$2.8 Million Settlement Shows Employment Testing to be Risky Business

On August 24, 2015, the U.S. Equal Employment Opportunity Commission (EEOC) reported that the Target Corporation has agreed to pay $2.8 million to resolve an EEOC charge that three employment assessments formerly used by Target disproportionately screened out applicants for exempt-level professional positions based on race and sex.  Specifically, EEOC alleges that the three tests were “not sufficiently job-related and consistent with business necessity” and thus violated Title VII of the Civil Rights Act of 1964.  Further, EEOC charged that a pre-employment medical examination performed by psychologists as part of Target’s hiring process also violated the Americans with Disabilities Act (ADA), which prohibits subjecting applicants to medical examinations prior to an offer of employment.  The EEOC’s charges of discrimination in this case are allegations, as the agency says Target also “committed record-keeping violations by failing to maintain records sufficient to assess the impact of its hiring procedures.”

The size of this settlement – based on allegations – is a wake-up call for employers.  Federal contractors, who are subject to oversight by both the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) and the EEOC, should pay particularly close attention.  We recommend that all employers use the utmost due diligence in deciding 1) whether to use employment/pre-employment testing at all, including whether the risks outweigh the benefits; 2) which assessments would have the least risk; and 3) how test results would be used and stored.  There is no shortage of information on the web, much of which appears to be assessment test marketing.  The bottom line is that any employment test administered to a job applicant/candidate must be task/skill-specific to the position being filled if it is to pass the scrutiny of Federal agencies that are continually on the lookout for even the possibility of disparate impact within employer employment procedures.

As you do your research, be aware that employment/pre-employment testing is not a new item of interest to Federal agencies.  The EEOC posted Employment Tests and Selection Procedures on its website years ago and last modified it on September 23, 2010.  This fact sheet is a straight-from-the-horse’s-mouth resource from one of the agencies that exercise oversight authority over U.S. employers.  The fact sheet includes a Background (of the entire testing issue); Types of Employment Tests and Selection Procedures; Governing EEO Laws; Recent EEOC Litigation and Settlements (as of September 2010); and Employer Best Practices for Testing and Selection.

As always, the Maly Consulting staff is available to answer questions about this important topic.

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U.S. Equal Employment Opportunity Commission

PRESS RELEASE
8-24-15

Target Corporation to Pay $2.8 Million to Resolve EEOC Discrimination Finding

Company’s Former Use of Pre-Hire Employment Assessments Discriminated Based on Race and Sex and Violated the ADA, Federal Agency Found

MINNEAPOLIS – Target Corporation, which is headquartered in Minneapolis, has agreed to pay $2.8 million to resolve a Commissioner’s charge of discrimination which was investigated in the Minneapolis Area Office of the U.S. Equal Employment Opportunity Commission (EEOC).  Based on the investigation, EEOC found reasonable cause to believe that three employment assessments formerly used by Target disproportionately screened out applicants for exempt-level professional positions based on race and sex.  The tests were not sufficiently job-related and consistent with business necessity, and thus violated Title VII of the Civil Rights Act of 1964, EEOC found.

In addition, EEOC found that one of the assessments Target formerly used in its hiring process also violated the Americans with Disabilities Act (ADA).  The EEOC determined that this particular assessment performed by psychologists on behalf of Target was a pre-employment medical examination.  Employers are prohibited by the ADA from subjecting applicants to medical examinations prior to an offer of employment.

EEOC found that Target also committed record-keeping violations by failing to maintain records sufficient to assess the impact of its hiring procedures.

EEOC’s investigation revealed that thousands were adversely affected when Target used these assessments in its hiring process.  The monetary settlement will be divided among these individuals as appropriate. Target will pay for a claims administrator to distribute the funds.

During EEOC’s investigation, Target discontinued the use of those tests that violated the law.  Target has agreed that it will not use these assessments again as part of its exempt-level employment selection procedures.  In addition, Target has made changes to its applicant tracking systems to ensure that the collection of data is sufficient to assess adverse impact.  Target will perform a predictive validity study for all exempt assessments currently in use and any new assessments Target expects to use.  Target agreed to monitor the assessments it uses for exempt-level professional positions for adverse impact based on race, ethnicity and gender.  Annually, Target will provide EEOC with a detailed summary of the studies and the adverse impact analysis conducted.

Target also agrees to retain an experienced outside consultant to provide a minimum of two hours of training at least once per year to all personnel responsible for the development and implementation of exempt assessments on the topics of record keeping, the ADA and pre-employment medical exams, and disparate impact in employment selection procedures.

“We applaud Target for taking corrective action to ensure the validity of their hiring practices,” said EEOC Chair Jenny R. Yang.  “This resolution demonstrates the benefits of working with EEOC and serves as a model for businesses committed to effective and lawful selection procedures.”

Julianne Bowman, director of EEOC’s Chicago’s District Office, said, “We are pleased that Target chose to work with us to reach this conciliation agreement and that through our joint efforts, we have been able to bring about real change at Target without resorting to protracted litigation.”

The Minneapolis Area Office is part of EEOC’s Chicago District.  The Chicago District is responsible for investigating charges of discrimination in Minnesota, Illinois, Wisconsin, Iowa and North and South Dakota.