Will Your Employee Test Make the Grade? Considerations for Applicant and Employee Testing

With demand increasing for efficient applicant and employee screening due to the proliferation of online job applications and rising safety concerns, scrutiny and enforcement have also increased.  Selection procedures (including testing) may occur during the hiring process, but may also be used for determining promotions, retention, transfer, and training decisions, which are subject to many of the same rules.
 
There is a wide spectrum of testing types.  Cognitive tests assess reasoning, memory, perceptual speed and accuracy, and arithmetic and reading comprehension skills.  Physical ability tests measure the applicant’s or employee’s ability to perform a particular task, strength of a specific muscle group, and stamina.  Personality and integrity tests assess the degree to which a person has certain traits or dispositions (e.g., dependability, safety).  Also included in this spectrum are disability-related inquiries, medical examinations, and psychological tests, which are governed by the three-stage analysis set forth in the Americans with Disabilities Act (ADA).  The ADA contains different rules for disability-related inquiries and medical examinations made: (i) pre-offer (no medical examinations); (ii) post-offer, but before work begins (employer has much more discretion here, so long as it does the same thing for all entering employees in the same job category); and (iii) after employment begins (permitted only if they are job-related and consistent with business necessity).  Other ADA considerations are discussed below.
 
Importantly, employer tests are governed by at least three different federal statutes.  First, Title VII of the Civil Rights Act of 1964 permits employer tests as long as they are not “designed, intended or used to discriminate” on the basis of any protected class association.  Title VII also prohibits intentional discrimination in testing (“disparate treatment”) and the use of tests that have the effect of disproportionately excluding persons in a protected class (“disparate impact”).  Also, with respect to scoring tests, Title VII prohibits employers from adjusting the scores of, using different scores for, or otherwise altering the results of employment-related tests on the basis of any protected class association.
 
With respect to disparate treatment claims, the first step is identifying and establishing differential treatment.  Is there any evidence of bias, discriminatory statements, or a culture of discrimination that the applicant or employee can use to demonstrate the intent to discriminate through the testing mechanism?  Employers will not only have to demonstrate that there was a legitimate, non-discriminatory reason for the differential treatment, but will also have to defend this reason against claims that it is merely offered as pretext for some underlying discriminatory motive.
 
With respect to disparate impact claims, where the test is facially neutral but disproportionately excludes a protected class, employers will likely have to engage in a statistical analysis of their test results.  The Uniform Guidelines on Employee Selection Procedures (UGESP), which establishes uniform standards for employers to use in selection procedures and to address adverse impact, test validation, and record-keeping requirements, establishes the “4/5^ths” or “80%” rule for determining adverse impact.  This rule compares the selection/passage rate for the group with the highest rate with the selection rate of other groups and if the other groups do not have a passage rate equal to or greater than 80% of the highest group, this is considered evidence of adverse impact.  Although the UGESP is not law, it was adopted jointly by the U.S. Civil Service Commission, the U.S. Department of Labor, the U.S. Department of Justice, and the Equal Employment Opportunity Commission and is referenced with deference in numerous judicial decisions.  Thus, employers should reference it when analysing their tests.
 
The UGESP also contains three different ways employers can show that their tests are job-related and consistent with business necessity under a disparate impact analysis.  Content validity is where the employer justifies a selection procedure by showing that it representatively samples significant parts of the job.  Criterion validity allows for test validation by demonstrating that statistical relationship between the scores on the test (or selection procedure) and measures of job performance.  Construct validity identifies the psychological trait (construct) which underlies successful job performance then devises a selection procedure to measure the presence/degree of that construct in the applicant or employee.  Notably, even if the employer is able to defend against a claim of disparate impact by demonstrating that the test or selection procedure is job-related and consistent with business necessity, the applicant or employee may still prevail if they are able to show that there is a less discriminatory alternative available.  Thus, employers should regularly review their testing and selection procedures and revise them when a less discriminatory option becomes available.
 
Title I of the ADA prohibits use of employment tests that screen out or tend to screen out individuals with a disability, unless the test can be shown to be job-related and consistent with business necessity.  It also requires the selection and administration of tests to be done in the most effective manner to ensure that the tests accurately reflect skills and aptitude and do not reflect any impairment.  The ADA also requires employers to make a reasonable accommodation, including during the administration of tests, unless it would impose an undue hardship.  The ADA also regulates medical examinations and disability-related inquiries under the three part analysis discussed above and employers should take note of the rapidly expanding definition of disability under the ADA.  Also, keep in mind that the Age Discrimination in Employment Act prohibits discrimination based on age (over 40) with respect to any term, condition, or privilege of employment, and also prohibits disparate treatment and disparate impact with regard to age.
 
Penalties imposed in recent years based on disparate impact liability in employer testing cases and agency enforcement actions have ranged from $200,000 to $8.5 million, and offer some best practices: First, employers should ensure that their tests are validated for the positions and purposes for which they are used and that they comply with the UGESP (including regularly auditing job procedures and requirements and updating their tests accordingly).  Remember, one size does not fit all here and tests that were not properly tailored to the skills of the position have led to some of the larger penalties.  Second, employers should be thoughtful at every stage of test development, administration, and scoring.  Third, if it is determined that a test or selection procedure screens out a protected group, the employer should determine if there is an effective, less discriminatory option.  Fourth, employers should train managers and test administrators on proper scoring technique and also disseminate and enforce rules regarding collection and preserving the relevant records.  Finally, if the employer uses an outside vendor to conduct or score the test, it should perform appropriate due diligence on that vendor, because the employer, and not the vendor, will usually be the one left holding the bag.  Implementing these best practices will give the employer a better chance at receiving a passing grade.
 
Tyler Volm is an attorney with Barran Liebman LLP in Portland, Oregon, where he practices employment litigation.  He works with business owners and managers to ensure compliance with changes in the law, and defends employers against complaints when they arise.  Tyler represents employers in a wide range of industries in state and federal court, and is known for his creative solutions in both the courtroom and board room.  Tyler is a Director on the Multnomah Bar Association’s Young Lawyers Section Board, and a volunteer attorney with the Lewis & Clark Small Business Legal Clinic.  Tyler earned his B.A. at the University of Oregon, and graduated cum laude from Lewis & Clark Law School with a Business Law Certificate in 2008. Contact him at 503-276-2111 or tvolm@barran.com.