By Gerald Maatman and Michael Fleischer

On May 13, 2011, in Lewis, et al. v. City of Chicago, Illinois, No. 07-2052 (7th Cir. May 13, 2011), the Seventh Circuit, on remand from the U.S. Supreme Court, issued an important decision applying the Supreme Court’s ruling that plaintiffs may challenge the application of an employment practice with an alleged disparate impact on protected employees even if they have not timely challenged the adoption of that practice. 

In Lewis, African-American applicants challenged the City of Chicago’s selection process for hiring new fire fighters.  In 1995, the City administered a written examination to over 26,000 applicants for positions in the Chicago Fire Department.  The applicants who scored 89 or above were deemed “well qualified,” and the applicants who scored between 65 and 88 were deemed “qualified.”  To fill their position openings, the City announced that they would randomly draw from those who were deemed “well qualified,” while those who were deemed “qualified” would remain on the list of potential selectees but were unlikely to be hired.  From March 1996 to November 2001, the City hired 11 groups of applicants, all from the “well qualified” group.  On March 31, 1997, the plaintiffs sued, alleging that the City’s practice of selecting only applicants who were “well qualified” caused a disparate impact on African-American applicants in violation of Title VII.

The district court found that the City’s reliance on the 1995 test constituted an on-going violation and did not make the plaintiffs’ claim untimely.  The district court noted the City’s concession that the test had a disparate impact on African-Americans, and rejected its business-necessity defense in awarding relief to the plaintiffs, which included the hiring of 132 class members and damages.  The Seventh Circuit later reversed, holding that the plaintiffs’ suit was untimely because it was filed more than 300 days after the City’s announcement of the selection policy, and that later hiring decisions were merely automatic consequences of the discriminatory act, not fresh violations.  The Supreme Court reversed that ruling in Lewis v. City of Chicago, 130 S.Ct. 2191 (2010), and remanded to the Seventh Circuit on the grounds that the adoption of an employment practice and its later application both give rise to an independent cause of action.

On remand, the Seventh Circuit applied the Supreme Court’s ruling that in disparate impact litigation, the 300 day statute of limitations starts anew whenever the employer uses a test (or other practice) to make hiring decisions.  The Seventh Circuit analyzed whether the City had preserved its contention that the charge of discrimination was untimely with respect to the first hiring class on March 16, 1996.  The Seventh Circuit found that since the district court had treated all of the hiring waves alike, the City did not need to make separate arguments for each hiring class, and that only plaintiffs’ charge on March 31, 1997 – for the first wave of hires – was untimely because it was filed after the 300 day statue of limitations.  The Seventh Circuit also found that the City was unable to prove that the plaintiffs failed to establish a disparate impact in any particular use of the list. 

As to the remainder of the plaintiffs’ claims, the Seventh Circuit first pointed to the City’s admission in district court that the City’s policy had a disparate impact on minority applicants.   The Seventh Circuit found that since the City had always selected from the “well qualified” group at random, each new batch of hires created the same disparate impact as the overall list.   Though the Seventh Circuit noted that there was a possibility that one of the 10 contested hiring classes may have produced a batch of hires in which minority applicants predominated, the City had failed to point this out, and the plaintiffs were entitled to the natural inference that all classes were alike and created the same disparate impact.

The Seventh Circuit suggested that if the City had hired in rank order, as many civil-service employers do, the outcome may have been different.  If the City had hired the top scores in the “well qualified” group first, followed by the next highest, it would have been essential for the plaintiffs to evaluate each use of the list separately.  In turn, the City may have had more success in arguing a business necessity defense premised on the fact that it was essential to hire those who scored 100 ahead of those who scored 85.  

In affirming the district court’s decision, except for the first batch of hires, the Seventh Circuit concluded that “in disparate impact litigation, the question is not whether a test or standard is lawful standing alone, but whether its application has been adequately justified.”  Lewis, at 8.

The Seventh Circuit’s application of the Supreme Court’s ruling provides insights for employers whose practices may be subject to class action disparate impact litigation.   First, employers may be liable for disparate impact violations stemming not just from the date of their policy, but for each action which results from their policy.  Second, employers should review their policies and procedures to ensure that they are not creating a disparate impact on members of a protected class.  Third, as suggested by the Seventh Circuit, employers would be wise to forego future selection processes which allow for a broad grouping of candidates by score; instead, employers who use selection tests should institute policies whereby their candidates are selected by their specific scores. In doing so, this will give employers the opportunity to later present specific business necessity evidence which may aid in reducing the size of a class.