• Business Team

Don’t Forget About Disparate Impact Discrimination

As Human Resources professionals, you all know about the various types of discrimination and quite certainly you all have policies prohibiting discrimination in the workplace. I am sure you have regular training for management and non-management personnel regarding how to prevent discrimination and in the unlikely event of discrimination, how to remedy it. Most likely, though, your focus is on intentional discrimination, not disparate impact. You may be just like the Consumer Financial Protection Bureau.

In a recent Wall Street Journal article, Ronald Rubin, a former CFPB enforcement attorney, recounted the “political correctness” that permeated the CFPB. He noted that workplace diversity was a top hiring priority, there were regular meetings of the “Culture Club” where workers could air concerns about discrimination, and internal surveys and “other extraordinary efforts” were made to ensure a discrimination-free workplace. The CFPB couldn’t possibly be engaging in any form of discrimination could it? After all, the first leader of the CFPB was Senator Elizabeth Warren and a driving purpose of the agency is to combat discrimination in consumer finance. According to confidential data obtained, the answer is “Yes.”

Date obtained from the CFPB showed that 20.7% of the CFPB’s Caucasian employees received the highest performance rating while only 10.5% of African-American employees and 9.1% of Hispanic employees received the highest performance rating. Notably, pay raises and bonuses were based, in part, on these reviews. Statistics like these often form the basis for disparate impact discrimination claims.

While disparate impact discrimination may be less common, it is just as dangerous. Disparate impact discrimination does not require proof of intent to discriminate. Rather, it only requires proof of a policy or practice that has a disproportionate and adverse effect on a protected class. Often times, the policy or practice is facially neutral.

In a recent case by the Third District Texas Court of Appeals out of Austin, Texas, the Court addressed the City of Austin’s method of consolidating the ranks when it merged the Public Safety Emergency Management Department into the Austin Police Department. Specifically, the City allowed officers to transfer a maximum of three years of service credit into their new jobs. The officers claimed that the effect of the rule was that younger officers transferred in with raises averaging 15.61%, while officers over the age of 40 transferred in with raises averaging only 5.68%. The officers over the age of 40 alleged age discrimination and sued on a disparate impact theory. A jury found in favor of the officers.

On appeal, the City asserted that the consolidation was based on a reasonable factor other than age. Specifically, the City pointed to other aspects of the policy, which ensured no employee’s base salary decreased after the transfer. The Court, however, held there was no logical connection between reducing the officers’ years of service and ensuring they maintained their current salaries. Ultimately, the Court upheld the jury verdict in favor of the officers.

So, what is the takeaway here? Nothing is full proof and as Human Resources professionals, you cannot prevent everything, no matter how hard you try. But you should remember that disparate impact discrimination is alive and well and despite your best efforts at training, solid hiring practices, and an open and positive company culture, your company still could be at risk for discrimination claims. It is important, therefore, to periodically but regularly review your personnel policies and practices to ensure that they do not have a disparate impact on any protected category of employees. It is yet another task on your already busy task-list but it is an extremely important one that could save your company money in the future.

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