A recent decision from the Department of Labor’s Administrative Review Board serves as a warning to federal agencies against overreaching in their efforts to identify alleged employment discrimination.  It also serves to highlight the heavy burden that plaintiffs—whether government agencies or private litigants—must carry in cases alleging a pattern or practice of disparate treatment.

The ruling is the latest in a twenty-year case that the Office of Federal Contractor Compliance has pursued against Bank of America related to its Charlotte, North Carolina locations.  In a 2010 order, an Administrative Law Judge had found the Bank responsible for hiring discrimination against African-Americans in the years 2002-2005.^[1]  Citing to Hazelwood School District. United States, the ALJ appeared to endorse a blanket rule that statistics demonstrating a disparity of two or more standard deviations “is sufficient to establish a prima facie case of unlawful discriminatory animus.”  At that point, she ruled, “the burden shifts to the employer to rebut it by showing that the plaintiff’s statistical evidence is inadequate.”

The ARB reversed the ALJ’s ruling.  Importantly, the ARB rejected OFCCP’s suggestion that, “after its presentation of evidence, [the Bank] had the specific burden of showing that the OFCCP’s statistical proof was unsound or to prove that the disparity occurred as a result of legitimate, nondiscriminatory reasons.”  The ARB emphasized that “[t]he burden of proof always remains with the OFCCP,” and cautioned that attempting to shift the burden of persuasion to the employer was the result of “confus[ion].”

The ARB also rejected OFCCP’s reliance on amalgamated statistics and a brightline test of significance.  The ARB emphasized that the mere fact of a statistical disparity permits the inference that “race discrimination was a motivating factor” only in “[v]ery extreme cases.”  Lumping together three years of data to manufacture a “bottom line” statistical disparity that appeared to be significant was insufficient to prove OFCCP’s pattern and practice claim.

One of the ARB panelists would also have found the OFCCP violated the Bank’s due process rights by tacking the 2002-2005 charges on to an existing administrative proceeding.  Noting that “federal courts have repeatedly overturned actions of administrative agencies, under the arbitrary and capricious doctrine, for failure to follow their own procedures,” the concurring judge would have found that the failure to conduct a compliance review or engage in the required pre-enforcement conciliation process for 2002-2005 barred OFCCP’s claims.

Employers should stay attuned to administrative rulings that evaluate OFCCP’s conduct, particularly in light of an increased emphasis on enforcement actions and the director’s promise that “You’ll see a real uptick in 2016, 2017, 2018.”  Counsel assisting clients with OFCCP reviews should likewise continue to push for appropriate procedural protections and substantive standards in those reviews.

^[1] Judge Chapman’s finding of discrimination at the Charlotte location of NationsBank (a predecessor to Bank of America) in 1993 was affirmed by the ARB, but that ruling has since been appealed to the federal court in Washington, D.C.