On the Legal Front: Surprise!

Rich Tonowski

America awoke on November 9, 2016 to the election of Donald J. Trump as its next president. So for many commentators, your humble author included, what might have been a ho-hum summary of the past year was transformed into the opportunity, if not the obligation, to prognosticate on the coming year. This, of course, was after the election had thrown prognostications into disrepute.

The annual roundup would have included matter-of-fact mention of major regulatory changes. But for some of these, the courts are already postponing, if not undoing, key initiatives of the Obama Administration that a Trump Administration might conclusively bury.

The major issue here is how a Trump presidency will impact the practice of I-O at the intersection of science and law. But changes to the general employment law climate will also get a few words.

One place to start is with the U.S. Equal Employment Opportunity Commission (EEOC), chief enforcer of laws affecting selection practices in the workplace that are a traditional I-O area. The new president’s authority to appoint a new chair and the upcoming general counsel vacancy1 have the potential to change the emphasis of EEO guidance and enforcement. These appointments perhaps have less immediate impact on substantive matters. EEOC is headed by a five-member bipartisan commission with staggered terms for the commissioners. Current Chair Jenny Yang indicated that she would serve out her term as a commissioner. That term expires in July 2017; hers is the earliest term to expire, and so presents the earliest opportunity for a Republican majority. 

Majority party is not necessarily indicative of agency litigation activity. During fiscal years (FYs) 2001–2008, roughly corresponding to the George W. Bush administration, EEOC filed 2,852 “merit” suits, that is, suits involving allegations of discrimination and not including subpoena enforcement or administrative matters. For FYs 2009–2016 under the Obama administration, there were 1,406 suits. For the Obama years, the average number of suits per FY was 176, about half that for the Bush years. Suits for FY 2016 (ended 9/30/2016) were 86, about half of the recent overall annual average. There can be multiple reasons for the change. Recent years have seen a focus on systemic discrimination, which can imply fewer suits with bigger payoff. Litigation activity is limited by the types of available cases and the resources to handle them. EEOC’s monetary recovery from presuit action is up considerably. The high point for overall monetary recovery in the Bush years was $290.6M in FY 2007. Every one of the Obama years beat that.

Adverse Impact

One big potential issue is the future of adverse impact theory. Arguably, there are problems with who qualifies as a member of the aggrieved demographic group (Self-identification? “Perceived as” by the employer? Third-party visual identification?), what constitutes a numerical disparity cognizable as having impact, specification of “job related” and “consistent with business necessity” as employer defenses in Title VII without defining what these mean, and ambiguity as to legitimate less discriminatory alternatives available to the employer. Then there are the matters of how to count applicants and perform statistical analyses. See Cohen, Aamodt, and Dunleavy (2010) for a practitioners’ survey on these matters.

Ricci (2009) held that taking race-based action to avoid adverse impact from a selection procedure was unlawful, absent a “strong basis in evidence” beyond just numerical disparity that the procedure was itself unlawful. The late Justice Scalia’s concurrence went further, anticipating the “evil day” when the courts would need to choose between the protections afforded by Title VII and those guaranteed by the U.S. Constitution. He questioned the government’s pressure on employers to achieve demographic parity, an aim unlawful for the government itself.

Competencies relevant for a given job are not necessarily evenly distributed across demographic groups; adverse impact, assessment for competency, and group identity may be intertwined, the “validity-diversity dilemma.”

The converse problem, at least from the perspective of this writer, is that there are instances where historically excluded groups are still excluded by facially neutral procedures that cannot be shown by professional standards (including the SIOP Principles [2003]) to be job relevant in how they are developed or used. Adverse impact has been the means to address this.

LeRoy (2016), extrapolating from Trump campaign themes, envisioned the possibility for adverse impact that, “A one-sentence bill, passed by Congress and signed by Trump, would end 50 years of bedrock antidiscrimination law.” 

What’s the probability of this happening? Adverse impact cases do not seem to be frequent; commentators have noted that they are not easy to prove and are expensive. The Department of Justice continues to bring cases in the public sector—big but few. Current EEOC emphasis has included adverse impact, but for the most part the few cases brought by the agency have not led to breaking new legal or professional ground. Credit and criminal history had particular emphasis; the agency won zero court decisions but got some favorable settlements. With litigation in conjunction with the “Ban the Box” movement regarding criminal history, consumer credit advocacy, and legislation at the state and municipal levels, the overuse2 of these considerations for employment seems to have been curbed (although plaintiff-side attorneys might say not curbed everywhere). This might be an area for adjustment of emphasis, but it’s not clear what objective is to be achieved through adverse impact legislation that inevitably would entail a major political fight.

Some of the same can be said about traipsing through the quicksand for revising the government’s Uniform Guidelines on Employee Selection Procedures (1978). EEOC put the Guidelines on its regulations review schedule for 2020, which does not imply action. One potential casualty of the transition is that SIOP’s Task Force on Contemporary Selection Methods, intended to address professional and technical issues with the EEOC, and barely started, might not be a priority for the new chair.

Pay Data Collection

Compensation systems that actually motivate outcomes desired by the organization and are administered fairly so as not to become demotivators are an I-O concern. A related EEOC activity is the plan to collect employer aggregate pay data starting in 2018 via the annual EEO-1 workforce reporting procedure. It is also another potential transition casualty. This procedure currently calls for demographic group numbers reported by occupational group. To this would be added a set of average pay categories crossed with the existing categories. Some employer-side stakeholders have called the project excessively burdensome and inherently useless. Other stakeholders see it as a tool for identifying and correcting pay discrimination. As with any other EEOC activities that are objectionable, the president can propose, and congress can enact, budget legislation that effectively starves the activity to death.

Other EEOC Priorities

Other current EEOC priorities that might be seen as attempts to expand the law involve pursuing LGBT discrimination as sex discrimination, examining implications of work arrangements such as the “gig economy” (think Uber) and joint employers (think franchises) for EEO law, and the potential positives and negatives for Big Data.3 Whether any of these would be deemed objectionable under the Trump Administration remains to be seen. The matter of franchisers has been controversial as it can arguably make the franchiser jointly liable for day-to-day operations over which it has little control.
Recent Controversial Regulations

“Stare decisis” (Legal Latin, “to stand by things decided”) has gotten a bad rap from those impatient with the lack of congressional action to change the law as they think it should change. New agency positions afforded deference by the courts have been seen as a possible work-around, upending areas of the law previously considered as settled. Opponents of following precedent may now become advocates. With the change in administration, such regulatory revision can change direction dramatically. The U.S. Supreme Court ruled that agency positions not originally promulgated with formal hearings and adoption proceedings can change as circumstances warrant. Stare decisis does not apply to agency policy positions or to rulings from bodies such as the National Labor Relations Board (NLRB). How much deference these changes get from the courts is another matter; the principle of following precedent likely would put the brakes on radical change absent an actual change in the law. 

Regulations promulgated by the U.S. Department of Labor (DOL), some pursuant to executive (presidential) orders, can change. Executive orders that triggered rule-making procedures likely would need to be undone with similar procedures not just by order. That will take time, limiting what might be changed in the initial days of the new administration. Some changes apply specifically to federal contractors: protection for LGBT employees, increased minimum wage, hiring goals for veterans and people with disabilities, permission for employees to discuss their respective pay, and scrutiny of a contractor’s record of employment law violations. This last item, the “Fair Pay and Safe Workplaces” rule (Executive Order 13673) has been controversial and has been labeled as the “blacklisting rule” by opponents. At issue is how violations would be considered for future contracts, where the alleged violation may not have been fully adjudicated or treated as a “nuisance complaint” by the employer, cheaper to settle than to fight. Again, it remains to be seen what Obama orders may not be objectionable to the new administration.

Some major changes are already stalling out in the courts—a cautionary note that presidents don’t always get what they want. DOL issued a change in the salary ceiling before an employee is exempt from overtime provisions in the Fair Labor Standards Act (FLSA), from $23,600 to $47,476. The effect would be for many workers to become eligible for overtime. This could have serious consequences for employers who are not prepared for such a major change in payroll costs. The salary threshold would be revised every 3 years. A court has issued a nationwide injunction, finding that the regulation’s dependence on salary did not take into account other factors in the law. (FLSA is an area where I-Os can contribute sound job analyses to settle what the employees do and what competency the job requires.) The suit was brought by 21 states and the U.S. Chamber of Commerce (State of Nevada, 2016.). The “blacklisting rule” also was stopped by temporary injunction (Associated Builders, 2016). A permanent national injunction was entered against DOL’s “persuader rule,” which would have forced disclosure of anyone (including attorneys) hired by an employer regarding opposition to union organizing efforts (National Federation of Independent Businesses, 2016).4 EEOC has also been rebuffed when its current position has not aligned with previous pronouncements.

For transgender students, which bathroom to use was the subject of Department of Justice rules favoring the choice of the student. This has been blocked, and employment considerations added, by court injunction. The court objected to an agency change apparently in conflict with previous regulations and no process to amend the regulations other than agency say-so. This subject will be addressed by the Supreme Court in Gloucester County Board of Education (2016). The broader issue of whether LGBT discrimination is already prohibited as sex discrimination under Title VII is pending in the courts. District courts have reached different conclusions. The Seventh Circuit decided that it was not prohibited, with the panel noting that the decision was in line with precedent, but the case law was ambiguous. The full court will now re-hear the case (Hivley, 2016). Presumably LGBT protection can be maintained for federal contractors whether or not that protection applies more broadly under Title VII.

The NLRB has been criticized for setting a new course involving employee collective action. Use of social media to criticize management, partially excusing racial epithets on the picket line, striking down employee handbook language that might discourage collective action, and declaring some employee arbitration polices to be unlawful are just a few items. Two of its five seats are vacant, allowing the possibility of a Republican majority in short order that could return to the status quo ante the Obama Administration.

What Next?

Watch for further developments between:

• Religious rights of employers and EEO rights of employees.
• Attempts to prevent workplace harassment (subject of a recent EEOC taskforce) and objections to enforced “political correctness.”
• “Enforcing EEO law” and “ending discrimination;” as sometimes used, the former implies a more conservative approach to legal issues.

There are other workplace issues that will arise, notably health and safety regulations. Environmental issues are yet another area of controversial rules.

So where does that leave us? The House of Representatives passed the Midnight Rules Relief Act to allow for Congress to review and reject rules enacted within the last 60 days of the current administration. Not surprisingly, the president has indicated that he would veto the bill should it cross his desk (Macagnone, 2016). 

The new administration has indicated an interest in freezing hiring for federal agencies, which could in time reduce the available workforce in regulatory agencies. Presumably this freeze will not apply to filling the vacancy on the Supreme Court. EEOC operated with a hiring freeze during the previous administration that apparently did not deter its litigation. But any effects on staffing will not be an immediate cause for a change in activity.

Although the new administration seems to have a distaste for government by regulation, the practical matter it will face is whether some of those regulations are in line with the administration’s objectives and were properly implemented. The latter goes to objections being raised by the courts to the positions recently taken by agencies that are not aligned with previous pronouncements, the agency’s authority established by congress, or with the underlying statutes themselves. Some of the more controversial rules are likely headed for the trash can. But others may be more suited for recycling, or just leaving alone.

In the short run, it will be a wait-and-see situation simply because the ship of state does not turn on the proverbial dime. The challenge to the I-O profession, to demonstrate the relevance of its science and practice to the well-being of individuals and organizations, has not changed. Some of the audience has.

Notes

  P. David Lopez, the agency’s longest-serving General Counsel, announced before the election that he would leave at the end of the year.  The General Counsel heads the agency’s litigation activities.
2 There is a distinction between using credit and criminal history as an initial screen or final suitability determination.  The legal concern has been for the former because of adverse impact.  The meta-analytic evidence for substantial validity that generalizes across situations is not impressive (Aamodt, 2015).
3 Big Data was covered at the SIOP Leading Edge Consortium in October 2016.  The same month the EEOC commissioners held a meeting on that and related issues.  The chair announced formation of an internal task force to study further the implications for EEO law.
4 It appears that Texas is the place to go for these injunctions.

References

Aamodt, M. G. (2015). Using background checks in the employee selection process. In C. Hanvey & K. Sady (Eds.) Practitioner’s guide to legal issues in organizations. New York, NY: Springer.
Associated Builders and Contractors of Southeast Texas v. Rung, No. 1:16-CV-425 (E.D. Tex. preliminary injunction Oct. 24, 2016).
Cohen, D. B., Aamodt, M. G., & Dunleavy, E. M. (2010). Technical advisory committee report on best practices in adverse Impact analyses. Washington, DC: The Center for Corporate Equality. Retrieved from www.cceq.org/pdfs/2010tacai.pdf.
Gloucester County School Board v. G.G., No. 16-273 (U.S. cert. granted Oct.28, 2016).
Hively v. Ivy Tech Community College, No. 15-1720 (7th Cir. rehearing en banc order Oct. 11, 2016).
LeRoy, M. H. (2016, Nov. 9). Employment law possibilities under President Trump. Retrieved from Law360: http://www.law360.com/articles/861139/employment-law-possibilities-under-president-trump.
Macagnone, M. (2016, Nov. 17) House Oks bill to shut down lame-duck Obama rules. Retrieved from Law360: http://www.law360.com/articles/863672/house-oks-bill-to-shut-down-lame-duck-obama-rules.
National Federation of Independent Businesses v. Perez, No. 5:16-c4-066 (N.D. Tex. injunction Nov. 16, 2016).
Ricci v. DeStefano, 557 U.S. 557 (2009).
Society for Industrial and Organizational Psychology (2003). Principles for the validation and use of personnel selection procedures, 4th ed. Bowling Green, OH: Author.
State of Nevada v. U.S. Department of Labor, No. 4:16-CV-00731 (E.D. Tex. injunction Nov. 22, 2016).
Uniform Guidelines on Employee Selection Procedures, 29 C.F.R. § 1607 (1978).