By Alex W. Karasik

Seyfarth Synopsis:  In EEOC v. Schuster Co., No. 13-CV-4063, 2021 U.S. Dist. LEXIS 79815 (N.D. Iowa Apr. 13, 2021), the EEOC alleged that Defendant’s use of a strength test had disparate impact on female job applicants for driving positions.  After both parties moved for summary judgment, the Court denied both motions, holding that the “4/5 Rule” relied upon by Defendant served as a general benchmark as opposed to a dispositive measuring stick, and material issues of fact remained as to the business necessity of the test.

This ruling is instructive for employers facing EEOC-initiated litigation involving disparate impact allegations, and demonstrates how both Courts and the Commission may interpret statistical defenses stemming from expert reports and testimony.

Case Background

The EEOC alleged that Defendant’s use of a isokinetic strength test (the “CRT Test”) had a disparate impact on female job applicants.  Id. at *3.  In its motion for partial summary judgment, the EEOC alleged that from June 2014 to present, Defendant violated Title VII by refusing to hire women who failed a pre-employment physical test that had a disparate impact on women.  The EEOC further claimed that under Title VII, if a plaintiff demonstrated that an employer uses a selection device that has a disparate impact on women, then the employer has the burden of proving that the selection device is job-related and consistent with business necessity.  Id. at *4.

In support of its motion for summary judgment, the EEOC’s cited its expert’s opinion that Defendant’s use of the CRT test had a statistically significant, adverse, disparate impact on women.  The EEOC argued that Defendant could not raise an issue of fact as to whether the CRT test was job-related and consistent with business necessity when, (1) it cannot explain how the test is scored or whether the passing score relates to the physical demands of the job; (2) the test did not accomplish Defendant’s stated goals of reducing workers’ compensation injuries or costs; and (3) Defendant retained incumbent drivers who failed the test.  Id. at *4.  Finally, the EEOC asserted that Defendant hired many males who failed the CRT test, but refused to hire more than two dozen women who failed the test, yet scored higher than the males who passed.

In Defendant’s motion for summary judgment, the company argued it was entitled to summary judgment because: (1) the CRT test did not have a disparate impact on female applicants for the position of truck driver; (2) it was entitled to use a physical abilities test that has been validated; (3) its use of the CRT test was job related and consistent with business necessity; and (4) the EEOC failed to demonstrate the existence of reasonable alternatives that would effectively serve Defendant’s needs while resulting in hiring more female applicants.  Id. at *5.

The Court’s Decision

The Court denied both parties’ motions for summary judgment.  As a preliminary matter, the Court explained that in order to establish a prima facie case in a disparate impact lawsuit, a plaintiff must identify a facially-neutral employment practice, demonstrate a disparate impact upon the group to which he or she belongs, and prove causation.  Id. at *6.

Here, the EEOC’s expert, a labor economist, opined that during the period of June 2, 2014 to February 10, 2020, 95% of CRT tests taken by male conditional hires to the driver position received a passing score, whereas only 76.6% of tests taken by female conditional hires to the driver position received a passing score.  Id. at *6-7.  In its opposition brief, Defendant relied on the “4/5 Rule,” which states that, “a selection rate for any race, sex, or ethnic group which is less than four-fifths (4/5) (or eighty percent) 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.”  Id. (quoting 29 C.F.R. § 1607.4(D)).  Defendant thus argued that the EEOC did not establish that its use of the CRT test had a disparate impact on female conditional hires.

Analyzing Defendant’s application of the “4/5 Rule,” the Court held there was no dispute that it met the test, since even the EEOC’s expert noted that 95% of males passed, while only 76.6% of females passed.  Id. at *8-9.  However, the Court also held that Defendant overreached in applying the 4/5 Rule because: (1) it ignored the part of the rule indicating, “[s]maller differences in selection rate may nevertheless constitute adverse impact, where they are significant in both statistical and practical terms or where a user’s actions have discouraged applicants disproportionately on ground of race, sex, or ethnic group”; (2) Defendant’s own calculations were just above 80% and barely met the 4/5 Rule; and (3) although the “4/5 Rule” is generally a benchmark, both the U.S. Supreme Court and EEOC have emphasized that courts should not treat the rule as generally decisive.  Id. at *9-10.

Finally, considering the issues of Defendant’s burden to demonstrate that the CRT test is related to safe and efficient job performance and is consistent with business necessity, and the EEOC’s demonstration of an alternative selection method that has substantial validity and a less disparate impact, the Court held there were material facts in dispute precluding summary judgment for either party.  Accordingly, the Court denied both parties’ motions for summary judgment.

Implications For Employers

In EEOC-initiated litigation involving claims of disparate impact, this decision is instructive in terms of how courts may assess expert testimony and statistical data.  Specifically, the Court’s refusal to strictly apply the 4/5 Rule signals that parties in these types of cases should not necessarily expect a summary judgment victory just because the percentages cut in their favor.  Employers who satisfy the 4/5 Rule can likely expect the EEOC to tout this decision to oppose motions for summary judgment in disparate impact cases.

Readers can also find this post on our Workplace Class Action blog here.