnaires and interviews of current leaders in the fire department, and used related training manuals and procedures to serve as sources for the test questions.

In addition to the requirements set forth by the City charter, the relevant collective bargaining agreement required that the exam have separate written and oral components, worth 60 percent and 40 percent, respectively. Seventy-seven candidates competed for the lieutenant examination and 41 competed for the captain examination. The pass rates for African American and Hispanic firefighters were about one-half the rate for Caucasian candidates in both exams. Moreover, based on the exam results, no African American candidates would have received a promotion. The New Haven Civil Service Board – the body responsible for certifying the results of civil service examinations – held a series of meetings and invited testimony from various experts, candidates, and others regarding the examinations and the results. Ultimately, the Board decided to throw out the results based on the disparate impact.

In a sharply divided 5-4 decision, the Court noted a tension in Title VII between the prohibition of intentional discrimination (disparate treatment) and the prohibition on practices that are not intended to discriminate, but in fact have a disproportionately adverse impact on minorities (disparate impact). Writing for the majority, Justice Anthony M. Kennedy stated that “fear of litigation alone” – here, fear of a disparate impact lawsuit brought by the African American candidates who would not have received promotions – cannot justify an employer’s intentional racial discrimination against other qualified individuals.

The Court rejected the City’s proposed “good faith” standard, which would have permitted an employer to discard the results of an examination if it had a good faith belief that there could be disparate impact violation of Title VII. Instead, the Court adopted the “strong basis in evidence” standard from its analysis of similar claims under the Fourteenth Amendment’s Equal Protection Clause.

The Court conceded that the results of the examination in this case demonstrated a significant racial disparity and acknowledged that the evidence was sufficient to state a prima facie case of disparate impact liability. However, the Court stated that permitting an employer to discard the results of lawful examinations on its fear of disparate impact liability could cause employers to discard the results of lawful examinations “at the slightest hint of disparate impact,” which “would amount to a de facto quota system.” The Court further found that the City had not produced the requisite “strong basis in evidence” of disparate impact liability to throw out the test results.

In dissent, Justice Ruth Bader Ginsburg predicted the Court’s opinion will “not have staying power” because it “barely acknowledges the pathmarking decision in Griggs v. Duke Power Co.” and Congress’ subsequent codification of disparate impact theory under Title VII. Justice Ginsberg questioned the Court’s observed inherent tension in Title VII and argued that the standard should be a “good cause” test. In explaining this test, she stated “I would therefore hold that an employer who jettisons a selection device when its disproportionate racial impact becomes apparent does not violate Title VII’s disparate-treatment bar automatically or at all, subject to this key condition: The employer must have good cause to believe the device would not withstand examination for business necessity.” Justice Ginsberg argued that New Haven had ample cause to believe its selection process was flawed and was not justified by business necessity, citing the numerous flaws in the process identified by experts on the record. Accordingly, she stated “judged by that stan dard, petitioners have not shown that New Haven’s failure to certify the exams violated Title VII’s disparate-treatment provision.”

Practical Suggestions

This decision could have a far-reaching impact on employers. Whether an employer is engaged in hiring, promotions, a workforce restructuring, or other employment processes, the standards used to sort or select individuals should be thoroughly vetted before the process commences. Therefore, existing practices should be revisited now.

Additionally, for many employment practices, employers often engage in the recommended practice of conducting an adverse impact analysis to validate tests or employment processes. The Court has not determined that adverse impact analysis should not be used as a valuable tool to monitor the validity of a selection process. The Court is merely suggesting that the process should not be driven by the data analysis alone, but rather must be supported by rigorous assessment of the policy, procedure, or initiative and its impact on groups protected by Title VII. As a result of the Ricci decision, a more thorough analysis of any potential adverse impact must be completed before an employer takes any action to minimize the risk of a reverse discrimination lawsuit.  

Further, in the Ricci case, the Court stated that the raw racial results became the predominant rationale for the City’s refusal to certify the results. Accordingly, once a test has been administered or after a selection process has been completed, an employer would have to demonstrate more than a statistical finding of a disparate impact to throw out the results. This creates a new challenge for employers once a selection process has been completed and a disparate impact is identified. To discard the entire process and results and begin anew, the employer must now satisfy the substantial standard of, and thereby potentially acknowledge, a “strong basis in evidence” of disparate impact liability.

The best course of action is for employers to determine the most critical skills and abilities for each job category and ensure that the selection process used will identify the best candidates for those skills and abilities. Moreover, the dissent in the Ricci case noted that some of the experts who testified stated that including factors such as leadership, communication, and interpersonal skills in the selection process would have captured more of the essential capabilities needed for individuals in these positions and may have also resulted in less of an adverse impact on protected groups.

Federal law currently does not recognize reverse age discrimination claims and so Ricci’s applicability may be limited in the context of workforce reductions where the chief concern is the impact on older workers. However, several states recognize reverse age discrimination claims, and may adopt the Ricci standard.

Ricci did not involve an affirmative action program or diversity initiative. The business imperatives for diversity management remain valid – access to new markets, a more creative and productive workforce, and minimizing exposure to high profile lawsuits. The Ricci case, however, may require employers to reassess the manner in which they structure their efforts to advance diversity, particularly with regard to minimizing the risk of high-profile discrimination lawsuits and accelerating other diversity-related efforts. It remains to be seen whether the current administration and Democratic Congress will take legislative action in response to this ruling.