Chapter 3 Discrimination

Because this chapter is written for human resources professionals, we pose the following question: How much does HR really need to know about employment discrimination law? We assume that HR knows the "First Commandment": Thou shalt not treat employees differently on the basis of legally protected characteristics. In addition to this knowledge, HR almost always has access to legal counsel when administrative charges (e.g., claims brought before the Equal Employment Opportunity Commission (EEOC) or a state or local agency) or lawsuits come through the company's door. Isn't this enough?

The premise of this chapter is that the answer to the foregoing question is "No, it isn't enough." In today's challenging economy, unnecessary calls from HR to legal counsel bring a financial cost that those responsible for the company's financial health undoubtedly prefer to avoid. Equally true, however, is the risk that the failure to act when such a call is necessary might have adverse consequences (for example, a charge or lawsuit down the road that might otherwise have been avoided).

The challenges to HR, then, are manifold. How does HR recognize latent dangers when a business manager calls to bring a situation to HR's attention? What steps can HR take on its own to educate company management? How does HR identify high-risk situations? How likely is a bad outcome absent aggressive HR intervention? Does HR have sufficient internal authority to persuade business managers to take the steps that HR believes are necessary? Having done an initial assessment, when can HR appropriately decide to manage the situation on its own, and when is the call to legal counsel warranted? What are the best and worst possible outcomes for a particular factual situation?

This chapter presents the basics of employment discrimination concepts in plain English, with the hope that the reader, having finished the chapter, will be better positioned to answer these questions. We have organized the chapter from the most familiar set of challenges to most HR professionals — the single-employee disparate treatment (intentional discrimination) claim — to consideration of more complex group situations. What must the individual employee prove to sustain her claim? What defenses can the employer assert? Perhaps most importantly, what can HR do, before it is too late, to best position the company to prevail in such a claim, or even avoid it altogether?

The emphasized text merits some initial elaboration. Most employment law attorneys function as both litigators and counselors. Litigators function in one sense as historians: they reconstruct events that have already occurred and advance arguments on behalf of their clients based on historically closed events. As counselors, attorneys are sometimes able to influence those facts before the historical record is closed. Even in that role, however, attorneys usually function by suggesting to company officials how they should act. Often, it is HR who implements these suggestions and creates the factual record that, for better or worse, the litigator inherits, and on which the company's defense succeeds or fails. This is one reason why HR professionals who understand employment law concepts are their attorneys' best friends!

These considerations apply with equal — or perhaps greater — force in situations where many employees are involved. Again, recognizing the challenges of the current economy, we offer the reduction-in-force (RIF) as one example of these situations. What is HR's role in a RIF? What legal requirements limit the company's options? How should the RIF be designed? Should designing the RIF be a top-down process, bottom-up, or one that contains input from both directions? If bottom-up, are there particular managers (or other decision-makers) who warrant special concern? How can the company's business objectives be harmonized with applicable legal rules?

To ask these questions establishes the critical role of HR, regardless of a particular company's answers to them. While there are notable exceptions, as a rule, outside counsel is unlikely to know the company — including its financial, managerial, and personnel strengths and weaknesses — in sufficient detail to make these decisions without substantial assistance. This assistance usually comes from HR, who will bring greater value to the process with a better understanding of applicable legal rules.

In connection with group employment decisions like RIFs, this understanding must include not only disparate treatment theories, but also adverse impact (also called disparate impact) theories. Adverse impact is sometimes referred to as "accidental" discrimination (as opposed to intentional discrimination), and looks heavily to statistical analyses for support. The Supreme Court has told us that adverse impact analysis does not require employers to impose quotas. Harmonizing this statement with adverse impact analysis is not always easy, as we shall see. The benefits to HR in understanding these concepts cannot be overstated.

We pause for an important caveat on the limits of this chapter. We are concerned with discrimination, but there are many other factors that HR must consider in connection with group employment actions. One example, in connection with large RIFs, is the Worker Adjustment and Retraining Notification Act (WARN), which is beyond the purview of this chapter.

Finally, we will highlight some of the issues in the discrimination area that, as of this writing, are very much in play as possible legal developments, whether through new legislation or evolving judicial doctrine. But, as promised, we begin with the basics: the single-employee intentional discrimination paradigm.

Understanding Employment Discrimination — The Basics

Employment discrimination statutes prohibit employers from treating people differently on the basis of a legally protected characteristic. The statutes protect employees, as well as persons who are seeking employment and, in some cases, former employees. Major protected characteristics include: race, color, national origin, sex, age, disability, religion, and military service. Each of these distinct types of discrimination is discussed later in the chapter, but first we provide a discussion of certain basic concepts that apply to all of them.

Adverse Employment Action

In general, employment discrimination occurs when an employer subjects an employee to an adverse employment action because of the employee's protected characteristic. An employer's conduct will only qualify as an adverse employment action if it is serious enough to alter the employee's compensation or other terms, conditions, or privileges of employment. Courts generally hold that, to be "materially adverse," a change in working conditions must be more than a mere inconvenience or an alteration of job responsibilities. It must have a serious detrimental impact on the employee's current employment or opportunities to secure future employment.

Courts have articulated three general categories of actionable, materially adverse employment actions:

1. Those in which the employee's compensation, fringe benefits, or other financial terms of employment are diminished, including termination;

2. Those in which there is a lateral transfer with no change in financial terms, but, as a result, the employee's career prospects and job opportunities are significantly reduced, and/or the employee is prevented from using job skills and experience that may diminish or be lost; and

3. Those in which the employee's present job is not altered, but the working conditions are changed in a way that subjects the plaintiff to a humiliating, degrading, unsafe, unhealthful, or otherwise significantly negative alteration in his workplace environment.

Because there are no bright-line rules for determining when an employment action is "materially adverse," the determination in each particular case can be very fact sensitive.

Examples of the type of action that could indicate a materially adverse change are:

A demotion accompanied or evidenced by a decrease in wage or salary; A change in job title; A material loss of benefits; Significantly diminished job responsibilities; and A loss of supervisory responsibility. A loss of prestige may constitute an "adverse employment action" if it affects opportunities for professional advancement. This issue often arises when an employee has been demoted, has had a change in job title or reporting responsibilities, has been transferred, or has been denied a transfer. Although a change in job title may constitute an adverse employment action under some circumstances, where the change is just a matter of semantics with no negative consequences to the employee, most likely no adverse action will be found.

Disparate Treatment

There are two broad categories of discrimination claims, "disparate treatment" and "disparate impact." Disparate treatment is the simpler and more common of the two. Disparate treatment occurs when an employer intentionally discriminates against someone because of a protected characteristic such as race, sex, or age. Examples include outright bias (such as refusing to hire members of a particular religion because of the employer's dislike for them), preferential treatment (such as favoring members of a particular ethnic group to the disadvantage of non-members), and acting on the basis of stereotypes (such as regarding older job applicants as too out of touch with current office technology). Reverse discrimination and harassment of an individual because of a protected trait also constitute...