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Discrimination class action doomed; no showing that components of selection process could not be separated

By Marjorie Johnson, J.D.

The Supreme Court of Iowa affirmed judgment against a class of African-American employees and applicants who brought Title VII and state-law claims asserting that Iowa’s merit-based hiring system for its executive branch had an unlawful disparate impact. The state’s high court agreed that the class failed to challenge any particular hiring or promotion practice or show that they could not isolate any particular practice in the job selection process in the executive branch for analysis. However, the court also seemingly paved the way for future litigants to argue for different disparate impact standards under state vs. federal law (Pippen v State of Iowa, July 18, 2014, Appel, B).

Merit system. The executive branch of the state of Iowa has 37 departments, each of which exercises its own hiring authority. The state’s merit-hiring system is overseen by the Iowa Department of Administrative Services (DAS), which provides rules for the departments to follow, collects statewide data, and monitors compliance. Applicants, as well as current employees applying for promotions, submit applications to DAS, either online or by hard copy. DAS maintains electronic data on every applicant in its database, the BrassRing.

Although all departments follow the general practices of the merit system, their practices in the hiring process vary. Each department maintains data relating to each applicant, which is stored in paper hiring files, unlike the DAS data system, which is electronic. Each paper hiring file contains a BrassRing registration number, so a correlation between a specific job posting and the applicant’s performance on the screening devices and/or interview records can be made.

Alleged disparate impact. The certified class alleged that the state and its executive branch departments engaged in unintentional discriminatory practices that resulted in a disproportionate number of African Americans being denied an equal opportunity for employment. They further alleged that they provided Iowa with a document entitled “Initial Evidentiary (IE) Report,” alleging systemic racial bias and a pattern of retaliation by top managers and officials of the state. Moreover, the state itself hired a consultant to study employment practices who produced a report known as the CPS Report. The IE Report and the CPS Report allegedly put Iowa on notice that its hiring practices imposed barriers to African Americans.

Battle of the experts. At trial, the class offered evidence relating to the state’s efforts to document its employment practices, expert testimony by a statistical expert, a labor economist, and psychology professors, as well as testimony from DAS representatives and various plaintiffs. Notably, the labor economist said that based on his statistical analysis, African Americans were treated more disadvantageously than Caucasians with respect to the referral of applications by DAS for interviews, selection for interviews by various agencies and departments, and ultimate hiring. He also suggested that once hired, African Americans had lower salaries within a given job title or were hired for job titles that paid less than others, and were treated differently in performance evaluations. Finally, regarding whether the elements in the hiring process could be separated and analyzed for their discriminatory impact, he testified, “[I]t’s not that it’s incapable of being separated, but I think there are very serious questions about whether it can reliably be separated, which is a different story. Mechanically, one could certainly separate it. And I know [this] because [the State’s] experts have done [it.]”

In response, the state offered the testimony of its own expert economist, who found the class expert’s reports to be incomplete and his conclusions not well-founded. He further suggested that there was no statistically significant evidence of system-wide racial discrimination in the merit system and that it was, in fact, possible for the class to break down the aggregate analysis into more discrete consideration of employment decisions by department or by other classifications.

Judgment against the class. Ruling against the class, the district court first noted that even assuming the components of the decision-making process were not capable of being separated, which is a requirement under the Civil Rights Act of 1991 if plaintiffs have not challenged a particular employment practice, the class failed to provide legal authority for concluding that “abdication of statutory or regulatory responsibilities and obligations and/or failure to follow its own policies” was a particular employment practice. Significantly, the court went on to rule that the class had not demonstrated the inseparability of the employment system components for analytical purposes. Alternatively, it noted that the class failed to prove the causation element of their claim.

“Separation for analysis.” After an exhaustive discussion on the history of disparate impact law, the Iowa Supreme Court ultimately rejected the assertion, on appeal, that the district court erred in finding that the class failed to show that the state’s job selection process was not capable of separation for analysis. Specifically, the class had argued that the state failed to properly record the use or lack of use of any specific employment practices applied by any of its 37 executive branch departments, which they said made a statistical analysis of any separate element impossible. They also argued that although DAS was responsible for the oversight of merit and affirmative action, the information it maintained did not contain data sufficient to allow analysis of specific employment practices and was not capable of separation for analysis, since one could not compare the treatment of one applicant to another in any objective way.

Consideration of underlying documents. Finding that the district court correctly resolved the issue against the class, the high court noted that its economist did not review the underlying documentary files and offered no testimony indicating specific employment practices could not be extracted from the underlying files for statistical analysis, notwithstanding the flaws in some of the files. On the other hand, the state’s expert had suggested the underlying documents were capable of separation for analysis and characterized the hiring files as “a gold mine that hasn’t been analyzed.” The bottom line was that while the class demonstrated that the recordkeeping was sometimes incomplete, it failed to show the negative — that employment practices could not be extracted from the underlying documents and analyzed in a statistically significant manner. Thus, judgment against the class on its Title VII claim was warranted.

Different standards for state law? The Iowa Supreme Court also affirmed judgment against the class on its ICRA claim, although it appeared to leave open the possibility for future plaintiffs to argue for different disparate impact standards under the state anti-bias law. After an extensive discussion regarding the relationship between federal and state anti-discrimination laws and the judicial branch’s ability to interpret them independently of each other, the high court found that the class failed to assert that the state law should be interpreted differently than the federal legislation. Had they done so, a different factual record might have been developed at trial. However, under the framework presented at trial, the class failed to show that the underlying documents did not provide sufficient information to allow employment practices to be separated for meaningful statistical analysis. Thus, judgment against the class on its ICRA claim was also affirmed.

Critical concurrence. In a separate concurrence joined by Justices Edward Mansfield and Bruce Zager, Justice Thomas Waterman criticized the majority opinion for “gratuitously” undermining the court’s long-standing practice of relying on federal decisions to interpret equivalent provisions of the ICRA, as well as its “cursory” analysis of the dispositive issue. After conducting a detailed analysis of the trial record, Justice Waterman concluded that substantial evidence supported the district court’s judgment against the class on the issue of separability.