Testing the Tests

A year has passed since the $55 million settlement in the FedEx racial discrimination case that rocked the recruiting world.

The class-action lawsuit reminded recruiters that objective testing and neutral selection policies do not remove the risk of a discrimination charge if there is evidence of disparate impact—which occurs when a neutral policy or practice produces discriminatory results—on a protected group.

FedEx agreed to abandon the basic skills test that generated discriminatory patterns, but many employers still use similar tests and remain exposed to claims of disparate impact from minority group and female applicants, applicants age 40 or older and applicants with disabilities.

Employers should use the utmost caution when selecting a basic skills test.

“It had better be right,” says Chris Arbery, a partner specializing in employment law at Hunton & Williams in Atlanta. “Knowing the risks that are out there, employers should take test selection very seriously.”

The Equal Employment Opportunity Commission has increased its scrutiny of neutral practices that generate discriminatory results. In these disparate impact cases, the intent of the employer is irrelevant if a protected group can prove that a test or job requirement that is not justified leads to a disproportionate number of rejected applicants.

The employer must be able to demonstrate that the test or requirement is job-related and consistent with business necessity and that there is no effective alternative that would have a lesser impact on the protected group.

The EEOC’s Uniform Guidelines for Employment Selection Procedures establish the parameters for a screening process that avoids disparate impact, but employers and their recruiters must also understand workplace changes that may trigger disparate impact and the broad approach that many courts take regarding discrimination claims.

“Employers and recruiters must know the legal context and the general prohibitions,” Arbery says. “Understanding the legal context helps the employer avoid taking shortcuts and making assumptions.”

Outdated tests and job requirements and blanket diploma requirements open the door to legal challenges by unsuccessful candidates.

Changes in required skills
The key is to tailor the test to the job, but with ongoing automation and offshoring, the actual work performed in any job may change and those changes may not be reflected in the requirements posted for job candidates.

“New technology creates significant changes in job requirements,” Arbery notes. “As technology evolves, some skills may be required for a job that was not required before, and some skills that were required may no longer be necessary.”

To obtain the specific information needed to update the requirements for each job, human resources staffers can meet with the employees who do the job and the supervisor for the position.

“A better approach is to also obtain professional assistance from firms that specialize in testing and selection methods,” Arbery advises. “They stay up to date on legal requirements. This approach may be more costly in the short run, but it is less expensive in the long run.”

“The real goal is to use the right test to get results,” says Gregory Mersol, a partner in the employment and labor practice at Baker Hostetler in Cleveland. “The test must relate to the job. And although some employers have argued that reading skills are required for menial jobs because workers must understand safety precautions, unsuccessful candidates may argue that symbols and pictures are a valid alternative to written instructions.”

Mersol also reminds employers to use reputable testing vendors.

“There are many good firms out there,” he says. “Find out how much support they will provide if a test is challenged. Defending a test is expensive and the testing company should provide assistance from competent personnel.”

A different problem arises when the selection process for one job inadvertently eliminates candidates for another job without any grounding in business necessity.

“Look down the road, particularly when you have one pool that feeds into another,” Mersol says. “You may be testing in a way that has consequences in the future.”

For example, if the pool for supervisors comes from the pool for laborers, and laborers face a 100-pound lifting requirement, the employer may be eliminating women from the supervisors’ pool even though the lifting requirement does not apply to the supervisor’s job.

“Also, in service jobs, employees may need certain technical skills for one group of jobs, but the supervisors may not need those same skills,” Mersol notes. Programming skills requirements may be necessary for an entry-level position, but may not be necessary at the supervisory level. The impact of the requirements for one job may filter through to other jobs where the business necessity defense would not hold.

Mersol advises employers to review their tests at least every three years, and more often if there is new automation, a change in the product mix, a change in the customer base or a corporate restructuring, which may mean some job duties have been added or taken away. A requirement for a job may include typing so many words a minute, but the job or the technology might change so that fast typing is no longer a key skill.

If a test or requirement is a business necessity but results in disparate impact, the employer must demonstrate that there is no viable alternative for screening applicants.

“To explore alternatives, bring into the discussion a slice of the existing employees, their direct supervisors and HR and diversity personnel,” Mersol says. In many cases, employers can identify a different way to test for the required skills.

Diversity personnel may also be able to identify potential problems for unique groups, Mersol says. In addition, employers should ensure that tests are administered under consistent controlled conditions and the administrative procedures are correct.

“We’re going to see continued pressure on employers to lighten job requirements and testing,” Mersol says. Many employers evaluate their job requirements and testing procedures when they conduct their annual review of their affirmative action plan, but this may not be sufficient if positions change or adverse impact is discovered between reviews.

Diploma trap
Employers should also review their educational degree requirements.

“The high school diploma requirement is the granddaddy of all testing and selection issues,” Mersol notes.

The requirement is difficult to justify for any menial job. He notes that many cases arise from testing and degree requirements in areas where minorities may attend substandard schools.

Arbery suggests that employers periodically revisit high school diploma requirements. Many jobs do not require a high school diploma, but some employers prefer candidates with diplomas and use a blanket requirement. The presumption is that a graduate has general language and math skills, but those skills may not be necessary for the job. Any blanket requirement for a high school diploma is open to a challenge.

The annual reports employers must provide for the EEOC and, if they are federal contractors, the Office of Federal Contract Compliance Programs must include a snapshot of the workforce.

“Employers are doing a better job than they did 10 years ago, in part because it is so easy now to capture the data,” Arbery notes. “But no employer is immune to a legal challenge once this workforce information becomes available.”

The downside of reporting is that other people have access to the information, including lawyers who are looking for adverse impact.

“Make sure that the report is accurate and be aware that others have access to it,” Arbery advises.

According to Arbery, professional test validation is essential. Employers must also consider alternative tests or methods and monitor statistics on testing results to ensure that any disparate impact claim would not be successful. He advises employers to stay abreast of developments in testing and to tap expert consultants and counsel.

According to the EEOC’s guidelines, evidence of disparate impact appears when members of a protected group are selected at a rate of less than four-fifths of another group. Some employers still rely on the four-fifths rule to measure their own potential liability. However, Mersol advises employers to take a closer look at the rule.

“The OFCCP loves it, but it is analytically bankrupt and the courts will scrutinize its applicability,” Mersol warns. “The reality is that better tools are available.”

Courts are rejecting the rule as an appropriate measure of disparate impact particularly because it may not be a good measure for smaller groups. Courts want a more focused analysis, often based on multiple regression analysis.

One reason for heightened employer attention to objective testing is arising from cases where candidates are challenging the absence of a uniform method in selection and promotion. In the massive gender discrimination case now under way against Wal-Mart, the plaintiffs are challenging the absence of a uniform selection method across Wal-Mart’s 3,400 stores nationwide. In 2007, the 9th Circuit Court of Appeals in California allowed the case to move forward as a class action.

Particularly in sectors affected by ongoing labor shortages, eliminating unnecessary tests and skills and diploma requirements not only reduces legal exposure but also enlarges the potential pool of candidates.

“At the end of the day, most employers want a selection method that really works, not just one that avoids liability,” Arbery notes. “The key is to have both.”