Employee Referrals, Inclusion and…Discrimination?

There’s a heightened focus in the HR and Recruiting sphere on the effective use of employee referrals in order to make effective hires and we see numerous reports informing us that referrals tend to get hired faster, are often a better fit with the organization culture and are less likely to quit their jobs.

It’s hard to argue with the findings and few of us do; as a result a whole batch of nifty HR Technology solutions exist to assist employers as they tap into social referrals for hiring. Employers, however, should not go jumping headlong into any sort of employee referral program without considering some of the “what might happen” scenarios.

From a regulatory standpoint it’s always important to pay attention to the UGESP’s definition of discrimination (41 C.F.R. §60-3.3 A) and if you’re a government contractor you want to consider how referral programs appear to the OFCCP.  Even though in the case of OFCCP v. VF Jeanswear Limited Partnership (DOL Office of Administrative Law Judges, No. 2011-OFC-00006, August 5, 2013) the ALJ found against the OFCCP it’s interesting to read about this case while paying particular attention to the employer’s use of an employee referral program. (Note – the ALJ’s finding were based on the definition of “non-Asian” and the determination that it is “neither a race nor an ethnic group, either by regulatory definition or as used in common parlance.”)

As noted in the Recommended Decision and Order for Summary Judgment a VF representative testified that:

Applicants referred by employees were given priority in selection for interviews;

• Asian employees were much more likely to use the referral system;
• Asian employees made the most referrals; and
• Asian employees were highly likely to refer Asian applicants when making referrals.

Remove the phrase “Asian employees” in the above and replace it with any other phrase that refers to a mono-culture or class of employees.  Male employees? White employees? Employees under age 40? You get the idea.

As referenced in the summary judgment document – “To make a case of disparate impact a plaintiff need not show intent to discriminate. It may make its case by showing that a facially neutral employment practice caused a statistically significant disparity with respect to a protected class. “[T]he necessary premise of the disparate impact approach is that some employment practices, adopted without a deliberately discriminatory motive, may in operation be functionally equivalent to intentional discrimination.” Watson v. Fort Worth Bank & Trust, 487 U.S. 977, 987 (1988).

Very few organizations set out to create an exclusionary employee referral program; most work hard to design a program that is inviting, inclusionary, and strengthens the diversity of their workforce.  It’s important however that HR practitioners and recruiters make sure before twisting and turning their selection process into a fast-track for referred candidates that they think through some of the unintended consequences of launching such a program in their particular organization and with consideration of their existing workforce demographics.

I think we can all agree there’s a lot of potential; we just need to make sure we’re aware of the possible drawbacks.