U.S. Supreme Court Significantly Narrows An Employer's Potential Statute Of Limitations Defenses To Disparate Impact Claims

In Lewis v. City of Chicago, No. 08-974 (May 24, 2010), the U.S. Supreme Court unanimously ruled that plaintiffs may challenge the application of an employment practice with an alleged disparate impact on protected employees even if they have not timely challenged the adoption of that practice. The Supreme Court’s decision reinstates a class action lawsuit brought by African-American firefighter applicants alleging that the City of Chicago’s employment practices had a disparate impact on the basis of race in violation of Title VII of the Civil Rights Act of 1964. The decision will make it more difficult for employers to defeat disparate impact claims as untimely, and lower the barriers to institution of broad-based class actions challenging employment practices.

Applicants’ Challenge To Selection Process

In Lewis, African-American applicants challenged the City of Chicago’s selection process for hiring new fire fighters. The City administered a written examination to over 26,000 applicants seeking to serve in the Chicago Fire Department in July 1995. After notifying applicants of their scores, the City announced in January 1996 that it would be drawing randomly from those who scored 89 or above out of 100, whom the City deemed “well qualified.” The City also announced that based on the limited number of positions available, those applicants who scored between 65 and 88 were deemed “qualified” but were unlikely to be hired because of the large number whose scores had placed them in the “well qualified” category. However, the “qualified” applicants would remain on the list of potential selectees in case the City exhausted the list of “well qualified” applicants.

On May 16, 1996, the City selected its first class of applicants based on the cut-off score of 89 or above, and selected the second group on October 1, 1996. The City repeated the process nine more times over the next six years. On March 31, 1997 (approximately 420 days after the City’s January 1996 announcement), an African-American applicant who scored in the “qualified” range and had not been hired as a candidate firefighter, filed a charge of discrimination with the EEOC alleging that the City’s practice of selecting for advancement only applicants who scored 89 or above caused a disparate impact on African-Americans in violation of Title VII.

Seventh Circuit Holds Plaintiffs’ Suit Was Untimely

The City sought summary judgment on the ground that the plaintiffs had failed to file a charge with the EEOC within the 300-day limitations period after their claims accrued. The City admitted that the test had a disparate impact on African-American applicants, but argued that plaintiffs’ claims were untimely because the limitations period accrued in January 1996, when the City sent applicants their test scores and announced that they would be selecting those who scored an 89 or above and were deemed “well-qualified.” The district court denied the City’s motion, concluding that the City’s “ongoing reliance” on the 1995 test constituted a continuing violation. The district court certified a class of 6,000 African-American applicants who scored in the “qualified” range. The 7th Circuit reversed, holding that the plaintiffs’ suit was untimely because the only discriminatory act was the sorting of scores into “well qualified,” “qualified,” and “not-qualified” categories and that the later hiring decisions were merely automatic consequences of the discriminatory act, not fresh violations.

U.S. Supreme Court Lower The Barriers To Institution Of Broad-Based Class Actions

In a unanimous decision authored by Justice Scalia, the U.S. Supreme Court reversed the 7th Circuit and determined that the issue was not whether plaintiffs’ charge was timely, but whether the challenged practice could be the “basis for a disparate-impact claim at all.” The Supreme Court reasoned that the City’s January 1996 decision to adopt a cut-off score gave rise to a freestanding disparate-impact claim, but the real question was whether each subsequent use of the cut-off score to select new applicants constituted a new violation by the City. The Supreme Court found that it did, thus drawing a distinct line between the accrual period for disparate-treatment cases (intentional discrimination), and disparate-impact cases (employment practices that may be facially neutral but have a discriminatory impact on a protected class). It has been settled law since Delaware State College v. Ricks, 449 U.S. 250 (1980) that intentional discrimination claims accrue when the discriminatory decision is made, not when it is executed. In other words, if an employer communicates its decision to terminate an employee, the claim accrues when the decision is communicated, not on the actual termination date, which is merely a consequence of the decision.

In Lewis, the Supreme Court determined the same analysis does not hold for disparate-impact claims because a new violation occurs each time the unlawful practice is implemented. The Supreme Court reasoned that, for intentional discrimination cases, the intentional act has to occur within the limitations period. With disparate-impact cases, because no intentional act is required, the adoption of the employment practice and the application both give rise to an independent cause of action. The Supreme Court acknowledged that its decision may result in employers facing new disparate-impact suits for practices they have regularly used for years, but that by enacting the disparate-impact cause of action § 2000e-2(k)(1)(A)(i) under Title VII, Congress allowed such claims to be brought and “if that effect was unintended, it is a problem for Congress, not one that federal courts can fix.”

The Supreme Court's ruling significantly narrows an employer's potential statute of limitations defenses to disparate-impact claims, and employers should therefore be aware that they may be subject to disparate-impact claims based on policies instituted years ago if such policies are still used to make employment decisions. The Supreme Court also has sent a clear signal that if Congress did not intend to open the door to such lawsuits, it is not up to the federal courts to remedy the problem.

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