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Disparate Impact Insanity

In case you missed it, on February 26 I had an op-ed in the Wall Street Journal titled “How Not To Fight Discrimination.”  Here it is:

Welcome to the era of "disparate impact."

The Obama administration this month issued regulations formally adopting the "disparate impact" approach to its enforcement of the Fair Housing Act, the 1968 law designed to protect buyers and renters from discrimination (racial and otherwise). This approach is increasingly becoming standard in housing and every area of the law.

Landlords, businesses, local governments and others can be held liable for policies that have disproportionate racial effects—even if those policies make no racial distinctions, are adopted with no discriminatory intent, and are applied in nondiscriminatory ways.

Yet if the numbers come out wrong, then none of the rest matters, unless a defendant can prove to the satisfaction of a judge or jury that there is some high degree of "necessity" for the policy or practice in question. Even then, defendants can lose if a judge or jury is persuaded that some other procedure would have been as good and wouldn't have resulted in those numbers.

The disparate-impact standard for antidiscrimination law pushes people to do one or both of two things: Get rid of legitimate selection criteria, or use a racial double standard to ensure that the numbers come out right. This approach first became infamous in a 1971 Supreme Court opinion as a way to strike down hiring and promotion tests in employment. For example, the federal government and civil-rights groups have challenged police and firefighter written exams for having disparate racial impact, and physical exams for having a disparate impact on women.

The Obama administration is still doing plenty of that, but also much more. In 2010, the Equal Employment Opportunity Commission sued Kaplan Higher Learning Corp. for running credit checks on job applicants. Kaplan did so to cut down on employee theft of student payments. The Obama administration objected because the checks had a supposedly disparate impact on black applicants. I say "supposedly" because Kaplan kept no racial data on its personnel. The government hired "experts" to look at DMV photos and apply a "race rating." Mercifully, a judge threw out the lawsuit last month.

The magic of disparate impact can also mean that if a recipient of federal funding doesn't provide a service—say, a driver's license exam—in a foreign language, it can be held liable for national-origin discrimination.

The Obama administration is challenging school-discipline policies around the country as having a disparate impact on African-Americans—even though if discipline breaks down, the classrooms that will suffer most are likely to be filled disproportionately with other African-American students. The administration is also taking action against employers—and soon possibly landlords—who use criminal background checks before they hire or rent.

If a business, agency or school has standards for hiring, promoting, admissions or offering a mortgage that aren't being met by individuals in some racial and ethnic groups, there are three things that can be done. First, the standards can be relaxed for those groups. That is what racial preferences do. Second, the government can attack the standards themselves. That is what the disparate-impact approach to enforcement does. Third, one can examine why a disproportionate number of individuals in some groups aren't meeting the standards—such as failing public schools or being born out of wedlock—and do something about it. This option holds little interest on the political left.

If the executive branch is out of control, then there are the courts and Congress. The Supreme Court is considering whether to hear a case challenging the disparate-impact approach in federal enforcement of the Fair Housing Act. The court would have heard arguments in a similar case a year ago, but the Obama administration pressured the City of St. Paul, Minn., into dropping its anti-disparate-impact defense. ("We were afraid we might lose disparate impact in the Supreme Court because there wasn't a regulation," said Sara Pratt, an official in the Department of Housing and Urban Development.)

The court could strike down disparate-impact enforcement—a possibility that Justice Antonin Scalia raised during a 2009 case (Ricci v. DeStefano) involving firefighters in New Haven, Conn. After all, the disparate-impact approach urges employers to weigh racial results when hiring—the sort of thing the U.S. Constitution ordinarily forbids. (In the New Haven case, city officials threw out an exam because "too many" people of one color and "not enough" of another color did well on it. The court ruled against the city.)

The Obama administration has also used disparate-impact arguments to challenge voter-ID laws aggressively, using Section 5 of the Voting Rights Act—arguments about the constitutionality of which the Supreme Court will hear on Wednesday.

Congress needs to act, too. First, it can refrain from passing laws adopting the disparate-impact approach. Second, it can clarify that existing laws don't allow it. And where officials and courts have interpreted statutes as allowing it, Congress should amend the law to foreclose liability, at least if the defendant can show a lack of discriminatory purpose in the challenged practice.

Disparate impact makes illegal what any rational person would not define as discrimination. And by forcing a change in neutral standards for hiring, renting and the like in order to count outcomes by race, it actually causes discrimination.

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Soon after the WSJ piece ran, I found another item from the Obama administration to add to the list: The Consumer Financial Protection Bureau is reportedly warning banks that a policy of allowing auto dealers to negotiate loan interest rates (a.k.a. APRs) with retail buyers has an illegal disparate impact.

BTW:  I mentioned the Supreme Court argument regarding the constitutionality of Section 5 of the Voting Rights Act in my Wall Street Journal piece, and I’ll be discussing that case this week at Duke law school.