Home Enterprise holdings Unanimous Court of Appeals Overturned ALJ Ruling Finding Baltimore Enterprise Rent-a-Car Guilty of Unlawful Racial Discrimination: Judge Misunderstood Title VII Law | Direct Employers Association

Unanimous Court of Appeals Overturned ALJ Ruling Finding Baltimore Enterprise Rent-a-Car Guilty of Unlawful Racial Discrimination: Judge Misunderstood Title VII Law | Direct Employers Association


OFCCP’s disparate treatment claim had no pretext proof

Courts often equate evidence in an “intentional class type of disparate treatment” discrimination case (like United States v. Teamsters) with a three-hit tennis match:

First, the claimant (OFCCP in this case) must “hit the tennis ball” over the net to trigger play. most advantaged group, or “MFG”. In the Enterprise case, the allegation was that white applicants were the MFG and African Americans were the protected group suffering from a statistically disproportionate rejection rate. No rejected person who showed interest complained about the thousands rejected. The disparity, however, must be “legally significant” (it cannot be sleight of hand), which means that the disparity in pick rates must be at least two standard deviations or more different from this what we would expect if both races were rejected in the same proportions. (BTW, while many practitioners discuss “selection” rates, technically and more properly, we are looking at “rejection” rates since we are measuring “adverse action” (although “rejection rate” and rate selection” are reciprocal of each other by adding to 100% of the pool of candidates considered: if 30% are rejected; 70% are hired, for example). selection rate during the years in question (but not in 2013), Enterprise agreed and had stipulated to this conclusion.

Second, the defendant (the company in this case), in order to win the tennis match, then had a legal obligation to “hit the ball” over the net at the OFCCP by “advancing with evidence” (NOT prove it…just present evidence) of its legitimate non-discriminatory explanations for each unfavorable decision (in this case: thousands of rejected African Americans who expressed interest because Enterprise had significant and significant involvement with the Baltimore’s black community and was a magnet for African Americans). Enterprise went ahead with the trial by introducing into evidence its thousands of “decision codes” (which had simultaneously documented, often including handwritten and typed notes, the thousands of legitimate, non-discriminatory reasons for rejection followed along Enterprise’s sophisticated tiered, multi-tiered behavioral staged interview and selection system). The ARB held that “…the record shows that the defendant [Enterprise] non-discriminatory reasons for rejecting applicants for the management trainee program. (Slip op. p.8) So by then Enterprise had, legally, now “hit the imaginary tennis ball” into the OFCCP side of the imaginary tennis court. Then, if the OFCCP does not return the imaginary tennis ball, the OFCCP loses…just like in tennis.

Editor’s note: This is a perfect description of the context in which disposition codes suddenly become SO TERRIBLY IMPORTANT when an employer/contractor selection system results in significant statistical disparities, as happens with very many employers who experience high-volume application streams.

Third, the OFCCP then had to prove that the Company’s legitimate non-discriminatory explanations for the rejection were a “pretext” (ie “false”/not a real non-discriminatory reason). However, the OFCCP’s attack on Enterprise’s disposition codes, which Judge Davis swallowed hook, line and sinker, was not that they were “wrong”, but rather that they were “subjective”. But the problem for the OFCCP and Judge Davis was that Title VII law does not make subjective decision-making decisions illegal. On the contrary, decisions on Title VII cases praise and applaud subjective decision-making systems. (And, of course, the great irony of the OFCCP and judge’s attack on subjective decision-making systems was that everyone in the courtroom and all of its witnesses had been hired by a subjective decision, as with most employees). Here is the ARB’s analysis and positions on the OFCCP’s disparate type of treatment class claims:

“The ALJ found that the defendant’s subjective use of disposition codes did not adequately explain the racial disparities presented in the statistical evidence. [fn omitted] However, in analyzing the evidence and arguments regarding Enterprise’s hiring criteria (including its sales and/or customer service requirement), the ALJ confused evidence of subjectivity with evidence of discrimination without allow legitimate use by an employer of subjective hiring criteria. [fn omitted]

Although there is a risk that a nefarious employer may use subjective standards as a cover for discrimination, subjective criteria that are apparently non-discriminatory “no matter how subjective the criteria are – may constitute a legitimate reason” for rejecting candidates. [fn omitted] Subjective evaluation criteria “may constitute [ ] legally sufficient, legitimate and non-discriminatory ground[s]for an employer’s business decisions. [fn omitted] In fact, “a job candidate’s subjective assessments are often critical to the decision-making process, and increasingly so in our increasingly service-oriented economy. . . .” [fn omitted]

However, an employer’s subjective criteria are not immune from scrutiny. The reasons given must have some substance to enable evaluation. [fn omitted] If, for example, the ALJ compared the qualifications of people who were rejected with those who were hired in order to demonstrate intentional discrimination, the differences must be so striking that they allow a reasonable investigator to sound the alarm of a pattern or practice of intentional discrimination. [fn omitted] Slight or even erroneous differences in qualifications do not satisfy this burden because the ALJ does not sit as a council of super-personnel reviewing the employer’s hiring practices. [fn omitted]

This objective assessment is not made by reviewing and comparing a small number of applications. [fn omitted] The ALJ relied on the subjectivity of the hiring decision-making process to summarily conclude that the racial disparity revealed by the statistical evidence and the small number of applications it reviewed resulted from racial discrimination. Thus, “in the absence of evidence that subjective hiring criteria [was] used as a mask of discrimination, the fact that an employer bases a hiring or promotion decision on [ ] subjective criteria” is not in itself a pretext for intentional discrimination. [fn omitted]

Because the ALJ erred in its disparate treatment analysis, we must refer the matter to the ALJ”