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Supreme Court expands time to sue over policies with disparate impact

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in Discrimination and Harassment,Hiring,Human Resources

There may be a ticking time bomb lurking in your employment policies and practices. It may go off at any time, when you least expect it. During its most recent term, the U.S. Supreme Court unanimously ruled that employers can be held liable upon the use of employment practices that have a disparate impact on employees, no matter how long ago the challenged practice was adopted.

In other words, a policy you created decades ago but never used can become the basis for an employment discrimination lawsuit the first time you brush it off and put it into practice.

In Lewis v. City of Chicago (Case No. 08-974, U.S. Supreme Court, 2010), some minority applicants for firefighter positions sued the city of Chicago under Title VII for unlawful disparate impact discrimination. In the incident in question, the city classified them as “qualified” and not “well-qualified” in 1997 based on an examination adopted in 1995 and a scoring and screening policy adopted in 1996.

Trial court, then appeals

The trial court rejected the city’s challenge that the applicants’ lawsuit was untimely because it was not filed within 300 days of the adoption of the city’s selection policies. The court said the city’s ongoing reliance on the examination results was a “continuing violation” and therefore, like disparate treatment cases, the applicants’ disparate impact claims could proceed.

The 7th Circuit Court of Appeals reversed the trial court’s decision, concluding that the discriminatory act in the case was the 1996 adoption of the eligibility factors, and therefore the filing of the complaint 300 days after this act was untimely.

The 7th Circuit reasoned that the later selection decisions were immaterial because they were only “automatic consequences of the test scores rather than the produce of a fresh act of discrimination.”

Disparate treatment or impact?

The Supreme Court rejected the appellate court’s focus on the adoption date and timeliness, and instead ruled that the case turned rather on whether subsequent applications of the selection practice could support disparate impact claims.

In reaching this conclusion, the Supreme Court distinguished the more commonly brought disparate treatment claims from disparate impact claims being asserted by the Lewis applicants.

Disparate treatment claims require proof of discriminatory intent within the limitations period. Disparate impact claims require no such proof. Instead, a plaintiff establishes a Title VII violation by showing that an employer “uses a particular employment practice that causes a disparate impact” based on the enumerated prohibitions.

The Supreme Court reasoned that only an employer’s use of a practice may result in disparate impact liability, so when the practice was adopted is irrelevant.

What the decision means

The Lewis decision makes it clear that a disparate impact claim now can be asserted for any application of an employment policy of any kind, as long as the challenged application occurs within the limitations period.

Employers now need to scrutinize their current application of hiring, promotion, compensation, disciplinary and discharge/layoff policies for potential unlawful disparate impacts.

More disconcerting, however, is that employers are now confronted with the difficult situation of potentially having to defend disparate impact actions about practices that have been regularly used for years, but because of the passage of time, crucial evidence required to prove the business necessity defense to such claims is no longer available.

What employers need to do

Employers can protect themselves from actions and decisions that could trigger disparate impact liability by:

  • Vigilantly focusing on ensuring that fair, nondiscriminatory practices are at work.
  • Reviewing disparate impact considerations in all employment decisions, especially those made in conjunction with policies that were adopted years ago.
  • Reviewing all employment policies and determining whether they are based on legitimate business reasons and whether those reasons rise to the level of “business necessity.”
  • Reviewing, identifying and preserving all evidence and records that would prove the “legitimate business reasons” and the “business necessity” for the policies.
  • Developing and re-adopting updated policies with well-documented analyses and records that can be retained for future use in any disparate impact litigation, if, because of the passage of time, records and evidence of the business reason and necessity for the older policies are unavailable.

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