If you use pre-employment testing of employees, please read this article. Even if you are not a federal government contractor, these issues will arise.

A recent settlement between the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) and a California food manufacturer highlights the complexity and risks for any employer who uses what have historically been referred to as “paper and pencil” tests. Readers will recall that OFCCP is the branch of the Department of Labor (DOL) that enforces the Affirmative Action requirements imposed on federal government contractors by Executive Order 11246, The Rehabilitation Act of 1973, and the Vietnam Era Veterans’ Readjustment Assistance Act. According to a recent DOL press release, during a routine compliance review, the OFCCP investigator determined that the employers’ use of a standardized pre-employment test had an adverse impact on minority job applicants for “on-call” laborer positions.Adverse impact occurs when an otherwise neutral factor — in this case the use of a standardized test — negatively impacts a protected minority group. Here, certain minority groups did not perform as well as non-minorities. The statistical disparity in performance may be evidence of adverse impact. When adverse impact exists in any employment decision, it is the employer’s responsibility to demonstrate “business necessity” for the decision.

Regulations and case law define how an employer can prove business necessity. When using tests to make employment decisions, business necessity is shown by proving the test used is in fact a valid predictor of job performance. The OFCCP further determined that the exam in this case was not job-related because it tested math skills as well as observation skills — skills that the OFCCP concluded were not critical to success as an on-call laborer.

All employers who use employment tests, regardless of whether they are federal government contractors or not, should become completely familiar with the Uniform Guidelines on Employee Selection Procedures (UGESP). In 1978, the EEOC, the DOL, and the Department of Justice jointly issued this very comprehensive set of regulations designed to ensure that all selection devices and procedures were not used in a discriminatory manner. The reach of UGESP is extremely broad, encompassing not only paper and pencil tests, but strength and agility tests, assessment centers, and virtually any other device or methodology used in making any employment-related decisions.

UGESP details how employers who use selection devices can demonstrate business necessity. When it comes to employment testing, recognized methods of test validation must be used. Employers should be leery of any test publisher’s representation that they have the proof necessary to show that their test will be valid in your workplace. Under UGESP, typically, each employer has to be able to demonstrate validity of the test as it applies to its own workplace and specific jobs. To do this, employers usually retain the expertise of a qualified industrial psychologist or testing expert.

The consequences of using a selection device that has adverse impact without an appropriate validation study can be severe. This is due to the fact that when an employer improperly uses a selection device, it will affect not just one individual but rather a large class of applicants or employees who were improperly screened out. In this most recent case, the OFCCP obtained a $550,000 settlement from the employer.

Before using any test or selection device in an employment context, employers must understand all the requirements of UGESP and carefully monitor the use of such devices to ensure they are not using it in a discriminatory manner.