The recent decision of the U.S. Court of Appeals for the Third Circuit in NAACP, et al v. North Hudson Regional Fire & Rescue, Nos. 10-3965 & 10-3983, 2011 WL 6144188 (3d Cir. Dec, 12, 2011), demonstrates how employers facing disparate impact claims must have a laser-like focus on statistical analysis of hiring patterns, along with the demonstrable business reasons implicated in hiring policies and decision-making.
In this case, the Third Circuit affirmed the findings of the U.S. District Court for the District of New Jersey that the North Hudson Regional Fire and Rescue Department’s (“North Hudson”) residency requirement for firefighter candidates caused a disparate impact by excluding African-Americans who would otherwise be qualified for available firefighter positions. The Third Circuit affirmed the District Court’s decision granting summary judgment for the NAACP and Plaintiff class and found that North Hudson had failed to present evidence to create any genuine dispute regarding this disparate impact or to adduce a valid business necessity for the residency requirement.
By way of background, the North Hudson fire department was formed in 1998, and it was comprised of firefighters from five New Jersey municipalities, including Guttenberg, North Bergen, Union City, Weehawken, and West New York. North Hudson maintained a requirement that all firefighter candidates must live within the five North Hudson towns to be eligible for hire, regardless of their written or physical test scores. The NAACP filed a class action to challenge this policy in 2007, along with three African-American firefighter candidates, alleging that it had a disparate impact on African-American applicants.
In February 2009, the District Court certified Plaintiffs’ class and preliminarily enjoined North Hudson from hiring any firefighters from its residents-only list. The District Court also permitted six Hispanic firefighters who would have otherwise been hired from that residents-only list to intervene in the NAACP’s action.
At the close of discovery, Plaintiffs sought summary judgment on their disparate impact claim and a permanent injunction against North Hudson prohibiting it from hiring from the residents-only list. Since disparate impact claims depend heavily on statistical proof of the discriminatory effects of the policy at issue, the District Court focused its analysis on the expert testimony presented by both sides. In the District Court, North Hudson had challenged the NAACP expert’s statistical analysis, arguing that it had failed to establish a causal relationship between the residency requirement and the statistical disparity in its African-American employment ratio. Alternatively, North Hudson claimed that even if there was a causal relationship, it could establish that there was a business necessity for its residents-only hiring policy for firefighters.
In granting Plaintiffs’ summary judgment motion, and permanently enjoining North Hudson from using its residents-only list, the District Court held that the North Hudson residency requirement had a disparate impact on African-American applicants. North Hudson appealed the District Court’s judgment to the Third Circuit, and the six Hispanic firefighter candidates who had intervened also joined in the appeal.
The Third Circuit affirmed the decision. The Third Circuit held that the report from the NAACP’s expert, Dr. Richard Wright, had established a prima facie case of disparate impact discrimination. Dr. Wright’s report had compared the proportion of African-Americans employed by North Hudson with the percentages of African-Americans employed in “full time protective service” positions (i) in the three neighboring counties and (ii) in the entire state of New Jersey. In the report, Dr. Wright identified disparities between the percentage of qualified African-Americans in the relevant labor market, and the percentage of African-Americans employed by North Hudson.
After finding Dr. Wright’s analysis credible, the Third Circuit then analyzed the finding of North Hudson’s expert, Dr. Bernard Siskin. The Third Circuit determined that Dr. Siskin’s expert report actually supported the NAACP’s case because it revealed that a significant number of qualified African-Americans would have been eligible and qualified for employment with North Hudson if the labor market were expanded to the Tri-County Area.
As a result, the Third Circuit found that Plaintiffs had provided ample evidence of not only a statistical disparity between the number of African-Americans in the labor market in New Jersey, but also a causal connection between its residents-only policy and that disparity. The Third Circuit emphasized that in more than a decade since North Hudson’s inception, it had hired only two African-American firefighters (0.62% of its firefighters), despite an African-American population of 3.4%.
As a result, the Third Circuit held that Plaintiffs had satisfied their prima facie case that by applying a facially neutral policy, it had caused a significantly discriminatory hiring pattern. The Third Circuit noted that Dr. Wright’s comparison of the proportion of African-Americans employed in Tri-County Area protective service positions (37.4%) with the proportion of African-Americans employed as firefighters by North Hudson (0.62%) showed a disparity that raised an inference of causation. It suggested that North Hudson should have employed sixty-five African-American firefighters, but in fact it employed only two.
Both the District Court and the Third Circuit were struck by the fact that although North Hudson had contested Dr. Wright’s definition of the relevant labor market as too broad because he had included the Tri-County Area, Dr. Siskin had offered no alternative analysis to explain why the market should be defined more narrowly. The Third Circuit further reasoned that Dr. Wright had bolstered his definition of the broader labor market by pointing out that applicants from the Tri-County area would not have significantly higher commuting times than the average for North Hudson residents. In addition, the Third Circuit rejected North Hudson’s argument that Dr. Wright’s analysis of full-time protective service employees included several positions which were not analogous to firefighters. The Third Circuit found that Dr. Wright’s definition of “protective service employee” fairly, and as nearly as possible, approximated the pool of qualified African-Americans.
In sum, Plaintiffs won this “battle of the experts” because both the District Court and the Third Circuit concluded that North Hudson’s expert not only failed to create a real dispute regarding Dr. Wright’s findings, but also actually bolstered the causal link between the residency requirement and the hiring disparity demonstrated in the NAACP’s expert’s calculations. Once the Third Circuit found that Plaintiffs had established a prima facie case of disparate impact, it made short shrift of North Hudson’s purported business necessity arguments and held that they too failed. The Third Circuit found that there was no business necessity for firefighters to be resident in the North Hudson towns; this requirement was not tied to minimum firefighter qualifications and less discriminatory alternatives were available.
The moral of this story is that employers who engage in a battle of the statistical experts to defend against a disparate impact hiring case, may win or lose based on how their expert defines the class of people from whom they draw applicants. In addition, if an employer has a facially neutral policy which is determined to have a disparate impact on one protected class, it must be prepared to advance significant business necessity arguments to survive close scrutiny.