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Bar News - April 15, 2011

Labor & Employment Law: Business Reorganization and Title VII


In the present economic climate, much is being written about the need for reorganization in the face of an increasingly tight bottom line. Private employers and branches of government at the federal, state and municipal level are increasingly seeking to reorganize, restructure and innovate, in an attempt to meet needs in a more cost efficient and effective manner. This article considers the extent to which such reports and recommendations result in policies and practices which may be deemed to violate Title VII of the Civil Rights Act of 1964, (Title VII) or are considered to be lawful, but nonetheless, result in negative gender consequences.

Title VII prohibits employment discrimination based on race, color, religion, sex and national origin. It applies to private employers who have 15 or more employees and equally, to federal, state and municipal government. In the seminal case of Griggs v. Duke Power Company, the US Supreme Court fashioned the disparate impact theory. Specifically, that Title VII proscribes not only overt discrimination practices, but also those that are neutral on their face and neutral in their intent but, discriminatory in operation. A complainant need not prove intentional discrimination in order to establish an unlawful employment practice under Section 703, therefore, it is necessary to recognize the type of situation in which rules look equal but unequally harm protected groups, even when equally applied.

The consequence of the practice is the focus of the act, not the intent of the employer, benevolent or otherwise. Further, Title VII provides for a shifting burden of production (but not of proof). For example, once a complaining party has established a prima facie case that a particular employment practice (such as imposing height or weight requirements, with no legitimate connection to job requirement) causes significant adverse impact on a protected class of persons, the employer has the burden to produce evidence to show that the practice is "job related" and "consistent with business necessity." This is all to no avail, however, if the complainant then demonstrates that there is an alternative and non-discriminatory practice that the respondent refuses to adopt.

Common Sense and Moral Decency

The reality is that not many sex discrimination cases have been brought under the disparate impact theory and, of those, few have been successful. The focus of such cases is on statistical disparities, rather than on specific instances and competing explanations for those disparities. Historically, they have involved specific and standardized criteria. More recently, in Watson v. Fort Worth Bank and Trust, the US Supreme Court expanded disparate impact theory to subjective practices. It also acknowledged that disparate impact cases involve high standards of proof.

What does this historical context mean for today’s marketplace, in which employers, private or public are responding to economic realities? While workforce reduction, reorganization and innovation policies can fall afoul of Title VII, the majority do not. Rather, they are more likely to fall afoul of common sense and moral decency.

During these austere times, many organizations have sought to streamline, through downsizing, reorganization and innovation. However, there is ample evidence that such endeavors fall short in terms of success. Statistics indicate that in the Fortune 1000 companies, success rate of structural change is below 50 percent. Such failures have in large part been a result of the failure of those seeking change (management) to stand in the shoes of those who are most immediately affected by such change (employees). Trendy management gurus refer to the need for "buy in" and "personal compacts." More simply, it is the ability and willingness to stand in the employee’s shoes and to make every effort to understand, accommodate and facilitate their journey through this process that increases the likelihood of success for structural change.

Similarly, government, (including New Hampshire) has sought to reorganize in an attempt to respond to an ever-increasing demand for services in the context of limited public funding. Asserting that structural reorganization will result in employment and operational cost reductions, plans are forged with multiyear timeframes. Structural fragmentation is deemed to lie at the root of the problem. Innovative reorganization is touted as a means by which inefficient duplication is ended, multiple people are to be replaced by a single individual and voilá, costs are reduced and streamlining is achieved. However, there are challenges to this orthodox theory. Empirical research of the reorganization of executive government has indicated that "significant savings" rarely occur. What does occur however, and what may be a desired or desirable result, is greater centralized control by a chief executive.

Negative Gender Effects

Regardless of success, however defined, downsizing has negative gender effects that cannot and should not be ignored. Specifically, in New Hampshire the public sector has been an important source of employment for women. Planned reductions in the workforce and the increased move towards hiring part-time and contractual workers, rather than fulltime employees, has the potential to offset gender inequalities, such as widening the gender pay gap. According to the US Census Bureau, in 2009, the earnings of women who worked full-time year-round were 77 percent of that for corresponding men (72 percent in New Hampshire).

The gap is even greater for women work part-time. The loss of pay and the loss of health benefits have the potential to increase the number of families living at or below the poverty line. Further, there is a burden-shifting effect, as families may be forced to resort to public assistance to make ends meet. Of course, some assert that part-time work offers a work-life balance. While this may be true, the reality is that there is a deeply engendered nature to part-time work, as well as significant wage penalties. While there are arguments in favor of part-time employment, its existence and upward trend has the effect of reinforcing a segregated labor market.

In conclusion, it is unequivocal that women are bearing, and will continue to bear, the brunt of public sector job losses. While policies for workforce reductions can fall afoul of TitleVII’s prohibition against sex discrimination, they likely will not. However, that does not mean that they will not have a significant and negative impact on women, in addition to questionable cost savings.

Denise Broughton MacLeod is currently teaching and researching her PhD in employment law issues at the School of Law, University of York, England. She is an NH Bar member.

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