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After recent waves of downsizing, many in-house counsel have become all too familiar with the Older Workers Benefit Protection Act and the Worker Adjustment and Retraining Notification Act. But while economic signals have been mixed, most economists agree that today’s economy is largely on the mend. This means that many manufacturers and other employers are looking to hire — some for the first time in a long while. Consequently, in-house counsel must now learn about (or become reacquainted with) the legal risks associated with hiring. More specifically, counsel must be aware that certain screening or selection methods carry considerable legal risk. And while those risks may be business-justified — good selection systems are unquestionably important in choosing the best candidate for a job — some selection systems are much riskier than others. Personality tests can create significant exposure to suits. Psychological tests are among those that can give rise to significant exposure. Use of these tests was already on the rise in the late 1990s. Many employers hiring at that time contemporaneously felt pressure to be “lean and mean;” even long-established companies struggled to find the right candidate for each opening. Also during this time, many technology companies were simply too busy to worry about legal niceties associated with hiring. These same companies hadn’t had to defend a hiring lawsuit back in the 1970s or early 1980s, when the EEOC and plaintiff’s attorneys pursued such cases with vigor. After a lull in hiring during 2000 and much of 2001, along came Sept. 11. According to Ron Adler, president of an HR management consulting firm, “There is a new interest in personality testing and psychological testing with recent reports of workplace violence and the events of September 11.” Some companies have renewed their use of these tests after 9/11. Others are contemplating tests as they make plans to hire. Besides psychological tests, some companies today are using or considering cognitive tests (e.g., reading comprehension, math or listening comprehension tests), honesty or integrity tests and management aptitude exams. Each of these tests carries legal risks; some carry multiple risks. LEGAL ACTIONS OVER TESTING HAVE ENTERED A NEW ERA Historically, the most likely challenge to employment testing was under Title VII disparate-impact theory. Plaintiffs argue that a facially neutral employment practice adversely affects women or minorities and cannot be justified as a business necessity. These cases are typically premised on statistics, which purport to show that protected class members, for instance blacks, were rejected for hire at a disproportionate rate. The EEOC’s Uniform Guidelines on Employee Selection Procedures say that a “selection rate for any race, sex or ethnic group which is less than four-fifths … 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 4/5 rate will generally not be regarded by Federal enforcement agencies as evidence of adverse impact.” Since 1978, however, both the EEOC and the courts have become more sophisticated in analyzing statistical disparities. Today, such analyses in discrimination lawsuits may depend on standard deviations or other measures of statistical significance, rather than the old four-fifths rule. The bulk of Title VII challenges to testing have been brought in the public sector (schools and police or fire departments) or vis-�-vis other safety-sensitive positions — the contexts in which employment tests historically have been most common. In most of these cases, the employer prevailed. See, e.g., Cox v. Consolidated Rail Corp., 47 Fair Empl. Prac. Cas. 685 (D.D.C. 1987) (no proof of actionable impact even though the engineer training program failed the four-fifths rule with regard to blacks and women); and Springfield Branch of NAACP v. City of Springfield, 139 F. Supp. 2d 990 (C.D. Ill. 2001) (fire department’s reading, math and listening tests held to be job-related). But employers have not uniformly prevailed in such cases. See Firefighters Inst. For Racial Equality v. City of St. Louis, 616 F.2d 350 (8th Cir. 1980) (fire department promotional exam held to be not job-related). Moreover, the Civil Rights Act of 1991 made it easier for plaintiffs to prove disparate impact. Some decisions since then, including the Springfield Branchfirefighters case, appear not to have taken this into account in upholding particular employment tests. In addition, some of the rationale used to uphold tests for safety-sensitive jobs appears inapplicable to many private employers. In Ludwig v. Northwest Airlines Inc., 98 F. Supp. 2d 1057 (D. Minn. 2000), for example, the court held that a commercial pilot applicant could not establish unlawful disparate impact based on Northwest’s use of a psychological test. In so ruling, the court deferred to the airline on issues of public safety. Courts may not be so deferential to other private-sector employers. Psychological or personality tests, which at least theoretically can give rise to adverse impact against minorities or women, almost certainly raise issues under the Americans with Disabilities Act. Many such tests include questions which might identify someone as mentally impaired. The EEOC says such exams must be given at the post-offer stage — to final candidates only. Even then, test results must be both “job-related” and “consistent with business necessity.” This means that, at a minimum, the test must accurately measure performance of essential job functions. An issue which has caused some employers great difficulty in recent years — and substantial monetary exposure — is employee privacy. Following an unfavorable California Court of Appeal decision, Target Stores agreed in 1993 to pay more than $1 million to a class of approximately 2,500 security officer applicants. Target had administered a “Psychscreen” exam to evaluate applicants’ judgment skills and emotional stability. The California court held that the test violated the California Constitution’s right to privacy, as well as California statutory prohibitions against religious and sexual orientation discrimination. Soroka v. Dayton Hudson Corp., 18 Cal. App. 4th 1200 (1991). The subsequent widely publicized settlement is one reason many companies avoided psychological tests in the 1990s. In July 2000, Rent-A-Center agreed to pay $2.1 million to resolve a class action involving 1,200 employees who alleged that the company’s use of the MMPI personality test violated the California Constitution, plus numerous federal and state statutes. Although most states do not have a constitutional right to privacy, states do typically recognize common-law privacy rights. Because employee privacy is a fluid and evolving area, employers outside California cannot assume they will remain insulated from such privacy-based challenges to employment tests. In-house counsel need to minimize legal exposure without unduly constricting employee selection systems. Five steps may help achieve these goals. First, counsel must inventory and review current selection methods to find out what tests are in use or are being contemplated. Counsel advising larger companies should not assume that hiring tests are not being used in far-flung subsidiaries, divisions or locations just because they are not used at corporate headquarters. Second, employers should assess whether employment tests are necessary to achieve their business purpose. Perhaps the same selection goals can be accomplished with more structured interviews, with more focused recruiting or by having candidates observe a job being done to make sure they are really suited for the position for which they’ve applied. A combination of these techniques and others may cause a company to conclude it doesn’t need a paper and pencil test as part of its selection process. Don’t make tests the only factor in hiring decisions. Third, many experts recommend using test results as a factor — but only a factor — in selecting candidates. This may make sense, but more from a business perspective than a legal one. Under Title VII at least, a discriminatory selection technique that is a factor in hiring decisions can give rise to liability, even if it is not the main or determining factor. Fourth, tests should be customized to measure performance on the job in question. Use of commercially available tests “off-the-shelf,” without any assessment of whether particular inquiries are job-related, poses substantial risk for almost any company. That these tests have ostensibly been “validated” in relation to some jobs at some point in the past may be of little value in defending their use today. Lastly, tests should be validated in accordance with EEOC’s Uniform Guidelines on Employee Selection Procedures. Even if a test has a disparate impact on minorities or women, it will be considered lawful under Title VII if it is “job-related.” In testing vernacular, this requires that the test be validated under one of three methods set out in the Uniform Guidelines. “Construct validity,” the most widely used method, requires “data showing that the procedure measures the degree to which candidates have identifiable characteristics which have been determined to be important in successful performance in the job for which the candidates are to be evaluated.” To comply with the guidelines, validity analyses must be current (in that they consider how a job is currently being performed) and otherwise applicable to the particular job in question. In conclusion, court approval of hiring tests for police or fire departments should not be taken as judicial endorsement of employment tests generally. Private-sector employers who use selection exams need to be aware of their risks, not only under Title VII, but also under the ADA and state privacy law analysis. Where tests have been validated in relation to particular jobs, they can play a lawful and constructive role in the hiring process. Where they have not, they can be a lawsuit waiting to happen. Condon McGlothlen is a partner in the Chicago office of Seyfarth Shaw, www.seyfarth.com, where he advises employers on all facets of employment law compliance.

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