The bad law of "disparate impact" - discrimination

Public Interest, Wntr, 2000 by Roger Clegg

THE "disparate impact" theory of discrimination is curious, ubiquitous, and mischievous. The theory holds that when an action has a disproportionate effect on some group (racial, ethnic, gender, whatever), it can be challenged as illegal discrimination--even if there was no discriminatory intent. This is quite different from a "disparate treatment" lawsuit, where the plaintiff must prove that the defendant treated him worse because of a particular characteristic.

The perniciousness of disparate impact was recently on display in two high-profile cases. The Office for Civil Rights (OCR) in the U.S. Department of Education, headed by civil-rights activist Norma Cantu, relied on the approach in its "draft guidelines" circulated to various college officials (and others). The guidelines put colleges on notice that relying on standardized tests, like the SAT and ACT, on which some classes of persons do worse than others, can place them in legal jeopardy under OCR's interpretation of the civil-rights laws.

In another example, federal judge Ronald L. Buckwalter ruled earlier this year that the National Collegiate Athletic Association's "Proposition 16" had an illegal disparate effect on African Americans. Proposition 16, along with its predecessor Proposition 48, was designed to ensure that students accepted into college athletic programs had some likelihood of eventually graduating. By requiring that any student have achieved some minimal combination of high-school grades and standardized test scores, the NCAA hoped to raise student athlete graduation rates and end horror stories of collegiate exploitation of young athletes.

Cantu does not assert that the SAT and ACT judge students of different races according to different standards, and Buckwalter did not rule that Proposition 16 by its terms treated blacks differently from whites. Nor did Cantu suggest that those designing standardized tests are deliberately discriminating against certain races or ethnicities, and Buckwalter did not find that the NCAA intended to discriminate against blacks. Nonetheless, because blacks and, to a lesser extent, Hispanics perform below whites and Asians on the ACT and SAT, colleges that rely too heavily on these tests can be accused of civil-rights violations. And because a disproportionate number of black students were disqualified from athletic participation by Proposition 16, Judge Buckwalter ruled that it was illegal discrimination. But if some selection criterion has neither discriminatory terms nor discriminatory intent, then in what sense is it discrimination because of race?

Recent explosion

The disparate-impact idea is not found in the original Civil Rights Act of 1964; indeed, it is clear from the act's text and history that this approach was not what Congress had in mind. But it was adopted by the courts at the behest of federal bureaucrats and the civil-rights establishment. The Supreme Court itself ratified the approach in 1971, in an employment case challenging a high-school diploma requirement and the use of off-the-shelf aptitude tests by a North Carolina utility. Twenty years later, Congress belatedly codified the approach for employment law.

Ironically, the popularity of disparate-impact lawsuits in the employment area, where the concept began, has actually declined since 1991, when highly lucrative compensatory and punitive damages were made available if intentional discrimination was shown. But outside the workplace, disparate-impact claims are exploding (and their popularity may soon return in the employment area if a decision last summer by the U.S. Court of Appeals for the Third Circuit, making it extremely easy to win disparate-impact lawsuits, is followed).

This new growth first became apparent in housing-discrimination lawsuits. During the Reagan and Bush administrations, the Justice Department had opposed expansion of disparateimpact doctrine to the housing area. The Clinton administration, however, has aggressively pursued these claims, as political scientist Robert Detlefsen has documented. An internal memorandum dated December 17, 1993, written by HUD Assistant Secretary Roberta Achtenberg, and addressed to "all regional directors" of the agency's Office of Fair Housing and Equal 'Opportunity, instructed that Fair Housing Act cases should now be analyzed using disparate impact. It further stated that if a housing practice had a disproportionate effect, it could be justified only "by a business necessity which is sufficiently compelling to overcome the discriminatory effect," and that such defenses were to be viewed skeptically. Thus, for example, a landlord who decided that he would not rent to drug addicts could be sued if it turned out that, in his commu nity, this had a disparate impact on racial minorities. He would be liable unless he could prove to HUD's or a federal judge's satisfaction that this practice was a "necessity."

The administration has extended the disparate-impact theory not only to the actual providers of housing but also to housing lenders and insurers. Banks and insurance companies that turn down a "disproportionate" number of some racial or ethnic group are being sued. In the wake of one such lawsuit by the administration, Nationwide Insurance Company, one of the largest property and casualty insurers, agreed it would no longer make underwriting decisions on the basis of such objective factors as the age or market value of a home. The administration claimed that these policies had an illegally discriminatory effect on minorities. Allstate and State Farm have also caved in to this pressure.