There are widespread racial disparities in employment, access to credit, health, and education. Many claim that the original cause is slavery and the subsequent Jim Crow regime of lawful segregation. However, disparities persist 40 years after the Civil Rights Act of 1964 marked the end of Jim Crow. One segment of opinion holds that continuing racial discrimination prevents progress by African Americans and that discrimination law is still a useful instrument to fashion remedies. Because disparate impact liability is based on an effects test rather than proof of discriminatory intent, it appears to be a plausible instrument for redressing disparity itself wherever it may be found.
Ian Ayres (2001) has advocated extending the “discrimination” paradigm beyond the original employment domain; broadening the view of what can constitute “discrimination”; and heightening the sensitivity of tests to set off the alarm that an unjustified act of discrimination has occurred. His advocacy has been influential in public debate and has been persuasive enough to induce defendants [End Page S95] to settle some large cases. Without winning a final court showdown, his doctrines are likely to transform distribution practices of the automobile industry. Ayres was successful in using his disparate impact doctrine to persuade the organization that administers the kidney transplantation regulatory regime to change its practices. The importance of these issues has inspired us to take a fresh look at the disparate impact doctrine.
In this issue, Ayres (2005) sets forth his theory of disparate impact. A view of that paper provides us with the occasion to take a critical look at his theory and tests for disparate impact. His proposed test is actually a test for disparity and is irrelevant for settling the issues raised by disparate impact doctrine as the Supreme Court has stated it. Here we ask whether there is a well-defined, economically grounded theory of disparate impact consistent with decided cases. Are there sound ways of measuring disparate impact, and is it wise to extend disparate impact litigation to most areas of economic and social action? We first discuss disparate impact doctrine as it has evolved in the area of employment discrimination.
Origin of Disparate Impact Analysis in Employment Discrimination
To understand the distinction between racial disparity in some outcome and the concept of “disparate impact” of a practice for selecting persons for participation in a productive activity, or rewarding them, it is useful to look at the origin of this concept in employment discrimination law. The Civil Rights Act of 1964 forbids intentional discrimination or “disparate treatment.” In the Griggs case, the Supreme Court held that liability could be established without a finding of intent to discriminate. But existence of disparity of some outcome like hiring or wages could not alone be the basis for liability. The court focused on the effect of a “practice” used by the defendant more than on the mere existence of a disparity:
Congress did not intend by Title VII… to guarantee a job to every person regardless of qualification…. Discriminatory preference for any group, minority or majority, is precisely and only what Congress has proscribed. What is required by Congress is the removal of artificial, arbitrary, and unnecessary barriers to employment when the barriers operate invidiously to discriminate on the basis of racial or other impermissible classification…. The Act proscribes not only overt discrimination but also practices that are fair in form, but discriminatory in operation. The touchstone is business necessity. If an employment practice which operates to exclude Negroes cannot be shown to be related to job performance, the practice is prohibited.(Griggs v. Duke Power Co., 401 U.S. 424, 431)
Not all disparities are the result of intentional discrimination or a discriminatory practice in the meaning of Griggs. A practice may have a disparate impact on minorities but be justified as necessary to carry on the employer’s business. [End Page S96] There may be no alternative practice that produces an equal level of output with lower disparate impact and lower cost. This is the defense of business necessity.