An Administrative Law Judge (ALJ) ruled against the OFCCP, granting VF Jeanswear Limited Partnership summary judgment in a disparate impact case. The OFCCP accused VF Jeanswear of engaging in employment practices having a disparate impact on “non-Asians”, violating Executive Order 11246 and federal regulations. The ALJ reasoned that “non-Asians” are not a “race” within the meaning of Executive Order 11246 and the federal regulations.

Factual Background of the Case:

The OFCCP alleged that in 2005, VF Jeanswear discriminated against 288 qualified non-Asian applicants for Operative Job Group positions. The job functions included laundering jeans, pressing, sewing, tacking labels in pockets and waistbands, and inspecting finished jeans. Employees worked at piecework rates, at VF Jeanswear’s Winston-Salem North Carolina plant, which has since closed. VF Jeanswear took referrals from North Carolina Employment Security Commission (NCESC) and an employee referral program.  VF Jeanswear allegedly interviewed more referrals from its employee referral program than from the NCESC.  Out of a non-Asian applicant pool of 342, VF Jeanswear hired 54 (15.8%). In contrast, out of 168 Asian applicants, VF Jeanswear hired 73, (43.5%). Based on this significant disparity in hiring percentages, the OFCCP found that VF Jeanswear discriminated against 288 qualified non-Asian applicants.

The OFCCP filed a complaint against VF Jeanswear on May 18, 2011. The OFCCP hired a labor economist to statistically analyze VF Jeanswear’s referral and hiring practices. The economist’s report used racial identification data for the region in the occupational category in the 2000 US census that most closely fit the jobs in question. The census figures were as follows: White, 61.5%, African-American, 24.3%, Hispanic 10.2%, Asian 2.4%. The percentages of each group hired by VF Jeanswear, in contrast, were: White, 7.7%, African-American 23.6%, Hispanic 18.9%, Asian 44.9%.

VF Jeanswear retained an industrial psychologist to address the demographics of its workforce, which includes a large percentage of Vietnamese immigrants. The industrial psychologist testified that a) applicants referred by employees were given priority in selection interviews; b) Asian employees were i) much more likely to use the referral system; ii) made the most referrals and iii) were highly likely to refer other Asians.  Employees were not paid for providing referrals; management had no control over who could submit referrals. VF Jeanswear received more referrals from the referral program than from NCESC. The number of applications exceeded the number of positions available.  VF Jeanswear gave equal weight and consideration to every employee referral, regardless of where it originated. English proficiency was not a job requirement, and VF Jeanswear provided Spanish and Vietnamese interpreters for interviews. It also provided statements of company policies in both languages.

The ALJ’s Reasoning:

The ALJ acknowledged that there in fact was a disparate impact between Asians and non-Asians hired for the positions in question. However, the ALJ noted that “non-Asian” is not a term found in the applicable regulations or common usage, and was an aggregation of three of the ethnic groups named in the regulations, Whites, African-Americans and Hispanics. The ALJ further noted that the percentage African-Americans actually hired were close to their percentage of the regional population, whereas Hispanics were “substantially overrepresented”. Whites, in contrast were the only group substantially underrepresented. The ALJ cited 41 CFR Section 60-33A, which provides that:

“the use of any selection procedure which has an adverse impact on the hiring, promotion, or other employment or membership opportunities of members of any race, sex or ethnic group will be considered to be discriminatory and inconsistent with these guidelines, unless the procedure has been validated in accordance with these guidelines, or the provisions of Section 6 of this part are satisfied”.

41 CFR Section 60-34B defines “race” and “ethnic” as “Blacks (Negroes) American Indians (including Alaskan Natives) Asians (including Pacific Islanders) Hispanics (including Mexicans, Puerto Rican, Cuban, Central or South American, or other Spanish origin or culture regardless of race), Whites (Caucasians) other than Hispanics and totals”.  The OFCCP’s labor economist was not asked to analyze the impact on any one of these particular groups, and the OFCCP never argued that there had been a disparate impact on any one of these groups. The labor economist instead argued in terms of a group of “non-Asians”, which was “apparently custom-designed for this case”, and that it was “unheard of to aggregate several ethnic groups”. Only one of those groups included in the aggregate was actually underrepresented.

Some Observations:

The US Supreme Court, starting with Griggs v Duke Power Co 410 US 424 (1971), has held that disparate impact is a form of discrimination because the practices have a discriminatory impact on groups that are supposed to be legally protected against discrimination.

The ALJ’s reasoning suggests that the case may have ended differently had the OFCCP focused solely on the underrepresentation of Whites, which is a “race” or “ethnic group” within the meaning of federal regulations.

Anti-discrimination laws identify Caucasians as potential victims of discrimination. Federal contractors therefore need to ensure that its hiring practices consider all groups identified in the federal regulations. In the meantime, the OFCCP can appeal the ALJ’s decision to the Administrative Review Board.

Best Practices for Federal Contractors:

At a minimum, federal contractors should consider the following practices to avoid similar OFCCP involvement:

1. Train managers and all HR employees involved in the screening and hiring process as to the anti-discrimination provisions of Executive Order 11246 and 41 CFR Sec 60-33A and 41 CFR Sec 60-34B, making it clear that Caucasians are also included as a “race” or “ethnic” group.

2. Periodically monitor and analyze hiring practices, paying particular attention to whether facially neutral practices may be adversely impacting a disproportionate number of protected classes.

3. Periodically review and update policies and procedures and Affirmative Action Plans to proactively ensure a diverse workforce.

For more information, please feel free to contact Ahmed Younies at 714-426- 2918 x. 1 or [email protected].