A Statistical Analysis of Adverse Impact of Employer Decisions

By Kadane, Joseph B. | Journal of the American Statistical Association, December 1990 | Go to article overview

A Statistical Analysis of Adverse Impact of Employer Decisions


Kadane, Joseph B., Journal of the American Statistical Association


1. INTRODUCTION

Federal law (U.S. Code, Title 29, Chapter 14 [section] 626) forbids discrimination against people 40 years of age and older with respect to employment decisions. Under the doctrine of adverse impact, statistics can be used to establish a prima facie case of discrimination. Under this doctrine it is not necessary to prove that the employer had discriminatory intent, but only to show that his actions had the actual effect of disadvantaging a disproportionate number of people of protected age or race. See United States v. Hazlewood School District, 443 U.S. 299 (1977) (race discrimination) and Geller v. Markham, 635 F.2d 1027 (2d Cir. 1980). To overcome such a prima facie showing, an employer can demonstrate a nondiscriminatory business reason for the decisions.

What must be shown statistically to demonstrate adverse impact? This question is analyzed using the data from a recent case, for which I served as an expert witness for the plaintiff, and which was settled just before the start of testimony. In order to protect the privacy of the parties involved, the plaintiff will be referred to as the Employee, and the defendant as the Company.

The Company was adversely affected by the downturn in the basic metals markets in the early 1980s. In that period the Company reduced the size of its work force in a series of moves that were the occasion for the lawsuit. The Employee is a union member who had received several promotions leading to a very responsible management position. In the fourth of four firing waves, his job was "abolished" (divided among his two former subordinates) and he used his union seniority rights to bump someone from a lower-paying union position. Because there was another aspect of his case, involving actions on the Employee's part in the nature of whistle-blowing, his suit was brought individually against the Company, and not as a class-action proceeding on behalf of all fired management employees. In the adverse impact portion of his lawsuit the Employee alleged that the Company had disproportionately fired people 40 and over (himself included). The case was a civil suit; such cases are decided on "the preponderance of the evidence."

In the remainder of this article, Section 2 describes issues concerning the data base, Section 3 treats the analysis, and Section 4 contains my conclusions.

2. DATA BASE ISSUES

In civil litigation, each side is entitled to discovery, that is, to whatever records and analyses the other side intends to use in court and, additionally, all other "relevant" records. In this case, the plaintiff's preparation of the case was hampered by the poor state of the defendant's personnel records. The Employee's position after he was dismissed from his management job involved handling personnel records; he often knew of errors or incompleteness in the service record cards made available by the defendant. Ultimately it was possible for the plaintiff to assemble a list, alleged to be complete, of all management employees during the period in question, their birth dates, and the dates they left management, if they had. Where ambiguities or doubts arose, the benefit of the doubt was given to the service record cards, because they were the documentary evidence made available by the Company in discovery. In this way, errors in the data base, if any, would be the responsibility of the Company.

A cursory examination of the list revealed that many employees had left management on four specific dates: 6/30/82, 11/30/82, 5/31/83, and 6/28/84. I was informed by the Employee's attorney that the Company had announced to these employees that their jobs were to be abolished, that unless they had union rights they would no longer be employed by the Company, and that they could choose to retire and receive a pension from the company if they were eligible. In view of the involuntary nature of these departures from management service, I refer to them as "firings" even though some, with union rights, might still have been employed by the Company in other positions. …

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