Being under the authority of the Fifth Circuit, Texas employers have been given a bit of a pass when it comes to Title VII compliance. However, in 2023, the Fifth Circuit Court of Appeals broadened its interpretation of what constitutes an adverse employment action under Title VII of the Civil Rights Act of 1964. This action has increased employer exposure for actionable employment discrimination.
Add to this the Equal Employment Opportunity Commission’s (EEOC) recent decision to hold employers liable for AI-driven discrimination in the hiring process, and many Texas employers are going to need to review their policies and procedures to make sure they are in compliance with the new, more restrictive laws.
Employment Discrimination in Texas After Hamilton v. Dallas County
Title VII says that it is illegal for an employer to discriminate against any individual with respect to “the terms, conditions, or privileges of employment” on the basis of race, color, religion, sex, or national origin. For more than 30 years, the Fifth Circuit had interpreted the language of Title VII to prohibit employer actions only if they affected ‘ultimate employment decisions’ such as ‘hiring, granting leave, discharging, promoting, or compensating.’
In Hamilton v. Dallas, the Fifth Circuit decided its previous decisions had too narrowly interpreted the plain language of Title VII. The court ruled that scheduling preferences favoring male employees over female employees did indeed affect the terms, conditions, or privileges of employment and, therefore, violated the proscription against discrimination on the basis of sex.
This expansion of potential liability may be new to Texas, Louisiana, and Mississippi employers, but it follows the interpretation by the U.S. Supreme Court and the other circuit courts of appeal. The U.S. Supreme Court has said employees may have a legal remedy for discrimination with regard to “benefits that comprise the incidents of employment” and are not limited to only those employer actions having a “concrete effect on employment status.”
What the Fifth Circuit failed to do that other circuit courts have done is to establish a minimum level of harm an employee must experience before Title VII is violated.
Mudrow v. City of St. Louis
The U.S. Supreme Court decision in Muldrow v. City of St. Louis is expected in 2024 and may help Texas employers better understand what they can and can’t do in the wake of Hamilton v. Dallas. The Court will decide whether there must be an additional showing of harm beyond the discriminatory actions of an employer in order to violate Title VII.
Muldrow was a female police officer who was forced to transfer to another division. She received the same pay and rank but lost other desirable working conditions related to scheduling, responsibilities, and work environment.
Based on Eighth Circuit precedent, St. Louis is arguing that the transfer did not violate Title VII because it did not result in a “material employment disadvantage.” Muldrow is arguing an additional showing of harm is not necessary because the discriminatory transfer itself is what Title VII prohibits.
A decision in favor of Muldrow could potentially broaden the scope of employer discrimination liability for other types of discrimination claims and encourage more employees to bring Title VII actions.
The EEOC Says Employers Will be Held Responsible for AI-Driven Discrimination
As the use of AI continues to penetrate the way businesses operate, more companies are turning to AI to assist with the recruitment and hiring of employees. While AI may improve efficiency and fairness in hiring, if the data used by AI to make decisions contains bias, it can result in prohibited discrimination under Title VII.
In May of 2023, the EEOC issued a technical assistance document to provide guidance for employers who use “algorithmic decision-making tools” for employment selection. The document was primarily concerned about the possible disparate impact these tools may have on Title VII protected groups.
The EEOC advises employers to determine whether the AI they are using produces a selection rate for a protected group that is substantially less than the selection rate for another group. Selection rates are determined by dividing the number of applicants by the number of hires for a particular group. Selection rates are then compared by dividing the lower selection rate by the higher selection rate. If the resulting percentage is less than 80%, there is an inference that the difference is substantial. The 80% rule is not hard and fast but can be used as a general guideline.
iTutorGroup
The EEOC recently settled the first AI-driven discriminatory hiring lawsuit against iTutorGroup. AI was used to hire U.S.-based individuals to provide English language tutoring services to students in China. The hiring software was programmed to reject female applicants age 55 and older and male applicants age 60 and older and violated the Age Discrimination in Employment Act (ADEA). iTutorGroup was ordered to pay $365,000 to more than 200 potential tutors automatically rejected because of age.
In its Strategic Enforcement Plan for 2024-2028, the EEOC is prioritizing the elimination of barriers in employee recruitment and hiring and will focus enforcement efforts on employer use of technology, including AI. Based on all these recent EEOC actions, it appears clear employers will not be able to avoid liability by using third-party vendors who use discriminatory algorithmic tools in the employment selection process if the vendors are given the authority to act on behalf of the employer.
What Recent Changes in Employment Discrimination Laws Mean for Texas Employers
Title VII requirements apply to employers in Texas with 15 or more employees. Recent changes in employment discrimination laws evidence a shift toward greater protections for employees and job seekers and an increase in potential liability for employers.
Unless an adverse employment action can be shown to be job-related and consistent with business necessity, subject employers now need to assess all of the imposed terms, conditions, and privileges of employment to ensure they do not violate Title VII laws. Employers using AI to screen job applicants must make sure their software programs do not contain biased data that causes a substantially adverse impact on a protected group.
Texas employers can get advice on the best practices to comply with employment discrimination laws and avoid costly litigation by contacting the labor and employment law attorneys at Fee Smith & Sharp, LLP.
