Companies are expanding campus recruiting and pouring resources into employee referral programs, which have become the preferred methods for attracting high-quality candidates. The upswing in hiring through these methods, however, translates into a higher risk of discrimination charges.
The new EEOC Compliance Manual issued on April 19, 2006, updates guidance on the prohibition of discrimination under Title VII of the Civil Rights Act of 1964. The manual explicitly warns that recruiting only at select colleges or relying on word-of-mouth recruiting, which includes employee referral programs, may generate applicant pools that do not reflect diversity in the labor market.
The new manual places a greater burden on employers to eliminate potential sources of discrimination in hiring. Workforce management executives may operate with full awareness of the legal pitfalls involved in the later stages of the recruiting process, but constructing an applicant pool carries its own set of potential lawsuits. In the rush to fill positions, these risks are too often ignored.
Race and Referrals
The EEOC’s list of "best practices" in the new manual explicitly recommends that employers eliminate word-of-mouth recruiting in non-diverse workplaces.
"Given the new guidelines, the EEOC will begin to look more closely at employee referral programs," says Gayla Crain, managing partner at Epstein Becker Green Wickliff & Hall in Dallas. "Employers should expect to be asked to document the applicant pool generated by the program."
Documentation is a major issue.
"Employers are good about keeping records for candidates who are interviewed and hired, but they often fall short on retaining documentation related to the applicant pool," Crain says.
Reliance on the employee referral program at Carl Buddig & Co., a major Chicago-area meat processor, led to discrimination charges when the EEOC discovered that African Americans were rarely hired. After two and a half years of litigation, the company paid $2.5 million and revamped its recruiting process in September 2004 to settle the lawsuit.
"Selection guidelines are in place and apply to employee referrals," Crain says. "Employers should review their programs to determine if minority employees are referring only minority candidates, or nonminority employees are referring only nonminority candidates."
Crain advises employers to ensure that at least 20 percent of the applicants produced through the referral program are minorities and that at least 20 percent are female for predominantly male positions or 20 percent male for female positions.
"If the employee referral program does not generate these results, the employer should take this as a warning sign and add another source of applicants to balance the pool," she says.
For jobs that have that have historically drawn relatively few male applicants, such as administrative assistant or secretary positions, the EEOC is less likely to challenge the referral program. But if the recruiting process fails to produce a sufficient number of applicants by race or national origin, the EEOC will scrutinize the practice.
To balance the pool, employers can use job boards, community resources or recruiting firms in an attempt to fix the problem.
"The enforcement agencies will look at the employer’s efforts to correct the balance," Crain notes.
In addition to the warnings about word-of-mouth recruiting, the new EEOC manual reminds employers that Title VII may be violated if a statistically significant racial disparity results from recruiting exclusively from predominantly white schools or predominantly black schools. The manual states that employers are responsible for ensuring that the applicant pool reflects the composition of the qualified labor force.
"There is no law that says you cannot selectively exclude recruiting sites, but the EEOC guidelines properly suggest that prudent employers consider adverse consequences when selecting the sites," says Juliann H. Panagos, an attorney with McGlinchey Stafford in Houston.
Panagos cautions employers to watch for situations where a company receives a résumé in response to a solicitation, but from a candidate outside the selected states or colleges where the company recruits.
"That applicant would have to be considered and, if rejected, could include in his charge that the company excluded his state or college for discriminatory reasons," she says.
Another issue to consider is where a company has different cutoff standards for different colleges when accepting applications. Some organizations take the top 30 percent from Ivy League schools, but insist on the top 5 percent from other schools that may have a higher minority population.
"Again, any such distinction should be linked to a legitimate business reason in advance, such as linking the cutoff percentage number to the college’s average SAT scores," Panagos advises.
The EEOC manual also warns that employers may be in violation of Title VII if the educational requirements for a position exceed what is needed to successfully perform the job and disproportionately exclude certain racial groups.
In addition to validating their educational requirements for jobs, employers must also bear in mind that the EEOC and the federal and state courts continue to scrutinize other requirements employers use to screen out applicants, including excessive years of experience, English-language skills, arrest records and bankruptcy and credit issues.
Panagos reminds employers that they should store all résumés for two years, in keeping with EEOC guidelines.
"There is no need to keep unsolicited résumés, but every résumé received in response to a posting should be kept for two years, even those that are totally off the mark for the job," she says.
In addition to EEOC mandates, the 16,000 U.S. companies with 25 million employees that do business with the federal government have additional concerns. Federal contractors are subject to Office of Federal Contract Compliance Programs audits of affirmative action plans plus compliance checks and reviews.
In 2005, the OFCCP recovered a record $45 million for employees who had been subjected to unlawful discrimination, with almost all of that amount collected in cases of systemic discrimination.
"Federal contractors have the obligation to engage in outreach efforts to ensure diversity in the workforce," Panagos says. "If there is an identified area of underutilization or nonrepresentation of a group of employees, the OFCCP may look at the company’s recruiting patterns, note that the company is not recruiting from, for example, historically black colleges, and find that there is not an effective outreach effort. The requirement to expand recruiting efforts can be included as part of a consent decree."
As employers increasingly turn to search firms for assistance in recruiting, questions arise about legal responsibility for discriminatory actions. The answers revolve around the point at which the discriminatory action arose.
Ultimately what the EEOC cares about is who participated in the decision-making process that touched off the discrimination charge, says Kathleen O’Toole, director of employment law and litigation management for Manpower Inc., the staffing giant based in Milwaukee. "Whoever is responsible for the decision that led to the claim is responsible."
If the vendor decides not to send a candidate to a client and that candidate claims discrimination, the responsibility rests with the vendor. If the vendor sends five candidates and the client interviews and hires one, the client is responsible for charges raised by the disappointed interviewees.
"If the allegation is that recruiting did not tap a diverse applicant pool, the responsibility rests with the search firm," O’Toole notes.
A relatively simple situation occurs when the client issues a discriminatory order to the search firm.
"We still get calls from clients saying that they only want to see male candidates, for example," O’Toole says. "We use that as an opportunity to educate the client about anti-discrimination issues. If the client refuses to reissue instructions in neutral terms, we refuse to execute the request."
If an employer issues a discriminatory request and the search firm executes it, both parties are responsible for any discriminatory results.
A more complex case occurs when the client’s instructions to the search firm are neutral, but the execution may lead to disparate impact. Manpower carefully screens instructions for potential disparate impact claims.
"We tell clients, for example, that we cannot use height and weight criteria for a heavy industrial position, but we can use specific job requirements, such as the ability to lift a certain number of pounds with a certain frequency," O’Toole reports.
O’Toole notes that workforce management executives and staff are often well-versed in discrimination issues, particularly at midsize and large companies.
"But they face an uphill battle in communicating these issues to the people they support, including hiring managers," she says.
Supplying a diverse group of candidates helps hiring managers avoid discrimination claims.
She advises employers to ensure that recruiters are posting positions in ways that reach diverse groups, including niche job boards and community organizations that address protected groups.
"It is imperative for the employer to understand the importance of posting everywhere to ensure a diverse applicant pool," she says.
O’Toole also advises companies to follow specific essential steps to avoid discrimination charges.
"First, every employer needs a documented hiring process that explains how every job is filled, including the process for reviewing résumés and the methodology selected for generating interview questions," she says.
"Every decision related to the process must be made upfront and the same process must be used for all candidates," O’Toole notes. "Obviously, the process will be nuanced based on the specific position, but there should be a consistent policy on the steps that must be taken. And you must train people in this process."
Finally, HR should conduct biannual or annual audits for the hiring process. The audit consists of selecting a recently filled position and carefully reviewing how it was filled. It may be useful to include counsel in this review.
"Following these steps ensures that all applicants are treated the same way, which is the best way to avoid charges or to win if charges are brought," O’Toole says. "You need to be prepared to impress an EEOC investigator."
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