Employers in the Sixth Circuit are no Longer Safe from Disparate Impact Claims by Complying With the EEOC’s Four-Fifths Rule

Julie Y. McLaughlin¹

Disparate impact claims are based on the premise that the employer has a neutral employment practice that is fair in form but discriminatory in operation. A plaintiff establishes a prima facie case of unlawful disparate impact when a specific employment practice is challenged and through relevant statistical analysis, the plaintiff proves that the challenged practice has an adverse impact on a protected group.

Prior to the Sixth Circuit’s decisions in 2005, discussed below, it was generally accepted that if an employer’s facially neutral employment practice passed the Equal Employment Opportunity Commissions’ (“EEOC”) four-fifths rule, disparate impact could not be established. Under the four-fifths rule, “a selection rate for any race, sex, or ethnic group which is less than four-fifths (or 80%) of the rate for the group with the highest rate will generally be regarded by the Federal enforcement agencies as evidence of adverse impact, while a greater than four-fifths rate will generally not be regarded by Federal enforcement agencies as evidence of adverse impact.” 29 C.F.R. § 1607.4(D). However, the Sixth Circuit has now rendered decisions in two cases that show plaintiffs can rely on different degrees of statistical evidence to establish a disparate impact claim, and that an employer can no longer rely on compliance with the four-fifths rule alone to avoid a showing of disparate impact. See Phillips v. Cohen, 400 F.3d 388 (6th Cir. 2005); Isabel v. City of Memphis, 404 F.3d 404 (6th Cir. 2005), rehearing en banc denied, 2005 U.S. App. LEXIS 16625 (6th Cir. July 29, 2005).

Phillips v. Cohen
In the Phillips case, a number of African-American employees sued alleging that the Department of Defense’s Defense Finance and Accounting Service, Columbus Center (“DFAS-CO”) maintained a promotional process that had a disparate impact on African-Americans. This promotion process included more than eighteen different steps. The court was faced with deciding whether the evidence in the record supported a finding that African-American employees were promoted at a lower rate than white employees.

Statistical evidence regarding the promotion rates of African-Americans was presented by both parties. The parties’ experts addressed two questions in their reports: (1) whether African-Americans are under-represented in the various job grades at DFAS-CO, and (2) whether African-Americans are promoted at a lower rate than whites. The Plaintiffs’ expert used methodology that showed African-Americans had a lower representation rate than whites only in one Grade. She found a statistically significant difference between the promotion rates of African-Americans (42.23%) and whites (45.87%). The Defendant’s expert used methodology that showed there were greater than expected numbers of promotions of African-American employees in half of the 14 grade levels, and fewer than expected in half. His study showed that there was only a downward departure in one Grade. Both experts made their conclusions without the Defendant’s promotion information, because it had been destroyed.

The Magistrate Judge had found the Defendant’s expert to be more credible. The Sixth Circuit found that it was incorrect for the Magistrate Judge to do so, and noted that the jury is responsible for evaluating what weight and credibility to give each expert opinion. Thus, an employer should not be awarded summary judgment simply because the judge finds its expert to be more credible.

The Sixth Circuit noted that statistical evidence is not to be considered in a vacuum, but must be considered in light of all the evidence in the record in order to determine whether plaintiffs meet their prima facie test. The court concluded that the combination of the following factors was sufficient to defeat summary judgment: (1) evidence (although largely statistically insignificant) that African-American employees are promoted less...

[1]Julie McLaughlin is an associate in the Memphis, Tennessee law firm of Lawrence & Russell, LLP, where she is devoted to litigating employment disputes and ERISA matters on behalf of employers and self-funded employee welfare benefit plans. She can be reached at juliem@lawrencerussell.com.