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Anyone who has ever logged on to Monster.com knows that recruiting online can produce an avalanche of applicants. This presents a unique problem for companies doing business with the federal government � a group composed of some 16,000 companies with 25 million employees. To ensure that they are not discriminating in their hiring practices, federal contractors are required to keep records on every job applicant. Recognizing the potential record-keeping burden this creates, the U.S. Department of Labor in October created a new definition of “Internet applicants.” This new definition and related regulations go into effect February 6. On the surface, the Department of Labor’s new rules appear favorable to business. They allow employers to limit the universe of potential Internet applicants to those who meet employer-defined “basic qualifications” for the job. Under the new rules, companies do not have to collect data from potential candidates who do not meet these qualifications, nor do they have to include them in analysis and reports required by the Labor Department. By using basic qualifications to reduce their record-keeping burdens, however, companies run the risk of eliminating some of the legal arguments frequently used to defend against hiring discrimination claims. For example, employers in a “pattern or practice of discrimination” lawsuit typically argue that the plaintiffs’ statistical analysis of the employer’s data failed to take into account whether applicants were qualified for the job. Under the new regulations, employer data available to plaintiffs and government enforcement agencies will include only qualified candidates, eliminating this important legal defense. To reduce liability exposure, it’s critical for employers to understand the new rules fully. It’s also important because the rules offer new methods to streamline record-keeping and minimize costs. The new rules revise long-standing provisions requiring employers to collect information on applicants’ race and gender, track that data for each job, and then analyze it to determine if hiring discrimination took place. As Internet recruiting searches became common, however, employer groups pushed to have the rules revised so that only candidates who met some minimum qualifications needed to be tracked. By and large, the new regulations adopt this qualifications approach. They also allow employers to use data management techniques, such as random sampling, to limit the number of Internet applicants for whom data must be collected. For example, if an employer runs a search of its internal resume database and comes up with 500 candidates who meet the basic qualifications, the new rules allow the employer to reduce that to only 20 candidates through a random sort. In addition, employers do not have to count someone as an Internet applicant � even if he met the basic qualifications of the position � if his resume contains a stated salary preference twice what the salary position is. Unfortunately, the rules also pose several new liability exposures. One potential pitfall is the need to apply the regulations consistently in every Internet search conducted by internal and external recruiters across the entire organization. Another is the need to apply job qualifications and random sampling tools consistently when filling each open position. For example, once the employer sets five years’ experience as a basic qualification for a position, it cannot then hire a candidate who has superior educational credentials but only four years’ experience. Not setting and following the right protocols can trigger massive record-keeping obligations for each mishandled search. For example, under the new regulations, employers that search Monster .com using the basic qualifications for a position must retain all the resumes of potential candidates who come up as “hits” from the search. But there would be no obligation to save thousands or tens of thousands of resumes if the company recruiter, as regulations allow, first drew a random sample from Monster.com and then ran a basic qualifications search on that smaller sample. The greatest liability imposed by the revised record-keeping standards, however, is that the records produced will provide substantial aid to government enforcement agencies or private plaintiffs in making a case of systemic hiring discrimination. Here’s why. Courts have long held that plaintiffs can establish a claim of hiring discrimination on the basis of statistically significant disparities in race or gender between the applicant pool and those actually hired. But the statistical analysis supporting the claim had to take into account the “minimum, objective” qualifications the employer used to make hiring decisions. As a consequence, litigants typically argued over which qualifications the employer actually used, whether these qualifications were “minimum” or “objective,” and whether applicants possessed the qualifications. If the case concerned a professional or technical job, like a chemical engineer, plaintiffs were typically at a disadvantage because they lacked the technical knowledge necessary to determine whether candidates had sophisticated qualifications, like prior experience with a particular chemical process. Under the new Internet applicant record-keeping requirements, employers lose these arguments and advantages because Internet applicants are, by definition, individuals who have the basic qualifications for the job. Moreover, it is the employer who established the basic qualifications and determined whether any particular candidate met them. Thus, the pool of Internet applicants the employer submits to the government agency during a compliance review is ready-made for statistical hiring discrimination comparisons. And any statistically significant disparities between the pool of Internet applicants and those hired will establish the government agency’s or private plaintiff’s prima facie case of hiring discrimination. Such disparities may also be all the proof a plaintiff or government enforcement agency needs to survive a summary judgment motion and obtain a determination on the merits of its claims. This was not true in the past, when the broad definition of “applicant” did not allow the employer to use qualifications to limit the applicant pool. Rather, anyone who “submit[ted] an expression of interest in employment” had to be counted as an applicant. Employers should carefully weigh their options for responding to this new regulatory environment because the stakes are now higher. Here are some options to consider: Since the courts are concerned with minimum qualifications, not basic ones, it’s important to pick a strategy for handling these two categories: (1) Ensure that all minimum, objective qualifications are listed as basic qualifications; or (2) hold back some of the minimum, objective qualifications for the job when creating the pool of Internet applicants. The first option is comprehensive and will avert disputes over what objective, minimum qualifications were actually used. The second approach reserves some qualifications to form a defense argument that the pool contains some unqualified candidates. Use basic qualifications that go beyond the bare minimum necessary for the position. The new regulations make it clear that basic qualifications can include literally any qualification, so long as it is objective, noncomparative, and job-related. The preamble of the regulations notes that “basic” is not intended to place any substantive limits on the type or range of qualifications. And the Labor Department expressly rejected a commenter’s proposal that the basic qualifications must be strictly necessary for the job. Ensure that job advertisements and other lists of basic qualifications accurately convey the qualifications. Qualifications should be described concretely and specifically. Include technical terms as necessary. Ensure that the list of individuals who meet the basic qualifications for each position is accurate. Develop a system that errs on the side of excluding candidates who are marginal. Use data management and other techniques to define the pool of Internet applicants more narrowly than those who meet the basic qualifications. Keep track of candidates excluded through data management and other techniques. Analyze the impact of hiring practices by dividing the number of women hires by women Internet applicants and compare that to the same ratio for men. Do the same analysis for minorities versus nonminorities. Carefully investigate the reasons for any statistically significant disparities. The new Internet applicant regulations will ultimately help many employers reduce record-keeping burdens. But employers must approach these regulations strategically to avoid potential pitfalls, such as use of Internet applicant data in hiring discrimination claims. William E. Doyle, Jr., is a Washington, D.C. � based partner of Morgan, Lewis & Bockius.

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