The EEOC recently announced its $2.8 million settlement with Target Corp. of discrimination claims arising out of the use of employment tests in the hiring process. Discriminatory pre-employment tests like the ones at issue in the Target investigation are a national priority for the EEOC. “Eliminating barriers in recruitment and hiring, especially class-based recruitment and hiring practices that discriminate against racial, ethnic, and religious groups, older workers, women, and people with disabilities, is one of six national priorities identified by the Commission’s Strategic Enforcement Plan,” the EEOC said in a recent news release.

Why the concern? First, the use of pre-employment tests and background checks by employers has increased. Second, even facially neutral pre-employment tests may have an adverse impact on employees with protected characteristics. Third, many employers who rely upon those tests fail to make and keep required records that will disclose the impact of assessments on employees in protected categories.

Toeing the line with pre-employment tests

Pre-employment assessments consist of cognitive exams that measure verbal, numerical and spatial reasoning; physical exams; psychological exams; and aptitude exams. Pre-employment assessments also include background checks. Pre-employment assessments are acceptable under Title VII of the Civil Rights Act and the Age Discrimination in Employment Act as long as they are not designed, intended or used to discriminate on the basis of a protected characteristic. They are not precluded by the Americans with Disabilities Act either, but a medical exam may not be used to screen out qualified individuals with disabilities and may only be administered after an offer of employment has been made.

The basic rule for employers to remember is that any pre-employment testing method should be appropriate to the job. It should be related to the job and its results should correlate to the performance of the job. This is true with respect to criminal background checks as well. A policy that automatically excludes all individuals with any criminal record from any position of employment is generally considered to impact minorities in a discriminatory fashion. Employers must instead consider whether the job in question justifies the “no criminal record” requirement.

Where Target missed the mark

In the Target investigation, the details of the specific pre-employment assessments were not provided, but there were four assessments that caused the EEOC concern. The EEOC found reasonable cause to believe that three employment assessments disproportionately screened out potential employees based on race and gender in violation of Title VII. The EEOC found another assessment performed by psychologists constituted a pre-employment medical examination in violation of the ADA. According to the EEOC, thousands of individuals were affected by Target’s use of the assessments in its hiring process, and the $2.8 million settlement will be paid to these individuals, as appropriate.

Target stopped using the allegedly unlawful tests during the EEOC investigation and changed its applicant tracking systems to deal with any potential adverse impact on certain groups. The retailer also hired an outside consultant to provide training on recordkeeping, pre-employment medical exams and the ADA, and disparate impact. Target cooperated with the EEOC, providing numerous interviews and sharing substantial documentation.

EEOC targets other employers as well

Target is not the only employer finding itself the target of the EEOC. A Pennsylvania janitorial and facilities management services company, Crothall Services Group, Inc., was sued recently by the EEOC to enforce federal recordkeeping requirements. According the EEOC, the company conducted criminal background checks and criminal history assessments to make certain hiring decisions, but failed to disclose the impact of the selection procedures on persons identifiable by race, sex or ethnic group. The EEOC had received a commissioner’s charge in September 2010 alleging that Crothall’s use of criminal history assessments had an unlawful disparate impact on black, Hispanic and male applicants and employees. The EEOC then filed a subpoena enforcement action seeking records from Crothall to disclose the impact of its criminal history assessments on employment opportunities for the impacted groups. That’s when the EEOC discovered that Crothall had failed to retain the appropriate documents as required by law.

In 2008, the EEOC settled a case with Ford Motor Co. for $1.6 million arising out of the use by Ford of a written cognitive exam that measured verbal, numerical and spatial reasoning. The EEOC alleged this pre-employment assessment had a statistically disparate impact on black applicants. This was the second suit by the EEOC against Ford. The first settled for $8.5 million and involved, among other things, the use of an apprentice test the EEOC believed had a disparate impact.

In another high-profile case involving pre-employment assessments, the Eighth Circuit Court of Appeals affirmed a $3.4 million jury verdict that found Dial Corp. had routinely and intentionally discriminated against women by requiring job applicants to take a strength test. As a result, the test unlawfully reduced the number of women hired from 46% in the three years before the company implemented the test to 15% after the test was implemented. Dial had developed the test in an effort to reduce injuries at its plants where workers were required to carry heavy loads. Expert testimony at trial established that the test was more difficult than the job itself and did not actually reduce injuries.

Protecting against disparate impact claims

In general, the use of pre-employment assessments is acceptable as long as employers are careful to ensure they are reasonably related to the job and as long as employers take steps to retain the documents that demonstrate there is no disparate impact on employees with protected characteristics. Unfortunately, many employers reject far more applicants than they hire, and this provides the potential for a large recovery if a rejected applicant or the EEOC can prove a pre-employment assessment has a disparate impact on a protected group.