By Gerald L. Maatman, Jr. and Howard M. Wexler

On February 4, 2014 the U.S. Court of Appeals for the Second Circuit dealt the New York City Board of Education (“BOE”) a resounding defeat when it affirmed a District Court decision that allowed a class action brought by public school teachers regarding a mandatory certification test and rejected several of NYC’s defenses to the allegations of discrimination. The ruling is significant to both private and public employers.

Case Background

In Gulino v. Board of Education, No. 13-1001 (2d Cir. Feb. 4, 2014), a group of teachers brought a class action alleging that the BOE engaged in unlawful discrimination under Title VII by requiring public school teachers to pass certain examinations to obtain/retain a teaching position. Id. at 2. On appeal the BOE asked the Second Circuit to overturn the District Court opinion, which held that: (1) the BOE could be subject to Title VII liability for its use of the at issue required test – the Liberal Arts and Sciences Test, or “LAST” – and that LAST violated Title VII’s disparate impact provisions as it was not properly validated; (2) that Wal-Mart v. Dukes, 131 S.Ct. 2541 (2011), did not compel full decertification of the class; and (3) that the BOE’s defense grounded in the Supreme Court’s decision in Ricci v. DeStefano, 557 U.S. 557 (2009), does not apply to disparate impact claims. Id. at 2-3.

The Second Circuit’s Decision

The Second Circuit affirmed the District Court’s decision in all respects. First, the Second Circuit rejected the BOE’s argument that its use of a facially neutral state licensing requirement – LAST – shielded it from liability under Title VII. Id. at 3. In addition to finding that the BOE forfeited this argument by abandoning it in a previous appeal brought before the Second Circuit, it held that employers cannot “justify [its] policy by reliance on what it contends are the requirements of state law” as “Title VII explicitly relieves employers from any duty to observe a state hiring provision ‘which purport to require or permit’ any discriminatory employment practice.” Id. at 4-5.

With respect to the BOE’s contention that the District Court should have decertified the entire class based Wal-Mart v. Dukes, the Second Circuit deemed this dispute as moot since on August 29, 2013, the District Court granted the BOE the relief it sought – a determination of whether plaintiffs’ claim satisfies the predominance and superiority requirements of Rule 23(b)(3) – which it held it did when a remedy-phase class was certified. Id. at 6.

Finally, the Second Circuit rejected the BOE’s argument based on the “Ricci” defense. Id. In Ricci, the Supreme Court determined that the City of New Haven discriminated against a group of white firefighters when it scrapped the results of a promotional exam that had a disproportionately adverse impact on minorities. In evaluating the City of New Haven’s decision to disregard the test results, the Supreme Court held that in a race-based action, is a permissible defense to a disparate treatment claim under Title VII only if the employer can demonstrate a strong basis in evidence that, had it not taken the action, it would have been liable under a disparate impact claim. The Second Circuit rejected the BOE’s claim that Ricci also provided a defense to employers facing claims of disparate impact. Id.

Implications For Employers

This decision highlights the continued wide-ranging impact (as we recently discussed here and will be covered in our upcoming Annual Workplace Class Action Report Webinar on February 11, 2014, which our readers can register for here) – that Wal-Mart v. Dukes has on virtually all class actions pending in federal and state courts throughout the country. Additionally, the Second Circuit’s holding as to the unavailability of Ricci as a defense to disparate impact claims, although not surprising, is an important reminder for employers as to the reach of this 2009 Supreme Court decision.