Labor and Employment Update

Supreme Court Limits Employers' Ability to Discard Employment Test Results Based on the Adverse Impact of the Test on Minorities

A divided U.S. Supreme Court yesterday ruled that New Haven, Connecticut violated Title VII when it threw out the results of a promotional exam because white candidates scored disproportionately higher than minority candidates. The 5-4 decision in Ricci v. DeStefano, No. 07-1428 (U.S. June 29, 2009 ), affects all employers who use objective tests to determine the advancement potential of employees. In the future, an employer confronted with statistically skewed test results must carefully scrutinize the testing process for possible deficiencies but may not ignore the results absent evidence that the test is not job-related and consistent with business necessity, or evidence that there exists an equally valid, less discriminatory alternative that served the employer’s needs that the employer did not adopt.

In 2003, the New Haven Fire Department sought to identify candidates for future promotion. Consistent with a union contract mandating that promotions be based on objective examinations, the City hired an outside consultant to develop and administer a promotional test.

The City’s charter required vacancies to be filled from the top three scorers on the applicant lists. Black applicants scored significantly lower on the tests than whites--so much lower that no Black applicants would have been eligible for promotion to vacant positions. In view of these disparities, the City held hearings to consider if the test results were racially biased. A rancorous public debate ensued, with some firefighters threatening to sue for discrimination if the test results were certified and others threatening to sue for discrimination if the results were ignored.

Perceiving a “no-win” situation, the City opted to throw out the test results and promote no one. The top-scoring white and Hispanic firefighters then sued, alleging disparate-treatment race discrimination under Title VII and the Equal Protection Clause of the Fourteenth Amendment. The City argued that, had it certified the results, it would have risked Title VII liability for disparate-impact discrimination from unsuccessful black candidates affected by the tests and should not be held liable for disparate treatment just because it sought to avoid such liability. The trial court agreed, granting summary judgment for the City and the Second Circuit Court of Appeals affirmed.

The Supreme Court reversed, finding that the City’s decision to reject test results solely because the higher-scoring candidates were disproportionately white violated Title VII and thus a ruling in favor of the white and Hispanic firefighters on their disparate-treatment claims was appropriate.

Because all the evidence showed that the City threw out the test results because the higher scoring candidates were white, the Court began its analysis with the premise that the City’s actions would violate Title VII’s disparate-treatment prohibition absent some valid defense. The City tried to justify its decision based on concerns that it would have faced disparate impact claims had it certified the results. The Court noted that the racial adverse impact of this test was statistically significant and thus established a prima facie disparate impact case. However, the Court found that a prima face case, which is based solely on statistical disparity of test results, did not warrant throwing out the tests because the City could not be liable for disparate-impact discrimination unless the tests were not job-related and consistent with business necessity, or if there existed an equally valid, less discriminatory alternative that served the City’s needs that the City refused to adopt. Throwing out the test results based solely on a prima facie disparate impact case “would amount to a de facto quota system.”

The Court explained that there are competing expectations under the disparate-treatment and disparate impact provisions of Title VII. Congress imposed disparate-impact liability on employers to eliminate tests and other selection criteria that are “fair in form, but discriminatory in operation.” To address these concerns, the Court pointed out that an employer can legitimately take measures to ensure that all groups have a fair opportunity to apply for promotions and to participate in the process by which the promotions will be made. At the same time, however, scored examinations like those administered by the City create legitimate expectations on the part of those who participated in the testing process on the terms the employer has established for the promotion process. Once the process has been established and the employer has made clear its selection criteria, the employer cannot then invalidate the test after results show a racial disparity without upsetting “an employee’s legitimate expectation not to be judged on the basis of race.” To interpret Title VII in a way that resolves these competing expectations, the Court looked to the affirmative action cases under the Equal Protection clause for an analogy, reasoning that affirmative action created the same kind of conflict in Equal Protection cases. Under the Equal Protection cases, a government employer can engage in race-based decisions where there is a strong basis in evidence that it is warranted to remedy past discrimination by that government employer.

Thus, to justify throwing out test results based on racial adverse impact, the Court ruled that there must be “a strong basis in evidence” that the employer would have been ultimately liable for disparate-impact discrimination had it certified the test results. The Court held that the City failed to meet this standard. There was little evidence in the record that the examinations were not job-related or consistent with business necessity, or that there was a less discriminatory alternative--all factors necessary to prove disparate-impact discrimination. Having resolved the issue on statutory grounds, the Court declined to consider whether the City’s actions were constitutionally permissible under the Equal Protection Clause.

Addressing the City’s fear of disparate-impact litigation, the Court added that

If, after it certifies the test results, the City faces a disparate-impact suit, then in light of our holding today it should be clear that the City would avoid disparate-impact liability based on the strong basis in evidence that, had it not certified the results, it would have been subject to disparate-treatment liability.

It remains to be seen whether this decision signals a broader shift in the Court’s overall approach to disparate-impact or affirmative action cases beyond the narrow and unique circumstances of the decision in the case before the Court.