In the most familiar type of workplace bias lawsuit, the employee charges that the employer had a discriminatory motive. Butin disparate impact cases, the employee claims that an apparently neutral policy or practice of the employer disproportionately hurt employees in a protected class, even though there was no intent to discriminate. A new California appeal court ruling focuses on what it takes for an employee to prove a disparate impact case.
Most Administrative Managers Were Women
Helen Carter worked for C.B. Richard Ellis Inc. as both regional administrative manager for the Orange County region and administrative manager of the Newport Beach office. She worked for the company for more than 30 years.
Out of the 10 administrative managers in Southern California in 1998, all were female and eight were over age 40. Most, like Carter, had started out in the company as secretaries. Administrative managers wore many hats, were responsible for office personnel and benefits administration, assisted with budget planning and controlling expenses, directed facilities management, and acted as social director. Administrative managers could participate in the company’s profit-based bonus plan.
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Big Reorganization
In 1998, the entire company reorganized, replacing the existing two-region structure with nine regions. Each new region had a regional director and five “functional experts,” whose duties were accounting, legal support, marketing, information technology, and human resources. Many administrative manager responsibilities were transferred to the new functional experts. Carter was advised that she would lose many duties, too, and that she was being reclassified as an office services administrator and was no longer eligible for a bonus.
About 15 of the 57 former administrative managers were promoted to one of the new regional positions. Carter applied for two of the new positions, but those jobs were filled by other women.
Carter sued C.B. Richard Ellis for sex and age discrimination. She charged that the reorganization disproportionately impacted women and those over age 40 because the plan demoted administrative managers, all but one of whom were women and about half of whom were over 40.
No Liability
An appeals court agreed with Carter, awarding her $1,020,861, of which $600,000 was for punitive damages. An appeal court overturned this verdict, however, throwing out the large award. The court explained that to establish disparate impact, the employee must identify a policy or practice and then show, through statistics, that the policy or practice had a negative impact on individuals in a protected group because of their membership in that group. For example, simply showing that there is a high percentage of nonwhite workers in one job category and a low percentage in another job category doesn’t establish disparate impact discrimination—but showing there’s a high percentage of nonwhites in the applicant pool for a job category and a low percentage actually hired into that job would. Carter presented no evidence about the gender or age composition of all company employees, instead only providing statistics on the gender and age of administrative managers. Thus, she argued that the reorganization was illegal because no other group of employees besides administrative managers was adversely affected by it. But, said the court, the law doesn’t bar discrimination against administrative managers, and the mere fact that an employment practice—the reorganization—negatively impacted an almost all-female job doesn’t by itself prove discrimination.
Impact of Ruling
Although the employer won, this case highlights the need to ensure that your organization’s policies and practices don’t disproportionately impact employees or applicants in a protected class. Bear in mind that reorganizations or layoffs can put you at particular risk for disparate impact claims, including class action lawsuits. Before making final decisions in these situations, make sure that employees who are in a protected class such as age, race, or sex aren’t disproportionately harmed.