Although the U.S. economy is not back to where it was a few years ago, there are some indications that it is getting better, or soon will (http://tinyurl.com/2dburjt). As the economy recovers, jobs are created and employers need to make hiring and promotional decisions. Should employers choose to use employment tests or other similar selection procedures for those decisions? As is usually the case with good questions, the answer is “it depends.” One thing is certain however, following the Supreme Court decision in Ricci v. DeStefano (http://tinyurl.com/yc68mtc). When using testing or other objective selection procedures, employers face potential liability from both individuals who are in a minority class (such as race or gender) and those who are not. Therefore, employers should not limit legal counseling to whether their testing complies with federal anti-discrimination laws. Instead, legal counseling should begin with the fundamental question of whether the employer should use testing in its selection decisions at all.
Initially, employers must be aware that federal anti-discrimination laws prohibit the use of testing/selection procedures, including online tests as part of employment applications, that disparately or adversely affect a protected class, unless the employer shows that the selection procedure is job-related and consistent with business necessity (i.e., “validation”). Validity illustrates whether the test/selection procedure measures successful prediction of job performance. Validation is expensive, generally speaking, and must comply with the Uniform Guidelines on Employee Selection Procedures (UGESP) found in the EEOC regulations (http://tinyurl.com/2ap7rgc).
What is imperative for employers to understand is that they can face substantial legal exposure to applicants of a protected class if they are not selected for a position, and the testing results disparately impacts their protected class. For instance, the Ford Motor Company, as part of a court-approved settlement, recently paid $8.55 million in damages to a nationwide class of African-Americans who were rejected for an apprenticeship program after taking a selection test. In addition, following the Ricci opinion, employers also can face legal exposure from employees who are not members of a protected class and should have been selected for the positions based on validated testing results but were not because of fear of a lawsuit alleging the test disparately affected a certain protected class.
Therefore, employers should carefully and thoroughly analyze whether implementing a testing program is the best business decision, including a cost/benefit analysis. The following factors should be evaluated:
- Cost of implementing a testing procedure that can withstand a legal challenge. As stated above, validation is generally expensive.
- How large of an applicant pool does the employer expect? Will testing effectively pare down a large applicant pool? Are there other options for quickly and efficiently reducing the applicant pool, such as using specific minimum standards that directly relate to the job duties (i.e., requiring four years of sales experience or a degree in a relevant field)?
- What are the costs of making a wrong hiring decision? For instance, will the position require costly training, are errors expensive to the company either because of repair costs, loss of revenue, or customer relations, and so forth? Will finding a replacement be expensive due to shortage of qualified individuals?
- Does the position require attributes that are hard to develop or change through training, such as characteristics learned through extensive experience or correlated with certain personality traits? If the required attributes cannot be taught, identifying individuals with those attributes is very important and testing could be beneficial.
- Will the employer routinely be hiring for this position? How often will the test be administered? For instance, does the employer expect a lot of turnover, exceptional job growth, or is hiring seasonal? Do the job requirements routinely change or are they consistent? The more a test is used, the easier it is to offset the initial cost of validation.
- Has the employer been happy with its current hiring process and the results? Will testing provide sufficient improvement?
- Is testing the most cost-effective way to obtain necessary information? Testing may be good to determine knowledge pertaining to computer or software repairs, but may not be good regarding assessment of interpersonal skills.
- Can a test be purchased from a third-party vendor or must it be developed? Developing a test is generally more expensive, but an off-the-shelf test may not be applicable to the employer's position. If considering an off-the-shelf test, the employer should ensure the vendor has the necessary information to support validity and the information will be made available to the employer upon request.
In sum, employers face potential liability from both sides when using testing or other objective selection procedures. The current legal landscape places employers in the position that if they use testing for hiring or promotional decisions, they should be prepared to defend litigation premised on test results because there is no easy way out when a protected class is disparately impacted.