A federal administrative law judge recently ordered Enterprise RAC Co. of Baltimore to pay more than $6.6 million in lost earnings and benefits to 2,336 African American applicants who the judge said were wrongfully denied employment in the company’s management trainee program.

The ruling was based on a yearslong investigation and a lawsuit filed in 2016 by the U.S. Department of Labor’s Office of Federal Contract Compliance Programs. The office enforces certain discriminatory practices by businesses that contract with the federal government. Private businesses that do business with federal government agencies subject themselves to its oversight.

The judge determined that Enterprise engaged in a “pattern and practice” of discrimination against African American applicants for entry-level management jobs over a 10-year period. The judge ruled that the company engaged in a practice of “disparate impact,” which is a form of discrimination that occurs when neutral policies result in a disparate impact on a protected characteristic — here African Americans.

The office’s review determined that African American applicants were substantially more likely to be rejected at the initial screening stage and after the first interview than white applicants.

The judge ordered relief to include:

  • Providing back wages with benefits and interest, which will be at least $7.2 million.
  • Extending job offers to 182 rejected African American applicants by July 31, 2021, including pay as if they had been hired at the time of their rejection.

Based on this relief, the Department of Justice estimates the total value of the recovery to amount to about $16.3 million.

The judge ordered that Enterprise is prohibited from contracting with the federal government until it agrees to implement specific steps to address the effects of past discrimination and prevent it from happening again.

Regardless of whether a business is a federal contractor, all organizations need to tighten up on their hiring process to avoid disparate impact or discrimination. Employers that are not federal contractors also can be sued for disparate impact pursuant to laws enforced by the Equal Employment Opportunity Commission.

In reviewing hiring practices, employers should:

  • Develop a documented hiring process and follow it. If your hiring practices are tested, each step of the process will be scrutinized, from the job posting, to interviews and background checks so assess where individuals were rejected or accepted.
  • Review job descriptions and postings to make sure that requirements are legitimate and needed for the position. For example, if you screen out applicants without a high school diploma, make sure that diploma is an actual requirement for successful performance of the job.
  • Regularly assess whether your hiring process has a disparate impact. Federal contractors are required to track the race and gender of all applicants so the disparate impact analysis can be run. In general, employers are expected to hire applicants from one group (for instance women) at a rate of at least 80% of that for the other group (such as men). The analysis will depend on the number of applicants in each category, and then the hiring rate for each.
  • When disparate impact is found, employers should determine the cause of the disparate impact and whether the basis of the disparity can be removed.
  • Employers need to make sure their hiring process is well-documented, including the reason(s) why candidates are rejected or offered the position. Information on the Labor Department’s compliance office can be found at: https://www.dol.gov/ofccp/.

Karen Michael is an attorney with Richmond-based KarenMichael PLC. She can be reached at kmichael@karenmichaelconsulting.com.

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