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Meeting of February 16, 2011 - EEOC to Examine Treatment of Unemployed Job Seekers

Written Testimony of James S. Urban, Partner, Jones Day

Good morning Commissioners. I thank all of you for inviting me here this morning and affording me the privilege of appearing before you. My name is James Urban, and I am a partner at the law firm of Jones Day in Pittsburgh, Pennsylvania. I have been with Jones Day since 1998 and have represented and counseled employers about their employment practices for roughly 15 years.

Currently, Jones Day acts as principal outside counsel to, or provides significant legal representation for, more than half of the Fortune 500 companies. We also serve privately held companies, financial institutions, investment firms, health care providers, retail chains, foundations, and educational institutions.

The employers to whom I personally have provided legal advice regarding employment issues are leaders in the core industries that drive the nation’s economy. These industries include automotive, aluminum, steel, rubber, telecommunications, power generation and high technology, just to name a few.

With that background in mind, I’d like to tell you about my specific experience with employer hiring practices, then discuss with you the law that governs disparate impact theories of employment discrimination and how it might apply to employers who reportedly disqualify applicants on the basis of unemployment.

I. Employer Hiring Practices

First, I must tell you that the employers to whom I provide counseling invest great resources to make sure that they are complying with federal, state and local civil rights laws as they relate to employment. Practices and policies are reviewed, revised and vetted, sometimes multiple times. Managers are trained and then retrained, at least annually in many cases. When difficult employment issues arise, seasoned HR professionals and experienced legal counsel are engaged and able to weigh in to make sure that the civil rights laws are followed.

Second, while I am aware of and have reviewed recent assorted media reports regarding employers who reportedly have excluded applicants from hiring because they were unemployed, I personally have never experienced an employer with such a policy or practice. I thought perhaps that I was missing something, so I reviewed and have brought with me the “help wanted” sections for this past Sunday from my hometown newspaper and several other major metropolitan newspapers. I have with me the “help wanted” sections from the Pittsburgh Post-Gazette, Washington Post and Chicago Tribune. I found not one single advertisement in any of these publications stating that the unemployed need not apply. I haven’t discovered anything remotely close to such a statement.

This all is consistent with my personal experience that employers in most all circumstances are looking to hire the best candidate for the position that is being filled and, to that end, solicit, welcome and consider all qualified candidates regardless of their employment status. For example, my Sunday newspaper still contains a relatively thick “help wanted” section. There still are free employment papers available in many major cities that contain job postings. Many employers utilize their own web site to post open jobs, or post jobs on internet web sites. Are they doing this to limit the pool of qualified candidates? Absolutely not. The reason that employers want to capture all qualified candidates – which is the common hiring practice of which I am aware – is simple: Employers invest a lot of time and money when they hire employees, and it is in their best interest to identify and hire the best candidate.

Let’s stop and think about what is involved with hiring employees:

  • There is the time and expense of posting the job;
  • Time is spent reviewing applications;
  • Money is spent on aptitude, skill, drug testing and the like that many jobs require;
  • Managers spend time in hiring-decision meetings;
  • Money is spent on post-offer physical exams;
  • Time is spent in post-offer information gathering (records, payroll, etc.);
  • Some hires are paid signing bonuses;
  • Some hires require the payment of a finder’s fee;
  • Once on the payroll, a new employee spends time reviewing information and literature (manuals, brochures, policies, etc.) before he or she becomes productive;
  • The new employee spends time in general orientation, before becoming productive; and
  • The new employee spends time in specific job orientation, before becoming productive.

At least one authority has estimated the overall cost of hiring an employee is equal to 38 percent of the departing employee’s annual wage.1 Thus, if the employee who departed was making $50,000.00, the employer is going invest $19,000.00 in hiring a replacement.

My overall point is that there exists great motivation for the employer to identify the best candidate in the first instance. If the employer fails to do so, and the new hire does not work out, the employer will be starting over from scratch, and all that time and money spent the first time around was wasted. The common practice is to try to identify and hire the best candidate. In some circumstances, the best candidate may be currently employed. In others, the best candidate may be between jobs.

Are periods when an applicant has been unemployed scrutinized? They most certainly are, but not with any intention of discriminating against any one person or any group of people. My experience with employers across those diverse industries that I mentioned at the beginning of my comments is that current unemployment or any period of past unemployment is, at most, only a subject of inquiry if the applicant’s credentials (such as education and work experience) interest the employer such that the employer brings the applicant in for a job interview. In such a case, a best practice is to question the applicant during the interview about the period of unemployment. It may be that the applicant simply was let go by his or her prior employer during a reduction in force that was economically driven and impacted many, which may not weigh against further consideration of the applicant. However, if the candidate was discharged for cause, such as for an incident of workplace violence, surely that may disqualify the candidate from further consideration.

At end, under the widespread practice that I have seen employers follow, the simple fact that the applicant is or was unemployed does not operate to disqualify the applicant. The reason the employer may decline to hire the applicant will be the underlying reason the applicant became unemployed, and typically it is job-related.

In sum, it is my experience and belief that there is not a widespread practice among employers to disqualify applicants on the basis of unemployment. I submit to you that the anecdotal examples contained in a media reports over the past year or so regarding such circumstances are, when viewed in the broad scope, isolated incidents.

II. Disparate Impact Analysis

I’d now like to turn to some discussion of the legal analyses that would control such cases, and I’ll start first with a general discussion of the law involving disparate impact.

At the outset, let me say that the national unemployment averages for African-Americans, Hispanics and certain other groups unquestionably raise societal concerns. However, when we begin to talk about those national averages in terms of forming the basis for a disparate impact claim under Title VII, we must look more closely at the legal requirements for presenting a case of disparate impact.

A disparate impact violation is established when an employer is shown to have used a specific employment practice, neutral on its face but causing a substantial adverse impact on a protected group, and which cannot be justified as serving a legitimate business goal of the employer.2 No proof of intentional discrimination is necessary. Forty years ago, the Supreme Court first recognized that Title VII plaintiffs may be able to sustain a viable employment discrimination claim without alleging or proving discriminatory intent in the case Griggs v. Duke Power.3 In Griggs, the Supreme Court held that the employer’s standardized testing requirement prevented a disproportionate number of African-American employees from being hired by, and advancing to higher-paying departments within, the company.

Two decades later, in 1991, Congress codified the requirements of the “disparate impact” claim Griggs had recognized.4 That provision at 42 U.S.C. § 2000e-2(k) states:

(1)(A) An unlawful employment practice based on disparate impact is established under this subchapter only if-

(i) a complaining party demonstrates that a respondent uses a particular employment practice that causes a disparate impact on the basis of race, color, religion, sex, or national origin and the respondent fails to demonstrate that the challenged practice is job related for the position in question and consistent with business necessity . . . .

Thus, a plaintiff establishes a prima facie disparate impact claim by showing that the employer “uses a particular employment practice that causes a disparate impact” on one of the prohibited bases.5

As mentioned, an employer may defend against liability by demonstrating that the practice is “‘job related for the position in question and consistent with business necessity.’”6 Even if the employer meets that burden, however, a plaintiff may still succeed by showing that the employer refuses to adopt an available alternative employment practice that has less disparate impact and serves the employer’s legitimate needs.7

Proof is another issue. As the Commission is well aware, in disparate impact cases, there is no evidence of intent to discriminate. Thus, as discussed, in order to prove a prima facie case of disparate impact, the burden is on the complaining party to show a particular employment practice, which cannot be justified by business necessity, has a disparate impact on a protected class.8 The Supreme Court has explained9:

Plaintiff's burden in establishing a prima facie case goes beyond the need to show that there are statistical disparities in the employer's work force. The plaintiff must begin by identifying the specific employment practice that is challenged ... [Then], causation must be proved; that is, the plaintiff must offer statistical evidence of a kind and degree sufficient to show that the practice in question has caused the exclusion of applicants for jobs or promotions because of their membership in a protected group ... [Moreover], statistical disparities must be sufficiently substantial that they raise such an inference of causation.

The Commission has taken the position that evidence of adverse impact exists when the selection rate for any race, sex, or ethnic group is less than four-fifths (80 percent) of the rate for the group with the highest rate.10 In other words, the selection rate for Hispanic applicants, for example, would need to be less than 80% of the selection rate for white applicants to establish disparate impact.

With that in mind, applying the national averages supplied by the Bureau of Labor Statistics, the numbers do not meet the EEOC’s threshold for disparate impact. That is, the BLS unemployment statistics for Hispanics and other groups do not establish disparate impact under the EEOC’s rule. The statistics simply do not meet the four-fifths threshold. For example, according to BLS statistics, the most recent unemployment rate for Hispanics is 11.9% percent; for whites the rate is 8 percent. This means that 88.1% percent of Hispanics and 92 percent of whites are employed. The four-fifths rule applied to these numbers reveals that the employment rate for Hispanics exceeds 80 percent of the employment rate for whites. In fact, it is more than 90 percent (88.1 divided by 92) of the rate for whites. The same holds true for the national unemployment rates for African-Americans. The BLS unemployment national averages do not establish disparate impact for any of the identified groups.

Consider the following hypothetical example of a technology developer looking to fill 11 open positions. Let’s assume that the candidate pool consists of 100 individuals, 70 of whom are white and 30 of whom are Hispanic. Applying the current unemployment rates, let’s assume that 8 percent of the white applicants (a total of five) were unemployed and stricken from consideration for that reason. Let’s also assume that roughly 12 percent (a total of four) of the 30 potential Hispanic candidates were unemployed and stricken from consideration for that reason. The adverse impact ratio is 93 percent. Applying the four-fifths rule, there is no statistical evidence of disparate impact. Also, if you look at standard deviations, there is no statistical evidence of adverse impact because the proportion of Hispanics who received further consideration would be only 0.991 standard deviations below the proportion of whites who received further consideration. A result of less than two standard deviations is generally considered non-significant.

Furthermore, other factual evidence has to be considered. For example, were there other factors that contributed to applicants not applying for a certain job?

At end, Title VII requires a person making a claim of disparate impact to offer not just national or even regional unemployment averages, but specific statistical evidence of a kind and degree sufficient to show that the particular practice by the particular employer in question has caused the exclusion of applicants for jobs or promotions because of their membership in a protected group. The BLS unemployment statistics alone will not establish a claim of disparate impact.

I look forward to your questions. Thank you.


Footnotes

1 www.entrepreneur .com, Ask Entrepreneur – Human Resources (Nov. 16, 2007).

2 See Ricci v. DeStefano 129 S.Ct. 2658, 2672-73 (2009).

3 401 U.S. 424 (1971)

4 Pub.L. 102-166, § 105, 105 Stat. 1074.

5 Id.; see also Ricci, 129 S. Ct. 2658, 2672-2673 (2009).

6 Ricci, 129 S. Ct. at 2673.

7 42 U.S.C. §§ 2000e-2(k)(1)(A)(ii), (C); Ricci, 129 S. Ct. at 2673.

8 Watson v. Fort Worth Bank and Trust, 487 U.S. 977, 994-95 (1988).

9 Id.

10 See 29 C.F.R. 1607.4D.