US Supreme Court Increases Legal Risks in Reductions in Force?
Posted at www.aremploymentlaw.com by M. McClure on 06/30/2009
The press is unusually interested in an employment law case the US Supreme Court released on June 29, 2009, Ricci v. DeStefano, et al. While it's an important employment decision, the case received extra attention because Supreme Court nominee Sonia Sotomayor was part of the three-judge panel that was technically reversed by the Supreme Court. Linda Greenhouse of the New York Times does a good job of sorting out the political implications of the case, but aside from all the political heat generated by the case, can employers find any light?
In a nutshell, Ricci is a case of a promotion exam gone bad. The City of New Haven Connecticut instituted an exam to determine who among its firefighters should be promoted. The City went to great lengths to ensure that the test was fair to all applicants, but the test results clearly favored white applicants. Faced with the serious possibility of litigation from minority applicants, the City threw out the test results. For its trouble, the City was sued by the white firefighters who wanted the test results to stand. The Supreme Court ruled in favor of the white firefighters, finding that the City threw out the exam "because of race," and that the threat of litigation from the minority firefighters did not meet the new "strong basis in evidence" test that the court established with this case.
So what does this mean for employers? Daniel Schwartz of the Connecticut Employment Law Blog posted a thorough analysis of what the Ricci case means for employers. The most worrisome prediction that Schwartz sets forth is his warning that employers should now proceed with caution when conducting a disparate impact analysis for reductions in force. Employers routinely have legal counsel determine if a reduction in force will impact any protected group more than whole of the employee population. After this review, employers often adjust their selections to avoid legal risk. Schwartz suggests that this practice may now be discriminatory under Title VII, and I think he's right. Cue the scary music....
Bottom Line: An employer contemplating a reduction in force should work very carefully in establishing the selection criteria for the reduction because once the criteria has been applied, Ricci may not allow an employer to change the results because one protected group is significantly impacted. Using criteria that is based on objective performance measurements and clear business objectives is a good start. The reduction of entire departments or functions would also allow an employer to reduce headcount without tripping on to new legal risk.