Written Testimony of Grace E. Speights Partner, Morgan, Lewis & Bockius LLP

Meeting of June 22, 2011 - Disparate Treatment in Hiring

Good morning, Commissioners. Thank you for inviting me and giving me the opportunity to appear before you today. My name is Grace Speights, and I have been a partner at the law firm of Morgan, Lewis & Bockius, LLP here in Washington, D.C. since 1991. As a partner in Morgan Lewis's Labor and Employment Practice Group, I counsel employers regarding federal, state and local employment laws; best employment practices, including employment policies and complaint investigations; and litigation avoidance. I also defend employers in employment- related litigation, involving both individual disputes and class and collective claims, before federal and state courts, administrative agencies, and alternate dispute resolution tribunals. Morgan Lewis represents more than half of the Fortune 500 companies. We also represent privately held companies, financial institutions, healthcare providers and a number of federal, state and local governmental and educational entities.

With this background in mind, I would like to discuss with you my specific experience with employers in the hiring context, including employer in-house hiring processes and practices, including the role of the internet and staffing firms, investigation and litigation trends related to disparate treatment hiring discrimination claims, recommendations, and best practices for employers.

As a general matter, the employers that I work with usually make every effort to comply with federal, state, and local civil rights laws. To that end, employers invest significant resources to meet legal requirements and reduce the risk that their hiring practices are discriminatory in nature. Those investments, however, are not limited to funding mere compliance with the law, but are also used to improve recruiting and staffing efforts to better serve an organization's functional needs and market competitiveness and often exceed legal requirements.

In an increasingly global economy, most of the companies that I represent recognize that a diverse workforce gives them a competitive edge. They therefore understand that it is important to build and maintain an inclusive workforce that draws on ideas and talents from all segments of the population. Grounded with this understanding, many of them are investing significant resources in designing and building diversity programs and, to some extent, voluntary affirmative action programs, and restructuring their human resources functions to assist in hiring. In my experience, these initiatives have resulted in increased hiring and retention of employees in protected classes.

I. Employer In-House Hiring Practices

Although historically human resources departments were generally involved in hiring efforts, in more recent years many companies have been purposefully increasing human resources' level of participation in the hiring process in an attempt to provide a consistent and organized level of oversight in hiring. This additional oversight has become so essential that in many larger companies there are subgroups or specialists within the human resources departments whose sole function is to source, recruit, and staff for open positions. Those subgroups or specialists direct and supervise the hiring process, and often also participate in the process as a hands-on resource for management. In larger companies where there are numerous divisions or business units hiring, a recruiting/staffing department is extremely helpful in maintaining overall consistency with company policies and practices and monitoring compliance with legal requirements.

Regardless of whether a company maintains a separate staffing group within human resources, invariably many human resources departments are charged with oversight of the hiring function on some level. We have seen companies increase the involvement of their human resources groups at all stages of the hiring process. For example, human resources departments may create and enforce policies and practices designed to ensure that postings for open positions are advertised in such a way as to reach the widest diversity of eligible job candidates.

Human resources departments are also more involved in identifying minimum qualifications, drafting position postings, and screening and reviewing resumes, including the determination of the initial panel of qualified applicants who will be interviewed by management. Human resources may also be involved in interviewing candidates and consulting with management regarding candidate selection. Even after a candidate has been selected, in many companies human resources personnel remain involved in the process. For instance, if a manager ultimately selected a non-protected category candidate for the position when there was a similarly qualified candidate in a protected category, in many companies human resources will generally follow-up with the manager to better understand and document the manager's decision-making process.

In addition, more and more employers are accepting applications over the internet. Instead of sending cover letters and resumes by mail, applicants can now apply for numerous jobs within minutes using an internet jobsite. This method of accepting applications has helped companies to reach a greater number and diversity of applicants. While this process has helped both applicants and employers to streamline the process, it has also resulted in employers being inundated with applications. In addition, because the online application process usually is not labor intensive, many people apply for positions for which they are not qualified; there is no real downside in applying for as many positions as possible. This can lead to additional failure to hire claims.

A positive outcome of the growing use of online job applications is the investment by many companies in sophisticated applicant tracking systems. The OFCCP requires applicant tracking even for those applications that are made through the internet. These systems keep track of all applications that are submitted for a vacancy, are able to link those applications with the posting and requisition that is sought to be filled, and tracks all applicants through the hiring process. These systems make it much easier for employers to defend against claims for hiring disparate treatment claims because information about each applicant for each position is readily available on the system.

In conjunction with the increased involvement of human resources in hiring oversight, many larger companies have also expanded their training programs for both human resources professionals and managers. Human resources professionals generally receive formal internal and external training regarding hiring practices and compliance issues. Human resources itself usually conducts training for managers on legal requirements and hiring policies and practices.

In most cases, this management training occurs annually and is designed to increase management's understanding of the law and company policies regarding hiring practices.

II. Contingent Staffing Firms' Role in the Hiring Process

Not all companies recruit and hire all workers themselves. Contingent staffing companies also help employers to increase diversity hiring because they tend to recruit candidates from a wide range of sources. Unlike the companies that they work for, contingent staffing agencies are held to different legal standards and operate quite differently in the staffing aspect of their business, as opposed to when they are operating as an employer. For instance, contingent staffing companies are not typically legally obligated to track individuals whom they source, screen, hire, and place at client locations as temporary contractors because temporary employees are specifically excluded from EEO-1 reporting. Records are maintained, however, for successful candidates who are actually assigned to clients.

Some critics of the staffing industry allege that contingent staffing companies "steer," meaning refer certain races of employees to certain clients, presumably because of client "preference." Because only records of those candidates assigned to clients are maintained, however, it is difficult for contingent staffing agencies to establish that they do not participate in such practices. Therefore, the EEOC and other government agencies should focus on what efforts contingent staffing companies have made to develop training and policies to eliminate the potential of receiving illegal requests from clients. From our experience, this is a point of inquiry that is never made during most investigations. There has been a conscious effort in the industry to prohibit the misuse of the contingent personnel service offered by staffing companies by clients who may be attempting to use the industry as means to circumvent the law. Reputable contingent staffing companies maintain policies and train their employees on how to respond to inappropriate requests from their clients, and often use such policies and training as an opportunity to educate clients on the law and the inherent risks for both their client and the staffing agency.

In addition, there are several different contingent staffing models that range from employment agencies, day labor, professional employment organizations, and staffing companies. Each model has unique processes to obtain individualized business goals suited for their particular model. Each model may also provide different kinds of placements. For example, there are permanent placements, where the staffing company gets a fee from the client and the client makes the selection. In a permanent hire situation, generally there are no records maintained by the search firm as to those who are referred or even hired in this kind of placement. There are also "go to work" placements, which are done exclusively by the staffing company and the client plays no role in the selection process. In this situation, records are maintained as to those actually placed with the client, but there are no records maintained for the applicants who were merely considered. Finally, there are "temporary to permanent" placements. In these situations, again, there are no records maintained by the staffing agency as to the source of the candidates or their demographics in the sourcing, screening, selection, and referral process. Records are maintained, however, for those successfully placed. Consequently, because of the different models, placements, and legal obligations involved, it is important for the EEOC to better understand the various models, placements, and legal obligation involved when conducting an investigation.

III. Investigation and Litigation Trends

Because of human resources oversight at many companies and the trends and developments in hiring, we do not see very many "pure" disparate treatment hiring claims against employer companies. Even in those few instances when an applicant initiates a disparate treatment complaint, the matter is generally easily defended at the EEOC investigation stage because we are able to rely on company processes designed to maintain equality in the hiring process and documentation that reflects the company's hiring decisions. If a claim progresses to the litigation stage, which is not often from our perspective, these same processes and documentation help a company defend against such a claim. On the other hand, we are seeing an increase in claims against contingent staffing companies – such claims often stemming from a misunderstanding of the legal obligations and requirements for such companies.

The hiring claims that our employer clients are more often confronted with are claims of disparate impact that focus on assessments and other screening mechanisms that are alleged barriers to employment. For example, plaintiffs generally argue that requirements such as personality tests, cognitive tests, background checks, credit checks, and physical exams are obstacles in the hiring context for applicants in various protected categories.

While the trend in the number of disparate treatment hiring cases against employers appears to be declining, based on our experience we are still seeing a consistent number of hiring claims in the failure to promote context. Plaintiffs asserting these kinds of claims generally allege that an employer's policies and procedures for internal promotions tend to exclude employees in various protected categories and/or that a biased manager unduly influenced the hiring process in a way that resulted in a discriminatory decision to deny an employee a promotion.

With regard to claims alleging discrimination involving promotion policies and practices, claimants tend to focus on the following kinds of company policies, practices and/or procedures:

• Lack of internal postings for higher level jobs
• Requiring employees to pass tests or other assessments to be promoted
• Requiring employees to be in prior positions for a certain period of time
• Requiring a current manager's approval to apply for a promotion
• Requiring a certain level or score on performance management evaluations

In addition, these kinds of promotion claims tend to focus on the level of management discretion in the promotion process – the theory being that allowing management discretion in making promotion and other employment related decisions results in discriminatory decisions. Although such claims have enjoyed some traction with some courts, many courts also recognize that it is impractical to require the use of only objective criteria in the promotion process because such a requirement would undermine an employer's ability to use its own business judgment in making promotion decisions and would not allow an employer to take into consideration important intangible qualities of an applicant, such as his or her ability to get along with coworkers. These courts have recognized the importance of some level of employer discretion and have consistently held that an employer's business decisions should not be second-guessed.

IV. Best Practices

Based on my experience, there are several best practices that employers can utilize to minimize potential failure to hire and/or promotion claims. First, employers should develop strong equal employment opportunity policies, train company managers on the contents of the policies and the requirements of the law, and hold managers responsible if they fail to follow the policies. Second, diversity training for managers and the workforce can go a long way toward enlightening personnel about the benefits of having an inclusive work environment. Third, employers can increase human resources' participation and oversight in the hiring and promotion processes as a form of checks and balances. Allowing human resources a greater degree of oversight in hiring, particularly in large companies, can help to maintain overall consistency with company policies and practices, including documentation, and to monitor compliance with legal requirements. Fourth, employers can make efforts to identify and remove perceived barriers to hiring and promotion. For example, employers can take steps to widen and diversify the pool of candidates considered for employment opportunities by posting openings and by advertising such positions in sources that reach a more diverse applicant pool. Fifth, employers can conduct periodic self-analyses to determine whether current employment practices are tied to job requirements, job performance and business necessity. Finally, companies may want to consider developing training and mentoring programs that will afford workers of all backgrounds the opportunity, experience, and information necessary to qualify for promotions.

In conclusion, regardless of whether a company is large or small or maintains a separate in-house staffing group or uses a contingent staffing agency, the high cost of recruiting, hiring, and training new employees invariably acts as a strong motivator for employers to recruit and hire the most qualified candidates. I believe that because the emphasis is on hiring the best candidate, and diversity is a valued factor in the hiring analysis at many companies, we are seeing fewer distinct disparate treatment hiring discrimination claims.

Thank you. I look forward to your questions.