Ability tests can be exceptional predictors of job performance for job applicants, but a recent settlement by the Department of Labor should spur employers to ensure that such tests do not adversely affect minority applicants, experts say.
On July 19th, the Department of Labor announced a discrimination-suit settlement that sent a clear message to employers across the country. That is, if you are going to use testing in the hiring process, you had better know what you are doing or else it will cost you.
The company penalized by the DOL in the case, Leprino Foods, a Denver-based cheese and dairy producer, agreed to pay $550,000 in back pay and lost benefits (to those it didn't hire) in a settlement of the DOL's allegations that the company created artificial barriers for minority job applicants through its use of pre-employment testing. Specifically, as a government contractor, Leprino Foods is subject to various laws that forbid contractors from making employment decisions based upon sex, race, color, religion, national origin, disability or status as a protected veteran.
The initial dispute involved the company's practice of using ability tests to assess candidates' skills in applied mathematics, locating information and observation when hiring laborers. More specifically, the DOL alleged that Leprino Foods' use of WorkKeys -- an employee-skills assessment-testing system -- in its application process had an adverse impact on minority job applicants because it tested applicants' skills in math and observation, skills unrelated to laborer jobs.
Apart from the fine, Leprino agreed to ultimately employ 13 of the original applicants.
"This case illustrates a dilemma in hiring practices facing many organizations," says Christine Riordan, dean and a professor of management at the Daniels College of Business at the University of Denver. "And, it will only increase as the demographic and ethnic populations of the labor pool change."
The dilemma, she adds, is that while leading psychologists have shown that ability tests (usually written) are exceptional predictors of job performance, use of these tests typically results in adverse impact -- meaning employers using these tests are less likely to hire non-Caucasians. Adverse impact, in turn, triggers the interest of various governmental review agencies such as the DOL and Equal Employment Opportunity Commission.
Robert Gatewood, professor emeritus at the University of Georgia and the author of Human Resource Selection, 7th Edition, says that not only can applicants file discrimination suits and government agencies review the selection program, just as importantly, the organization is cutting itself off from major segments of the labor pool that are becoming increasingly larger.
"The paradox these tests pose by being a strong predictor of job performance but also creating an adverse impact has generated debate among organizational and HR professionals," Gatewood says. "Even though court cases have upheld the use of ability tests with a clear relationship to job activities, some professionals have deep reservations about their use because of their impact on society."
Of course, employers also should consider the benefits of having a highly diverse workforce, Riordan notes. For example, workforce diversity can:
* Improve an organization's access to labor pools,
* Improve its ability to market to diverse consumer segments,
* Result in a positive impact on public perceptions of the organization,
* ProEnahncethe organization's brand as an open employer and marketer, and
* Serve as a buttress to reduce the probability of discrimination suits and negative media attention.
"Employers can put in place selection portfolios that achieve both strong hiring practices and diversity goals," she says, adding that generally, ability tests are the least expensive and easiest type of selection instrument. However, other types of tests are clearly job related, including work sample tests, which give the applicant part of a job task to do, and structured interviews, in which an interviewer asks detailed job-related questions.
"Beyond merely making a yes-or-no hiring decision, employers should consider other options, such as specialized training of otherwise qualified applicants," he adds. For instance, members of an applicant pool may share a deficiency in a particular ability, such as simple computer literacy. In that case, employers could easily correct these deficiencies in skills by providing training.
"Adding such training may open jobs to large segments of the labor pool and ultimately increase diversity in the organization," Riordan says, noting that employers have successfully used ability tests since the 1920s, but for most of that time period, the business legal environment and the diversity of the labor pool have been very different than they are now.
"Today's trends make it necessary for each organization to carefully consider what its selection program should be and to carefully think about the diversity, legal, and societal implications of its portfolio of hiring practices," she says.
Leslie Silverman, a former EEOC vice chair and Washington-based partner in the labor and employment law department at Proskauer, says that when it comes to testing, employers that may be generally knowledgeable about hiring laws are often caught off guard when it comes to testing.
For one, much as happened with Leprino, they might purchase off-the-shelf tests and rely on claims that the tests can be used for any job. Another possibility is they might use a test that an internal manager created, which is fine except that once a test has a disparate impact on hiring, the law kicks in, so any such test should be carefully scrutinized.
"Employers mainly need to use common sense," Silverman says. "If a test measures basic skill sets, then you can use it. But it must test for skills needed to do a specific job."
Silverman adds that another critical factor is having a job analysis completed, so employers know what skill sets are needed for a job before they use testing.
Paulette Brown, a Madison, N.J.-based partner in Edwards Wildman's labor and employment practice group and the firm's chief diversity officer, says often times "unconscious bias" is a real problem among employers.
"What happens sometimes is people do things unintentionally without understanding the impact," Brown says. "And one of the impacts might be a discriminatory effect.
"In this case, the employer apparently believed this was a regular test with a lot of business use but didn't consider any negative effect it might have," she says.
Billy Hammel, a partner in Constangy, Brooks and Smith's Dallas office, says examples of pre-employment testing include performance and aptitude testing, physical testing, repetitive injury testing, personality testing, medical examinations, credit checks and criminal background checks.
"While a third-party testing vendor's own internal documentation supporting the validity of a test may be helpful, an employer is still responsible for ensuring that such tests are non-discriminatory and job-related," he says. "Even more significant, because pre-employment testing typically involves large numbers of applicants, the resulting lawsuits are usually filed as class actions."
To avoid litigation and potential costly fines, employers should:
* Ensure that pre-employment testing examines only those skills needed to perform the essential job functions of the specific position sought. Consequently, companies should further make sure that its job descriptions accurately reflect the essential job functions of each position.
* Determine if there are any alternative testing options available that would not adversely impact minority applicants.
* Update its pre-employment procedures when company jobs or job descriptions change.
* Examine its historical hiring statistics to self-audit, monitor and address potential adverse impact concerns early.
* Have current employees take the proposed pre-employment test before its implementation to see whether the test produces adverse impact and accurately predicts job performance.
* Store applicant testing data so it can be easily retrieved for EEOC reporting or Office of Federal Contract Compliance Programs audits (remember, though, that all such information must be kept strictly confidential and may be covered by HIPAA).
* Administer pre-employment testing as late in the application process as possible, preferably after an offer of employment conditioned upon the results of the pre-employment test.
"Due to the multi-year enforcement initiative by the OFCCP and the EEOC, employers who do not take steps to reduce adverse impacts of pre-employment testing will find that any operational or labor savings will be wasted by resulting litigation and compliance costs," Hammel says. "In short, employers should keep the focus on the job. They must know their job requirements and examine only those skills absolutely necessary for the job."
"The DOL message is that it's not permissible to have adverse impact as a result of the use of a selection instruments without being able to provide evidence that the selection test in question is job related," says the University of Denver's Riordan. "A variety of hiring practices are available today for employers, but the key is to ensure that the hiring practices used are related to performance on the job."