While the U.S. Supreme Court has taken up the issue of the future of the disparate impact analysis to show discrimination, President Obama’s administration seems to employ it more frequently to show racial discrimination by lenders and employers. Both California state law and Title VII of the U.S. Civil Rights Act of 1964 proscribe employment discrimination based on numerous protected classes that have traditionally suffered differential treatment.
The two most common methods of showing illegal discrimination are the disparate treatment and disparate impact analyses.
The U.S. Supreme Court describes disparate treatment as a situation in which an employer discriminates against members of a legally protected class by treating them less favorably than other similarly situated employees. Plaintiffs must demonstrate that the employer designed to discriminate because of the employee’s membership in the protected group.
Disparate impact occurs when an employer implements a neutral policy or program that has a discriminatory effect on a protected class. For example, an employer might institute a height requirement for a position with the company. The test is facially neutral but may exclude a disproportionate number of Asian employees.
The Mount Holly case
In Mt. Holly Gardens Citizens in Action v. Mt. Holly, residents of a poor neighborhood in Mt. Holly, New Jersey sued to stop the town’s gentrification plan that involved replacing hundreds of low-income houses with more costly middle-income homes. The U.S. District Court said that the claimants did not sufficiently support their argument of discrimination by producing statistics that black and Latino residents would no longer be able to afford the housing in their neighborhood. The U.S. Court of Appeals reversed this decision, recognizing the case as a traditional case of illegal discrimination by means of disparate impact. The U.S. Supreme Court is currently reviewing the case.