“Withholding Increases” May Be Unlawful Employment Discrimination, Federal Court of Appeals Says

An opinion from the Ninth Circuit Court of Appeals earlier this year, Freyd v. Oregon, clarifies what may constitute unintentional, but still illegal, discrimination under federal nondiscrimination laws. This decision to use “retention increases” could also have a significant impact in many corporate environments, especially since this same analysis should apply to “retention bonuses.”

Claims of “unequal impact” under Title VII

Under Title VII of the Civil Rights Act of 1964, a seemingly neutral employment policy can have an illegal “unequal impact” if its effects are disproportionately perceived by members of a specific sex, race, color, religion, or national origin. . 42 USC §2000e-2 (k) (1) (A) (i).

To be successful in a Title VII disparate income claim, the plaintiff must:

  • to establish a prima facie disparate impact event, and
  • demonstrate that the policy was not “work related” or justified by “business necessity”.

Background of the Freud Case

Plaintiff Jennifer Freyd is a professor of psychology at the University of Oregon. He filed his lawsuit in court alleging that the University was paying him substantially less, up to $ 42,000 a year, than four of his male colleagues of equivalent rank and seniority. Freyd’s lawsuit included several causes of action, including a claim under Title VII that the University’s policy had a disproportionate impact on the basis of sex.

In 2016, Freyd’s department conducted a self-assessment in which it noted that the salary gap between male and female faculty members was likely the result of “retention increases.” The University had the practice of negotiating a higher salary for professors who were being courted by outside institutions. According to the department’s findings: “Teachers who have not sought multiple outside offers over time have been progressively and significantly behind in salary. In fact, when we control the number of years since the last major hire / retention negotiation, the gender gap completely disappears. “

Freyd maintained that of 20 recent retention negotiations within the department, only four involved faculty members. Of those four, only one negotiation was successful.

Their lawsuit alleged that the University’s retention bargaining policy had an unlawful discriminatory impact on the basis of sex. It stated, among other things, that:

  • the University enters into fewer negotiations with female faculty members; Y
  • negotiations with faculty members are less likely to be successful.

In essence, Freyd stated that, for gender-related reasons, female teachers were less likely to seek, receive, or consider outside offers. Consequently, Freyd alleged that the University’s retention bargaining policy disproportionately favored male faculty members.Yes, which puts female teachers at a relative disadvantage.

In 2019, the U.S. District Court for the District of Oregon accepted the University’s motion for summary judgment on all of Freyd’s claims, which he appealed.

Ruling of the Court of Appeals

On appeal, the US Court of Appeals for the Ninth Circuit reversed the District Court’s grant of summary judgment on several key issues, including Freyd’s Title VII disparate impact claim.

Establishment of a prima facie case of unequal impact discrimination

In addressing Freyd’s evidence, the Court reviewed the “rule of four fifths, ”A rule of thumb developed by the Equal Employment Opportunity Commission (EEOC). According to this analysis, “a selection practice is considered to have a disparate impact if it has a selection rate for any race, sex or ethnic group that is less than four-fifths (4/5) (or eighty percent) of the rate of the group with the highest rate “.

The Court also noted that there is no “clear line” that dictates when a sample is large enough to build a case. Despite Freyd’s limited data set, the Court considered that it might be sufficient to build a case of disparate impact.

Resist the defense of the business necessity of the university “

The Ninth Circuit also vacated the District Court regarding the University’s affirmative defense.

First, the Court addressed whether the withholding increases were really a “business necessity”. They annulled the summary judgment on this issue for two reasons:

  1. the conflicting evidence on whether the policy was necessary to retain talented teachers, and
  2. Freyd was not challenging the practice of retention increases, but rather the practice of granting retention increases without increasing the salary of comparable faculty members.

In addition, Freyd offered a potentially viable alternative policy. Freyd had proposed that the University provide salary adjustments to tenured professors in a similar way when one receives a retention increase. The University questions the feasibility of such a program, but the Court nevertheless indicated that it could decide in Freyd’s favor even if the University establishes a business necessity defense.

To go

Freyd’s case, which is also directly applicable in high-level settings, illustrates important principles about what is necessary to prevail over a disparate impact claim under Title VII.

To prove unequal impact, the plaintiff must demonstrate:

  • that the impact of a policy falls disproportionately on a protected group, and
  • that the policy is not “work related” or is not justified by a “business necessity”.

When an employer’s policy is shown to create a disproportionate impact, the statistical significance of the quantitative evidence is important. However, there is no clear line established for when the statistical evidence is sufficient to constitute a prima facie case of disparate impact. Tools such as the “rule of four fifths” are useful in determining whether a disparity is significant enough to prove an illegal adverse impact despite a limited sample.

If a prima facie If it is met, the employer must demonstrate that the neutral employment policy is:

  • work related, and
  • a business need

Even if the employer meets this burden, a plaintiff can still prevail by showing that the employer has refused to adopt a less discriminatory alternative policy that would achieve its objectives.

This decision should prompt a fresh look at how “retention increases” are used not only in academia, but also in corporate settings.

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