AutoZone Employee Can’t Prove ‘Segregating or Classifying’ Claim Under Title VII

October 17, 2017

Many employers are aware that Title VII of the Civil Rights Act of 1964 prohibits them from failing to hire a job candidate, firing an employee, or otherwise discriminating against an employee based on race, color, religion, sex, or national origin. That provision of Title VII is often front and center in many federal employment cases. Less often litigated, however, is a provision of the law that prohibits certain types of segregation or classification of job candidates and employees.

What Title VII Forbids

Subsection (a)(2) of Title VII states that an employer may not:

Limit, segregate, or classify his employees or applicants for employment in any way which would deprive or tend to deprive an individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s race, color, religion, sex, or national origin.

That section of Title VII is rarely litigated and analyzed, which leaves many employers in the dark regarding its reach. Recently, however, the 7th Circuit was tasked with interpreting the section’s language. The 7th Circuit provided guidance on the application and scope of the section.

The AutoZone Case

In EEOC v. AutoZone, Inc., et al., an African-American employee alleged that he was limited, segregated, or otherwise classified based on his race and was subjected to discriminatory treatment as a result. The employee was transferred from an AutoZone store in a Hispanic neighborhood. His former store manager told him that the company wanted to make that location a “predominantly Hispanic” store. The transfer did not involve a reduction in benefits, pay, or job responsibilities, and the employee was transferred to a store that was closer to the home address in his personnel file. The trial court threw out the Equal Employment Opportunity Commission’s (EEOC) claim, and the agency appealed.

In reviewing the lower court’s decision, the court of appeals accepted the employee’s assertion that transferring him based on his race satisfied a portion of Subsection (a)(2). However, there was no discussion of what actions ultimately fall within “limit, segregate, or classify.”

Title VII does permit employers to base compensation and employment privileges on seniority, merit, and production. It also permits employers to “give and act upon the results of any professionally developed ability test.” Both of those permissions are founded on the notion that there is no intent or effect of discrimination based on any protected characteristic. Therefore, if an employer bases compensation or employment privileges on merit, it may be “classifying” or “segregating” an employee, but those decisions would not fall under Title VII’s prohibition because of the exception.

The court’s analysis focused on the second portion of Title VII. Assuming the employee’s later transfer “limited, segregated, or classified” him based on his race, did it “deprive or tend to deprive” him of employment opportunities or “otherwise adversely affect” his employment?

The EEOC argued that any action that limits, segregates, or classifies an employee based on his race (or another protected characteristic) automatically violates Subsection (a)(2) and that the employee was not required to show harm or deprivation. However, the 7th Circuit rejected that position based on the plain language of the law. A clear reading of Subsection (a)(2) indicates that an employee must suffer a deprivation, a tendency of deprivation, or another adverse employment action for an employer to be held liable for violating the law.

The 7th Circuit noted that Subsection (a)(2) does “cast a wider net” of protection than Subsection (a)(1), which only prohibits employers from failing to hire a job candidate, firing an employee, or otherwise discriminating against an employee or candidate based on protected characteristics. Those employment actions are more concretely defined than the actions listed in Subsection (a)(2), which broadly prohibit any action that “tends to deprive” an employee of employment opportunities. Based on the less specific language, an employer could be held liable for violating Subsection (a)(2) if an employee proves an action has a tendency to deprive him of an employment opportunity, even if he does not show any actual deprivation.

However, under the AutoZone case, an employee in the 7th Circuit would have a difficult time establishing that a lateral transfer meets the requirements of Subsection (a)(2), especially if he suffers no reduction in benefits, compensation, or job responsibilities. Based on the court’s language, however, lateral transfers may not always be immune. If an employee can articulate how a transfer tended to deprive him of an employment opportunity (e.g., arguing that a sought-after position was not available at his new location), he may still be able to assert a claim under Subsection (a)(2). EEOC v. AutoZone, Inc., No. 15-3201 (7th Cir., June 20, 2017).

Bottom Line

The 7th Circuit’s ruling provides important clarification for employers. It reinforces that a limitation, segregation, or classification of an employee or candidate based on protected characteristics violates Title VII only if (1) the individual suffers a negative employment action or (2) the action has a tendency to deprive him of employment opportunities. Regardless, carefully evaluate the reasons for classification or segregation of job applicants and employees in protected classes.

This article, slightly modified to note recent updates, was featured in the August 2017 issue of the Wisconsin Employment Law Letter, which is co-edited by Axley Brynelson Attorneys Saul Glazer and Michael Modl and published by BLR®—Business & Legal Resources. Reproduced here with the permission of BLR®—Business & Legal Resources.