Market Watch, July 23, 2012
On July 19th, 2012, the Department of Labor (DOL) announced it reached a settlement with Leprino Foods on a discrimination suit. The dispute involved the company’s practice of using ability tests to assess candidates’ skills in applied mathematics, locating information, and observation, for hiring laborers.
The DOL held that these tests had adverse impact on Asians, Hispanics, and African-Americans. The DOL claimed that these groups of applicants scored lower on the tests, on average, than did Caucasian applicants and Leprino, therefore, did not hire them. More importantly, the DOL cited a lack of evidence from the company to prove these ability tests related to job performance. In the settlement, Leprino agreed to pay back-wages of over $550,000 to those applicants it did not hire and will ultimately employ thirteen of the original applicants.
This illustrates a dilemma in hiring practices facing many organizations. And it will only increase as the demographic and ethnic populations of the labor pool changes.
The dilemma is that renowned psychologists such as Frank Schmidt, John Hunter, and Philip Bobko have shown that ability tests, usually written tests that measure some form of knowledge, are exceptional predictors of job performance. Thus, as a tool for determining applicants’ suitability for jobs, they are among the best in predicting applicants’ future job performance.
However, the use of these tests usually results in adverse impact — meaning that employers that use these tests are less likely to hire non-Caucasians. This adverse impact triggers the interest of various governmental review agencies such as the DOL and Equal Employment Opportunity Commission (EEOC).
Employers must think critically about the use of strong selection tests that also have a high probability of rejecting a larger proportion of applicants of color and ethnic diversity than Caucasian applicants. Among the implications of this pattern of rejection: applicants may file discrimination suits and government agencies may review the selection program. Perhaps as importantly, though, 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 human resource professionals. 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.
Employers can take several actions to attain high quality and defensible hiring practices that conform to the Uniform Guidelines on Employee Selection Procedures (1978) and related court decisions.
The Uniform Guidelines explicitly state that an organization can use ability tests even if they have adverse impact if the organization can prove that the tests are job related. This proof can consist of correlation coefficients offering direct evidence that test scores relate to job performance or a series of steps that generate indirect data that show such a relationship to important job tasks.
However, employers must consider the benefits of having a highly diverse workforce.
Diversity in its workforce can improve an organization’s access to labor pools, its viewpoints on how to market to diverse consumer segments, a positive impact on public perceptions of the organization, an enhancement of the organization’s brand as an open employer and marketer, and a buttress to reduce the probability of discrimination suits and negative media attention.
Employers can put in place selection portfolios that achieve both of the following objectives: strong hiring practices and diversity goals. Generally ability tests are the least expensive and easiest type of selection instrument. However, other types of tests are clearly job related. These include 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.
Such instruments can have several advantages. Applicants, even those not hired, generally perceive them as fair. This perception reduces the possibility of legal complaints. Such methods also provide direct information about the job readiness of the applicant pool.
Employers have used ability tests since the 1920’s and these have been quite effective and efficient. However for most of that time, the legal environment of business and the diversity of the labor pool have been very different than they are now. These 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.