Supreme Court Broadens Statue of Limitations for Disparate-Impact Cases Under Title VII

In a recent landmark decision significantly increasing risk and liability for employers with respect to policies and practices that may have a disparate-impact on minorities, the United States Supreme Court held that the time within which plaintiffs may file disparate-impact claims under Title VII of the Civil Rights Act of 1964, as amended (“Title VII”), is not limited to the first 300 days following the employer's adoption of the challenged policy. In Lewis v. City of Chicago, No. 08-974 (U.S. May 24, 2010), the Court was called upon to decide whether the limitations period for filing a charge of discrimination with the Equal Employment Opportunity Commission (“EEOC”) begins to run immediately after an employer originally adopts an employment practice that disparately impacts African Americans, or whether the limitations period begins each time the employer uses and relies on the discriminatory practice in question. In a unanimous decision, the Court held that the limitations period is effectively extended by the employer's subsequent use and reliance on the challenged policy. In other words, an actionable claim arises each time the employer invokes the offending policy. The practical effect of the Court's decision is that employers may potentially be subject to timely disparate-impact claims several years after a previously unchallenged, long-standing policy was implemented.

Background

The dispute in Lewis arose from City of Chicago's use of a “lottery” selection process to screen and hire applicants for firefighter positions with the Chicago Fire Department. The first step in the selection process was a written examination. In July 1995, the City administered a written examination to over 26,000 firefighter applicants. The exam was designed to measure an applicant's ability to comprehend written information at a reading level consistent with the materials used at the Chicago Fire Department's Academy and in the Department's written policies and procedures. Of the 26,000 applicants taking the exam, 11,649 (45% of test-takers) were white and 9,497 (37%) were African-American.

After scoring the exams, the City announced in January 1996 that it had decided to create a tiered eligibility list by dividing the applicants into three categories based on their written exam scores, “well qualified,” “qualified” and “not qualified.” Applicants who scored at least 89 out of 100 on the exam were designated as “well qualified.” The City announced that it would randomly select individuals from this group to proceed to the next stage of the hiring process, which included a physical abilities test, a medical exam and a background check. If the applicant was successful at this stage, he or she would be hired as a candidate firefighter. The “well qualified” pool was comprised of approximately 5.4 times more whites than African-Americans. Applicants who scored between 65 and 88 were designated as “qualified.” These individuals were informed that, based on the City's projected hiring needs and the large number of “well qualified” applicants, it was very unlikely that they would be called back to continue the hiring process. The City, however, would keep the “qualified” applicants' names on the eligibility list as the City hired firefighters over the next few years. In contrast to the “well qualified” pool, the “qualified” pool was comprised of only 1.3 times more whites than African-Americans. Finally, individuals who scored below 65 were advised that they had failed the written exam, and, therefore, they were “not qualified.” Accordingly, the City would no longer be considering them for open firefighter positions.

In May 1996, the City randomly selected its first class of “well qualified” applicants from the eligibility list to advance to the next stage of the hiring process. The City ultimately repeated this random selection process 10 more times over the next six years. As the City had previously announced, in each of the 11 rounds, it drew applicants from the “well qualified” pool. In the last round, however, the City exhausted the “well qualified” category, so it filled the remaining slots with “qualified” candidates. An overwhelming majority of the individuals that the City ultimately hired for the firefighter positions were white.

Discrimination Charge

In or about March 1997, six African-American applicants who scored in the “qualified” range on the written exam filed a charge of discrimination with the EEOC. The applicants alleged that the City's reliance on the 89-point cutoff for the exam produced an illegal disparate-impact on African-American applicants. In July 1998, the EEOC issued all six individuals right-to-sue letters, allowing the applicants to file a lawsuit in federal court. Two months later, in September 1998, the six applicants filed a class action lawsuit against the City alleging disparate-impact discrimination on the basis of race. The United States District Court for the Northern District of Illinois certified a class of more than 6,000 African-Americans who earned the “qualified” designation by scoring between 65 and 88 on the written exam, but were never offered a firefighter position. The examination scores of the named plaintiffs ranged from 70 to 87.

After the class was certified, the City moved for summary judgment on the ground that the applicants' claim was untimely because it did not comply with Title VII's 300-day charge filing requirement. Specifically, the City argued that the plaintiffs' charge of discrimination was filed more than 300 days after the City announced, in January 1996, that it would exclude applicants on the basis of their exam scores. Generally, Title VII imposes a relatively short statute of limitations for filing a charge of discrimination with the EEOC after an alleged act of discrimination has occurred ' the limitations period is either 180 or 300 days, depending on whether the discrimination occurs in a state with an administrative agency that has a work sharing agreement with the EEOC. For the individuals applying for the firefighter position in Illinois, the limitations period was 300 days. The District Court denied the City's motion for summary judgment after finding that the City's “ongoing reliance” on the results of the 1995 written examination constituted a “continuing violation” of Title VII.

After its summary judgment motion was denied, the City stipulated that the 89-point cutoff for the written exam had a “severe disparate-impact against African Americans.” However, the City argued that its use of the cutoff score was justified by “business necessity.” After an eight-day bench trial, the District Court rejected the City's “business necessity” defense and found for the plaintiffs. Among other things, the District Court found that the City failed to prove that the test results of the written examination could successfully be used to predict firefighter performance, i.e., that those who scored 89 or higher on the 1995 written exam were somehow more qualified for the firefighter position than those who scored between 65 and 88. The District Court ordered the City to hire 132 individuals randomly selected from the class (representative of the number of African-American firefighters that would have been hired, but for the City's discriminatory practices), and awarded backpay to the remaining class members.

The Appeal

The City appealed and the Seventh Circuit Court of Appeals reversed the District Court's ruling in June 2008. The Seventh Circuit agreed with the City's statute of limitations argument before the District Court. According to the Seventh Circuit, the plaintiffs' disparate-impact lawsuit was untimely because the earliest EEOC charge was filed more than 300 days after the City announced in January 1996 that it was sorting the written exam scores in the three categories. The Supreme Court granted the plaintiff's certiorari in September 2009.

Supreme Court Reverses Seventh Circuit

On May 24, 2009, a unanimous Supreme Court reversed the Seventh Circuit. The Court rejected the idea that the would-be firefighters' disparate-impact claims were untimely because they were not asserted within 300 days of the City's establishment of its admittedly discriminatory 89 point cutoff policy. To the contrary, the Court held that, under Title VII, the employer's subsequent “use” of a disparate employment practice is actionable, separate and apart from the point at which the discriminatory practice itself was originally adopted. Accordingly, the Court reasoned that a new violation of Title VII occurred each time the City “used” the discriminatory test results to make hiring decisions. In other words, each round of hiring by the City constituted a separate and distinct “use” of the previously adopted discriminatory policy that was actionable by filing a charge within 300 days after the round of hiring. Because the Lewis plaintiffs filed a charge within 300 days of the date that the City used the test results, their claims were timely.

Writing for the Court, Justice Scalia acknowledged that, as a result of the Court's decision, employers may face new disparate-impact suits for practices they have used regularly for years. The Court noted, however, that restricting disparate-impact claims to an employer's adoption of a policy would produce “puzzling results” and practical problems for employees and employers alike. For example, employers that have long-standing, disparate policies would be permitted to “continue using the practice indefinitely, with impunity, despite ongoing disparate impact.” This, according to the Court, would leave many affected employees and applicants “out in the cold,” unable to obtain their day in court. Furthermore, the Court reasoned that not allowing employees or applicants to challenge an employer's subsequent use of a disparate policy “may induce plaintiffs aware of the danger of delay to file charges upon the announcement of a ' practice, before they have any basis for believing it will produce a disparate impact.” Nonetheless, the Court denied that it was adopting an approach that simply “produced the least mischief.” Instead, the Court maintained that it was giving effect to Congress' intent for “claims to be brought against an employer who uses a practice that causes disparate impact ' whether or not he has employed the same practice in the past.”

Conclusion

Under the Court's broad interpretation in Lewis, employers are at risk and face significant liability for policies or practices which have a disparate-impact on minorities. Employers can no longer use Title VII's statute of limitations as a shield to prevent claims if they continue to use and rely upon offending policies and practices. This makes it imperative for employers to regularly review their employment policies and practices and evaluate the impact these policies and practices have on protected characteristics, such as race. If an employer identifies a long-standing practice or policy that disparately impacts employees in a protected class, then the employer should evaluate the company's “business necessity” for the policy or practice. If the employer is unable to identify a “business necessity” for the policy or practice, the employer should consider appropriately modifying the policy or practice to eliminate the undesired disparate-impact. As the Lewis case demonstrates, ignoring policies or practices that have a disparate-impact can result in severe negative financial and administrative consequences for an employer.

It is important to note that the Court's broad interpretation of the limitations period for disparate-impact claims does not change the analysis for disparate-treatment claims. The Court made it clear that its analysis was limited to disparate-impact claims, which do not require a plaintiff to establish discriminatory intent. For claims where a showing of discriminatory intent is required, such as disparate-treatment claims, the plaintiff must still demonstrate a deliberate discriminatory act by the employer within the limitations period. Accordingly, unlike with disparate-impact claims, plaintiffs may not be able to use a disparate-treatment theory to challenge what the Court described as the “present effects of past discrimination.” In fact, the Lewis court expressly recognized that the effect of its broad interpretation of the limitations period for disparate-impact claims will be that “some claims that would be doomed under one theory will survive under the other ' .”

Finally, although the Court interpreted Title VII to allow plaintiffs to challenge offending policies that were adopted years ago, the Court did not expand the amount of damages that plaintiffs may potentially collect under Title VII. The Court did not specifically address damages, but instead remanded any remaining damages issues back to the Seventh Circuit. Under general principles, however, back-pay awards are limited to two years under Title VII. The Court's holding in Lewis did not expressly or implicitly modify that two-year limit.

Anthony B. Haller is a partner and the Employment, Benefits and Labor Practice Group Leader at Blank Rome LLP in Philadelphia. His practice covers all aspects of labor and employment law. Mr. Haller can be reached at 215-569-5690 or [email protected]. Terry D. Johnson is an associate in the Employment, Benefits and Labor group at the firm's Princeton, NJ, office. He can be reached at 609-750-2658 or [email protected].

In a recent landmark decision significantly increasing risk and liability for employers with respect to policies and practices that may have a disparate-impact on minorities, the United States Supreme Court held that the time within which plaintiffs may file disparate-impact claims under Title VII of the Civil Rights Act of 1964, as amended (“Title VII”), is not limited to the first 300 days following the employer's adoption of the challenged policy. In Lewis v. City of Chicago, No. 08-974 (U.S. May 24, 2010), the Court was called upon to decide whether the limitations period for filing a charge of discrimination with the Equal Employment Opportunity Commission (“EEOC”) begins to run immediately after an employer originally adopts an employment practice that disparately impacts African Americans, or whether the limitations period begins each time the employer uses and relies on the discriminatory practice in question. In a unanimous decision, the Court held that the limitations period is effectively extended by the employer's subsequent use and reliance on the challenged policy. In other words, an actionable claim arises each time the employer invokes the offending policy. The practical effect of the Court's decision is that employers may potentially be subject to timely disparate-impact claims several years after a previously unchallenged, long-standing policy was implemented.

Background

The dispute in Lewis arose from City of Chicago's use of a “lottery” selection process to screen and hire applicants for firefighter positions with the Chicago Fire Department. The first step in the selection process was a written examination. In July 1995, the City administered a written examination to over 26,000 firefighter applicants. The exam was designed to measure an applicant's ability to comprehend written information at a reading level consistent with the materials used at the Chicago Fire Department's Academy and in the Department's written policies and procedures. Of the 26,000 applicants taking the exam, 11,649 (45% of test-takers) were white and 9,497 (37%) were African-American.

After scoring the exams, the City announced in January 1996 that it had decided to create a tiered eligibility list by dividing the applicants into three categories based on their written exam scores, “well qualified,” “qualified” and “not qualified.” Applicants who scored at least 89 out of 100 on the exam were designated as “well qualified.” The City announced that it would randomly select individuals from this group to proceed to the next stage of the hiring process, which included a physical abilities test, a medical exam and a background check. If the applicant was successful at this stage, he or she would be hired as a candidate firefighter. The “well qualified” pool was comprised of approximately 5.4 times more whites than African-Americans. Applicants who scored between 65 and 88 were designated as “qualified.” These individuals were informed that, based on the City's projected hiring needs and the large number of “well qualified” applicants, it was very unlikely that they would be called back to continue the hiring process. The City, however, would keep the “qualified” applicants' names on the eligibility list as the City hired firefighters over the next few years. In contrast to the “well qualified” pool, the “qualified” pool was comprised of only 1.3 times more whites than African-Americans. Finally, individuals who scored below 65 were advised that they had failed the written exam, and, therefore, they were “not qualified.” Accordingly, the City would no longer be considering them for open firefighter positions.

In May 1996, the City randomly selected its first class of “well qualified” applicants from the eligibility list to advance to the next stage of the hiring process. The City ultimately repeated this random selection process 10 more times over the next six years. As the City had previously announced, in each of the 11 rounds, it drew applicants from the “well qualified” pool. In the last round, however, the City exhausted the “well qualified” category, so it filled the remaining slots with “qualified” candidates. An overwhelming majority of the individuals that the City ultimately hired for the firefighter positions were white.

Discrimination Charge

In or about March 1997, six African-American applicants who scored in the “qualified” range on the written exam filed a charge of discrimination with the EEOC. The applicants alleged that the City's reliance on the 89-point cutoff for the exam produced an illegal disparate-impact on African-American applicants. In July 1998, the EEOC issued all six individuals right-to-sue letters, allowing the applicants to file a lawsuit in federal court. Two months later, in September 1998, the six applicants filed a class action lawsuit against the City alleging disparate-impact discrimination on the basis of race. The United States District Court for the Northern District of Illinois certified a class of more than 6,000 African-Americans who earned the “qualified” designation by scoring between 65 and 88 on the written exam, but were never offered a firefighter position. The examination scores of the named plaintiffs ranged from 70 to 87.

After the class was certified, the City moved for summary judgment on the ground that the applicants' claim was untimely because it did not comply with Title VII's 300-day charge filing requirement. Specifically, the City argued that the plaintiffs' charge of discrimination was filed more than 300 days after the City announced, in January 1996, that it would exclude applicants on the basis of their exam scores. Generally, Title VII imposes a relatively short statute of limitations for filing a charge of discrimination with the EEOC after an alleged act of discrimination has occurred ' the limitations period is either 180 or 300 days, depending on whether the discrimination occurs in a state with an administrative agency that has a work sharing agreement with the EEOC. For the individuals applying for the firefighter position in Illinois, the limitations period was 300 days. The District Court denied the City's motion for summary judgment after finding that the City's “ongoing reliance” on the results of the 1995 written examination constituted a “continuing violation” of Title VII.

After its summary judgment motion was denied, the City stipulated that the 89-point cutoff for the written exam had a “severe disparate-impact against African Americans.” However, the City argued that its use of the cutoff score was justified by “business necessity.” After an eight-day bench trial, the District Court rejected the City's “business necessity” defense and found for the plaintiffs. Among other things, the District Court found that the City failed to prove that the test results of the written examination could successfully be used to predict firefighter performance, i.e., that those who scored 89 or higher on the 1995 written exam were somehow more qualified for the firefighter position than those who scored between 65 and 88. The District Court ordered the City to hire 132 individuals randomly selected from the class (representative of the number of African-American firefighters that would have been hired, but for the City's discriminatory practices), and awarded backpay to the remaining class members.

The Appeal

The City appealed and the Seventh Circuit Court of Appeals reversed the District Court's ruling in June 2008. The Seventh Circuit agreed with the City's statute of limitations argument before the District Court. According to the Seventh Circuit, the plaintiffs' disparate-impact lawsuit was untimely because the earliest EEOC charge was filed more than 300 days after the City announced in January 1996 that it was sorting the written exam scores in the three categories. The Supreme Court granted the plaintiff's certiorari in September 2009.

Supreme Court Reverses Seventh Circuit

On May 24, 2009, a unanimous Supreme Court reversed the Seventh Circuit. The Court rejected the idea that the would-be firefighters' disparate-impact claims were untimely because they were not asserted within 300 days of the City's establishment of its admittedly discriminatory 89 point cutoff policy. To the contrary, the Court held that, under Title VII, the employer's subsequent “use” of a disparate employment practice is actionable, separate and apart from the point at which the discriminatory practice itself was originally adopted. Accordingly, the Court reasoned that a new violation of Title VII occurred each time the City “used” the discriminatory test results to make hiring decisions. In other words, each round of hiring by the City constituted a separate and distinct “use” of the previously adopted discriminatory policy that was actionable by filing a charge within 300 days after the round of hiring. Because the Lewis plaintiffs filed a charge within 300 days of the date that the City used the test results, their claims were timely.

Writing for the Court, Justice Scalia acknowledged that, as a result of the Court's decision, employers may face new disparate-impact suits for practices they have used regularly for years. The Court noted, however, that restricting disparate-impact claims to an employer's adoption of a policy would produce “puzzling results” and practical problems for employees and employers alike. For example, employers that have long-standing, disparate policies would be permitted to “continue using the practice indefinitely, with impunity, despite ongoing disparate impact.” This, according to the Court, would leave many affected employees and applicants “out in the cold,” unable to obtain their day in court. Furthermore, the Court reasoned that not allowing employees or applicants to challenge an employer's subsequent use of a disparate policy “may induce plaintiffs aware of the danger of delay to file charges upon the announcement of a ' practice, before they have any basis for believing it will produce a disparate impact.” Nonetheless, the Court denied that it was adopting an approach that simply “produced the least mischief.” Instead, the Court maintained that it was giving effect to Congress' intent for “claims to be brought against an employer who uses a practice that causes disparate impact ' whether or not he has employed the same practice in the past.”

Conclusion

Under the Court's broad interpretation in Lewis, employers are at risk and face significant liability for policies or practices which have a disparate-impact on minorities. Employers can no longer use Title VII's statute of limitations as a shield to prevent claims if they continue to use and rely upon offending policies and practices. This makes it imperative for employers to regularly review their employment policies and practices and evaluate the impact these policies and practices have on protected characteristics, such as race. If an employer identifies a long-standing practice or policy that disparately impacts employees in a protected class, then the employer should evaluate the company's “business necessity” for the policy or practice. If the employer is unable to identify a “business necessity” for the policy or practice, the employer should consider appropriately modifying the policy or practice to eliminate the undesired disparate-impact. As the Lewis case demonstrates, ignoring policies or practices that have a disparate-impact can result in severe negative financial and administrative consequences for an employer.

It is important to note that the Court's broad interpretation of the limitations period for disparate-impact claims does not change the analysis for disparate-treatment claims. The Court made it clear that its analysis was limited to disparate-impact claims, which do not require a plaintiff to establish discriminatory intent. For claims where a showing of discriminatory intent is required, such as disparate-treatment claims, the plaintiff must still demonstrate a deliberate discriminatory act by the employer within the limitations period. Accordingly, unlike with disparate-impact claims, plaintiffs may not be able to use a disparate-treatment theory to challenge what the Court described as the “present effects of past discrimination.” In fact, the Lewis court expressly recognized that the effect of its broad interpretation of the limitations period for disparate-impact claims will be that “some claims that would be doomed under one theory will survive under the other ' .”

Finally, although the Court interpreted Title VII to allow plaintiffs to challenge offending policies that were adopted years ago, the Court did not expand the amount of damages that plaintiffs may potentially collect under Title VII. The Court did not specifically address damages, but instead remanded any remaining damages issues back to the Seventh Circuit. Under general principles, however, back-pay awards are limited to two years under Title VII. The Court's holding in Lewis did not expressly or implicitly modify that two-year limit.

Anthony B. Haller is a partner and the Employment, Benefits and Labor Practice Group Leader at Blank Rome LLP in Philadelphia. His practice covers all aspects of labor and employment law. Mr. Haller can be reached at 215-569-5690 or [email protected]. Terry D. Johnson is an associate in the Employment, Benefits and Labor group at the firm's Princeton, NJ, office. He can be reached at 609-750-2658 or [email protected].