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SYSTEMIC DISCRIMINATIONREVOLUTION

May 22, 2008Presented by

Matt Halpern, Esq.Jackson Lewis LLP

58 South Service Road, Suite 410Melville, New York 11747

631- 247- [email protected]

www.jacksonlewis.comAssociation of Corporate Counsel

www.acc.com

THE MATERIALS CONTAINED IN THIS PRESENTATION WERE PREPARED BY THE LAW FIRM OF JACKSON LEWIS LLP FOR THE PARTICIPANTS’ OWN REFERENCE IN CONNECTION WITH EDUCATION SEMINARS PRESENTED BY JACKSON LEWIS LLP. ATTENDEES SHOULD CONSULT WITH COUNSEL BEFORE TAKING ANY ACTIONS AND SHOULD NOT CONSIDER THESE MATERIALS OR DISCUSSIONS THEREABOUT TO BE LEGAL OR OTHER ADVICE.

© Jackson Lewis LLP 2008

Introductory Statement


About the Firm

Jackson Lewis LLP is dedicated to representing managementexclusively in workplace law and related litigation. With 34 officesnationwide, the firm has a national perspective and sensitivity to thenuances of regional business environments.

Guided by the principle that a positive work environment results inenhanced morale and increased productivity, the firm devotes asignificant portion of its practice to management education andpreventive programs. This approach helps limit exposure togrievances, charges and lawsuits.

www.jacksonlewis.com



About the Affirmative Action Practice Group

We have unparalleled experience preparing AAPs and defending thembefore the OFCCP in all industries and areas of the country. Ourdiverse team of 45 attorneys, paralegals, and support staff preparesapproximately 1,500 AAPs a year.

Since 2002, we have defended more than 250 OFCCP audits andEEOC systemic discrimination investigations, including successfuldefense of Corporate Management (“Glass Ceiling”) ComplianceEvaluations. As a law firm, we offer more than consulting services,we offer strategic thinking and sophisticated legal representation.



About the Presenter: Matt HalpernMatt Halpern is a nationally recognized authority on federalaffirmative action policy and related issues. Matt is known for theuseful and practical advice he renders to employers on all mattersrelating to the workplace. He is a senior partner at Jackson Lewisand heads the firm's nationwide affirmative action practice group.Matt has defended hundreds of employers in affirmative action,wage/hour and FMLA audits and investigations over his twenty oneyears at Jackson Lewis. Mr. Halpern is the Treasurer and a memberof the Northeast Region Corporate Industry Liaison Group, anindustry association of federal contractors with corporateheadquarters in the Metropolitan New York tri-state area.





He is the co-author of Affirmative Action Compliance: TheReinvented OFCCP, published in the ACC Docket 22, No. 3 (March2004):24-44 and author of the Association of Corporate Counsel(ACC) on-line “InfoPak,” What Every General Counsel Needs ToKnow About Affirmative Action Compliance. He also was the co-presenter on two audio web casts presented by ACC’s Employment &Labor Law Committee and Jackson Lewis, LLP: What the OFCCP’SNew Internet Applicant Rule Will Mean For Your Company(November 30, 2005) and The OFCCP's New Take on SystemicCompensation Discrimination and Voluntary Self Evaluation (August16, 2006).

About the Presenter: Matt Halpern (cont.)

Increasing Focus on Systemic DiscriminationThe EEOC and OFCCP are the primary equal employment opportunity

enforcement agencies

In the beginning …

The EEOC traditionally responded to individual claims

The OFCCP traditionally focused on technical or record-keeping violations and where there were allegations of discrimination, the Agency relied on the contents and review of cohort by cohort comparisons

The EEOC and OFCCP are increasingly becoming robust enforcement agencies focusing on “systemic discrimination”

Why the change?© Jackson Lewis LLP 2008


OFCCP Focus on Systemic Discrimination

Until a few years ago, the OFCCP was an affirmative action complianceagency generally focused on technical paperwork issues related togood faith efforts, listing job openings with state employmentservices, proper postings on employee bulletin boards, etc.

The OFCCP’s focus today is on finding and eradicating systemicdiscrimination, focusing almost exclusively on the employers’ applicant andhire processes



OFCCP Focus on Systemic Discrimination

The OFCCP has focused on systemic discrimination since 2002,seeking to identify and eradicate broad patterns of discrimination inemployee selection processes and pay practices

The OFCCP will usually target applicant and hire processes

The OFCCP is no longer focused on technical issues or arguing overwhether the proper “cohorts” were considered

The OFCCP wants to find and eradicate “systemic” problems

The OFCCP is seeking statistically significant indicators, or “RedFlags.” These Red Flags arise most often in applicant and hire data



Results of OFCCP’s Focus on Systemic DiscriminationDuring the past few years, the OFCCP has used this changed enforcement approach

to bring back increasingly larger monetary settlements…

2003 - $26,220,3562004 - $34,479,2942005 - $45,156,4622006 - $51,525,2352007 - $51,780,950

…and obtain monetary settlements for more employees/applicants

2004 - 9,6152005 - 14,7612006 - 15,2732007 - 22,251

For the dollar totals and employee/applicant numbers above, the vast majorityresulted from settlements of applicant to hire adverse impact



EEOC Focus on Systemic DiscriminationIn the past, the EEOC prosecuted a few cases of systemic discriminationwith impressive results:

Wal-Mart: On December 17, 2001, Wal-Mart settled EEOC charges ofADA violations for $6 million

Morgan Stanley: On July 12, 2004, Morgan Stanley agreed to settle EEOCcharges of sex discrimination for $54 million

Abercrombie & Fitch: In the fall of 2004, Abercrombie & Fitch settledEEOC charges of national origin and sex discrimination for $50 million

However, the EEOC conducted these investigations in reaction to (the rare)claims of systemic discrimination by the charging party. They were not theresult of the EEOC independently seeking out systemic discrimination.



EEOC Focus on Systemic DiscriminationThen, in 2005, the EEOC established a “SystemicDiscrimination Task Force” to substantially enhance theEEOC’s focus on class-action type discrimination

The Task Force reviewed the EEOC’s systemic discriminationtrack record and found:

The EEOC did not effectively use its access to employment data(including applicant data) to identify systemic discrimination

The EEOC lacked the appropriate technology to support systemiclitigation

The EEOC was not appropriately staffing its systemic discriminationcases with expert statisticians, testing specialists and attorneys



EEOC Focus on Systemic DiscriminationOn April 4, 2006, recognizing that the Commission could not combatdiscrimination without a strong nationwide systemic program, theEEOC unanimously voted to shift the EEOC’s emphasis to systemicdiscrimination

The Commission is now more focused on investigating neutralpolicies and practices having a “disparate impact” on protectedgroups (in addition to its traditional focus on “disparate treatment”)

As a result, the EEOC has developed and implemented systemicdiscrimination plans for each of the 15 district offices

This enhanced focus on “disparate impact” has broughtemployers’ applicant and hiring processes directly into theEEOC’s sights



EEOC’s Increased Focus on Systemic Discrimination:The Results are In, and Growing


EEOC “Systemic” Claims FY 2006 FY 2007

Commissioner charges signed 11 24

Suit filings with 20+ victims 11 14

Suit resolutions with 20+ victims 7 20

Suit resolutions with 100+ victims 0 4


Practical Implications of the EEOC’s New FocusAs part of its Systemic Discrimination Initiative, the EEOCincreasingly has focused upon employers’ applicant and hiringprocesses

“Garden-variety” individual failure-to-hire EEOC charges often growinto EEOC systemic investigations of employers’ overall applicantand hiring process. Oftentimes, the employer’s response to theCharge is the “trigger” for the systemic discrimination investigation

We treated the Charging Party just like all other applicants”defense can open the door to a systemic focus



The EEOC’s “Hot Selection Criteria”According to its Employment Tests and Selection Procedures FactSheet, the EEOC believes certain hiring criteria may have a negativeimpact on racial/ethnic minorities or other protected groupsincluding:

Pre-employment testsCredit ReportsDrug ScreensArrest and conviction records

Current/pending prosecutionsActive warrants



Traps for the Unwary: You’re on the EEOC’sSystemic Discrimination Radar If…

In its Request for Information (RFI), it seeks informationconcerning:

The applicability of policies or selection criteria to sites beyond the onereferenced in the ChargeApplicant trend data involving other applicants, other positions or otherlocations beyond that specified in the Charge (especially in an ExcelSpreadsheet on a CD-ROM)Pre-employment test “validation studies”How the selection criterion is relevant to job performanceThird-party background check or testing vendors



The EEOC and OFCCP “Muscle Up”To increase the tools they have to investigate complex systemicdiscrimination claims, the EEOC and OFCCP have retained Ph.D.-levelstatisticians and testing experts

These experts now work closely with EEOC and OFCCP attorneys todevelop a systemic discrimination investigation plan early in the process if theagency believes there may be potential systemic issues in the applicantprocess

Employers must be on the lookout for signs the enforcement agencystatisticians and/or testing experts are involved in the case. If so, the agencyis gearing up for class-action type litigation

In fact, the EEOC has been utilizing the OFCCP’s testing expert



Applicant Tracking and Systemic Discrimination:The Perfect Storm

For many years, employers (government contractors in particular) have hadthe obligation to maintain race and gender data of employment applicants

However, the EEOC and OFCCP historically did not pay much attention toapplicant tracking data

During the past few years, all that has changed

Now, the EEOC and OFCCP are intently focusing on employment trends(hiring, promotions, terminations and compensation equality) and oftenbringing back huge financial settlements from those investigations

So why the big change?



Applicant Tracking and Systemic Discrimination As a result of the EEOC and OFCCP’s focus on systemic

discrimination, the EEOC and OFCCP are intently focusing on failureto hire trends within employer data

This data allows the EEOC and OFCCP to demonstrate systemicdiscrimination within employer hiring, promotion, termination orcompensation employment practices; oftentimes resulting in hugefinancial settlements from these investigations

Although the OFCCP also has focused on compensation over thepast few years, pay systems are so complex that it is difficult for theOFCCP to obtain large financial settlements. In contrast, applicantand hire data is straightforward, lending itself to systemicdiscrimination findings



Applicant Tracking and Systemic DiscriminationMeanwhile, several factors are making applicant tracking both abenefit and a curse for employers

Technology allows employers to track applicant data

Employers are increasing their use of pre-employment tests and trackingthe results of tests

Employers are increasing their use of third-party vendors to administerdrug screens, criminal background checks, etc., whose results are alsotracked electronically

As a result, the EEOC and OFCCP can request any or all of thiselectronic data in systemic discrimination investigations



Applicant Tracking and Systemic Discrimination The Internet and other electronic technologies have radically

transformed the applicant tracking landscape

Historically, employers tracked applicant data by hand or inputted thedata into an electronic spreadsheet

The data was minimalistic and did not include the “fall out stage” or whyeach applicant was not selected

Now, employers are increasing the use of on-line automated applicanttracking systems and internal applicant databases to:

(1) store huge amounts of detailed data and(2) easily retrieve and analyze the data



Applicant Tracking and Systemic DiscriminationResults of improved data tracking abilities

Employers can quickly and easily analyze large amounts of applicant datato determine who is most “qualified”

The EEOC, OFCCP and private plaintiffs’ attorneys can demand thesame detailed data and easily analyze it to determine if minority orfemale applicants are disproportionately rejected

Unsuspecting employers often design these sophisticated electronicapplicant tracking processes without regard to the consequences from alegal perspective (more to come on that below)



Applicant Tracking and Systemic DiscriminationEmployers have dramatically increased the use of pre-employmenttests and third-party vendors to administer the tests, drug-screens,criminal background checks, etc.

Employers have gravitated to pre-employment tests because they assumethey are a neutral, objective selection device

Pre-employment tests can often be a trap for the unwary. Oftentimes, itis often difficult to show that these generic tests are predictive ofsuccess for the employer’s specific job

Third-party vendors administer stages of the applicant process (such ascriminal background checks) and generally maintain electronic data

Unfortunately, these reports can be used against the employer by theEEOC, OFCCP and private plaintiffs’ counsel



Preventive Approaches to Systemic DiscriminationGiven the EEOC and OFCCP’s increased focus on systemicdiscrimination, employers should proactively analyze theiremployment practices, including:

Strategic use of the definition of “Applicant” under the newInternet Applicant Rule

Validity and defensibility of pre-employment tests, structuredinterviews and other selection tools

Selection stages in which applicants “fell out” and the specificreason(s) for falling out of the process

“Cloaking” these analyses under attorney-client privilege



Preventive Approaches to Systemic Discrimination:“Applicants” Under the New Internet Applicant Rule

Employers should strategically use the definition of “Applicant” underthe new Internet Applicant Rule to limit the number of potentialapplicants that may have been subjected to systemic discrimination

By reducing the number of “applicants” under the new InternetApplicant Rule, employers may reduce their potential liability underEEOC and OFCCP systemic discrimination investigations



Preventive Approaches to Systemic Discrimination:Test Your Tests

If a test is causing adverse impact, the OFCCP will scrutinize it evenif you present a validation study

At the very least, compare with the Uniform Guidelines on EmployeeSelection Procedures requirements

Even if you can defend the test and the validation study, you stillmust consider whether an equally effective alternative to the testexists

Keep abreast of changes in job requirements and update testspecifications or selection procedures accordingly



Preventive Approaches to Systemic Discrimination:Selection Stage Adverse Impact Analyses

Perform a selection stage adverse impact analysis to identify potentialadverse impact within stages of the hiring process, including:

HR screen

Interview

Pre-employment test

Drug screen

Background check

Credit check



Preventive Approaches to Systemic Discrimination:Privileged Analyses

Perform these preventive approaches to systemic discriminationunder the “cloak” of the attorney-client privilege

Reduce the likelihood that these analyses will be used against you in anEEOC or OFCCP investigation (or in a traditional lawsuit)

Proactively identify potential systemic discrimination before the EEOC orOFCCP begins an investigation. Use these results to reduce systemicdiscrimination or, at the very least, put the employer’s best foot forwardin an EEOC or OFCCP investigation (or lawsuit)



Thanks for attending!

If you wish to discuss the OFCCP and EEOC systemic discriminationclaims or any other area of EEO compliance, please contact:

Matt Halpern, Esq.Jackson Lewis LLP

58 South Service Road, Suite 410Melville, New York 11747

[email protected](631) 247-4603


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