By Pamela Q. Devata, Gerald L. Maatman, Jr., Jennifer A. Riley, and David J. Rowland

On January 28, 2013, Judge Patricia A. Gaughan of the U.S. District Court for the Northern District of Ohio granted summary judgment to the defense in EEOC v. Kaplan Higher Education Corp, et al., No. 10-CV-2882, 2013 U.S. Dist. LEXIS 11722 (N.D. Ohio Jan. 28, 2013) and thereby dismissed the EEOC’s first lawsuit challenging the use of credit reports in the hiring process on the grounds that such a screen adversely impacts African-Americans. The lawsuit, one of the Commission’s highest profile cases, received immediate media attention following the summary judgment order (click here, here, and here to read more).

The Court also rejected the EEOC’s theory that, contrary to its own mandates, an expert can determine the races of job applicants by looking at their photographs. The Court excluded the EEOC’s “race rating” evidence and, finding no evidence of disparate impact, entered judgment in favor of Kaplan. 

Factual Background

The EEOC brought suit against Kaplan claiming that its use of credit as a hiring criterion had a disparate impact on Black applicants. (Id. at 6.) (Click here for the EEOC’s press release issued upon the filing of the case.)

Kaplan did not collect race information for job applicants. Id. at *4. Thus, to attempt to show the races of particular applicants, the EEOC subpoenaed records from the Department of Motor Vehicles (DMV) in 38 states and the District of Columbia. Id. at *9. Although 14 states provided records that identified race, 24 states provided only copies of driver’s license photos. Id.

To purport to determine race from the photos, the EEOC’s expert, Dr. Kevin Murphy, assembled a team of five “race raters,” individuals with advanced degrees in cultural anthropology, education, human development, psychology, and economics. Id. at *10. Dr. Murphy asked the “race raters” to review each photograph (along with each applicant’s name) and determine whether the individual was African-American, Asian, Hispanic, White, or “Other.” Id.

Although Dr. Murphy assembled a data set of 4,670 individuals, he utilized only 1,090 of the applicants in his statistical analysis and did not take a random or representative sample. Id. at *19-21. Kaplan moved to exclude the expert’s opinions and moved for summary judgment on several additional grounds, including a novel governmental estoppel theory, as the EEOC itself conducts credit checks on its own employees. As the Court noted, the EEOC runs credit checks for job applicants for 84 of the 97 positions at the EEOC, for reasons similar to those employed by Kaplan. Id. at *6.

The Court’s Opinion

The Court excluded the expert reports and testimony of Dr. Murphy as inadmissible because the EEOC failed to show that his methodology was reliable. Id. at *13.

The Court noted that, “to establish the reliability of the analysis, the Court must be convinced that the rate of error is within acceptable parameters.” Id. at *14. The EEOC offered no indication that its use of “race raters” had been or could be tested and provided no known or potential rate of error in the technique employed by the “rate raters.” Id. at *13. Likewise, the EEOC failed to show that the process of “rating race” by visual means had been the subject of peer review or publication. Id. at *14. 

The Court expressed “great concern” over numerous other aspects of Dr. Murphy’s analysis. For instance, Dr. Murphy was involved not only in the statistical analysis of race data, but he selected photos to forward to the race raters and sat on the “panel” that determined race for 15 applicants. Id. at *15-16. Further, Dr. Murphy supplied the names of the applicants to the “race raters,” increasing the likelihood that an individual would be rated “Hispanic,” for instance, merely because she had a traditionally Hispanic surname. Id.

The Court also noted that the EEOC itself discourages employers from visually identifying an individual by race and indicates that visual identification is appropriate “only if an employee refuses to self-identify.” Id. Thus, the EEOC itself “frowns on the very practice it seeks to rely on.” Id. at *17.

Finally, the Court expressed great concern that Dr. Murphy’s sample was not random and, instead, consisted only of individuals for whom Dr. Murphy obtained race information. “There is no indication, for example, that the data is fairly distributed among geographic areas or is in any other way ‘representative’ of the applicant pool as a whole.” Id. at *18-19. In fact, the evidence showed the opposite. Id. at *21.   

Implications For Employers

Judge Gaughan’s opinion is a welcome relief for employers who fall victim to the EEOC’s “do as I say, not as I do” litigation tactics. The Court was quick to point out that the EEOC’s methodology for judging race based on photographs contradicted its own mandates and was an affront to both common sense and personal dignity. Because Judge Gaughan excluded the EEOC’s evidence of a purported statistical disparity, the Court did not reach other grounds for summary judgment, including arguments concerning job-relatedness, business necessity, and estoppel. These arguments centered, in part, on the EEOC’s decision to attack a criterion that it uses in its own personnel practices.