The Supreme Court's decision in Ricci v. DeStefano has interesting implications for the longstanding debate over whether the Roberts Court is "pro-business." The bottom line is that the business interests were among the big losers here. The Court's ruling makes it difficult for employers to use race-conscious measures to avoid disparate impact liability under Title VII of the Civil Rights Act. And this defeat was inflicted by the supposedly business-friendly conservative justices. Although Ricci addressed promotion decisions by a government employer, the same Title VII standards apply to private employers too.

The fact that the conservative justices dealt business interests a major defeat in Ricci doesn't prove that they would be equally indifferent to business concerns in other cases. That said, it's worth noting that the five conservative justices ruled against business interests on an issue that could potentially expose them to a great deal of costly litigation. This fact further weakens already dubious claims that the Roberts Court is systematically advancing a "pro-business" agenda.

Justice Kennedy's majority opinion holds that an employer may not use race-conscious measures to try to avoid "disparate impact" liability under Title VII of the 1964 Civil Rights Act unless it "can demonstrate a strong basis in evidence that, had it not taken the action, it would have been liable under the disparate-impact statute." A disparate impact lawsuit is a case alleging discrimination by the employer on the grounds that its hiring or promotion standards disproportionately disadvantage minority applicants, even if the employer wasn't deliberately trying to discriminate against them.

The Court's ruling makes life more difficult for employers trapped between the Scylla of Title VII disparate impact liability and the Charybdis of "disparate treatment" suits by white employees ("disparate treatment" suits are cases alleging traditional intentional racial discrimination). If a business adopts a race-neutral hiring or promotion standard that results in few or no minority hires or promotions, it is potentially vulnerable to a disparate impact lawsuit. As several Supreme Court cases make clear, that can happen even if the business was not intentionally trying to disadvantage minorities. But if the business adopts race-conscious measures to try to shield itself from liability (e.g. - by practicing affirmative action, adopting a standard that is more favorable to minority applicants, and the like), it opens itself up to "disparate treatment" lawsuits by whites, such as one the filed by the New Haven firefighters in Ricci.

To avoid this dilemma, business groups have long sought to persuade the courts to interpret Title VII to shield them from liability for race-conscious hiring policies that are intended to prevent disparate impact lawsuits. The Equal Employment Advisory Council, a group representing numerous large corporations and other businesses, filed an amicus brief in Ricci urging the Court to rule for New Haven for precisely this reason.

The five conservative justices weren't buying that argument, however. To be sure, the majority opinion does allow the use of race-conscious measures to avoid disparate impact liability where there is "a strong basis in evidence" to conclude that such liability would otherwise arise. However, Justice Kennedy also emphasized that race-conscious measures to avoid disparate impact liability will only be allowed in "narrow circumstances." Moreover, the Court ruled that such circumstances didn't exist in this case despite the fact that not even one black firefighter could have been promoted based on the results of the original exam. As the Court notes, "[t]he racial adverse impact here was significant, and . . . the City was faced with a prima facie case of disparate-impact liability." It is also important to recognize that, in deciding to grant summary judgment in favor of the plaintiffs, the Court was required to consider the evidence in the light most favorable to the opposing party (New Haven); even under that standard, the Court majority concluded that New Haven loses. Thus, there will likely be many cases where businesses face some substantial risk of disparate impact liability, but will still be forbidden to use race-conscious measures to avoid it.

The fact that business interests will suffer doesn't mean that Ricci was wrongly decided. I believe that private employers should be allowed broad discretion to adopt race-conscious affirmative action plans. But my view of the world is different from that embodied in Title VII, and I think the majority justices interpreted the statute more or less correctly. Right or wrong, the decision definitely isn't pro-business.

UPDATE: In the last part of his opinion for the Court, Justice Kennedy tries to address the conflict between disparate treatment suits and disparate impact:

Our holding today clarifies how Title VII applies to resolve competing expectations under the disparate-treatment and disparate-impact provisions. If, after it certifies the test results, the City faces a disparate-impact suit, then in light of our holding today it should be clear that the City would avoid disparate-impact liability based on the strong basis in evidence that, had it not certified the results, it would have been subject to disparate-treatment liability.

This gives New Haven and other similarly situated employers a potential safe harbor against disparate impact lawsuits. However, it is not clear that this reasoning extends beyond the context of a decision to decertify an already completed formal test. Most private employers do not use formal test processes like that of the New Haven Fire Department. Even in the testing context, there might not be a "strong basis in evidence" for disparate treatment liability absent the kind extensive record of racial motivation that New Haven compiled in this case (there was a lot of evidence, summarized in Justice Alito's concurring opinion, that the City's true motive for decertifying the test was to increase minority representation in the Fire Department for political reasons unrelated avoiding disparate impact liability.