At the end of the Supreme Court’s term in June, we blogged about a housing discrimination case that might be used by employers to limit disparate impact liability. Texas Dept. of Housing & Community Affairs v. Inclusive Communities Project, Inc., 135 S. Ct. 2507 (2015). Less than two months later, a divided three judge panel of the United States Court of Appeals for the First Circuit cited Inclusive Communities’ limitations in an employment matter. Abril-Rivera v. Johnson (1st Cir. July 30, 2015).

Here, a class of 300 Puerto-Rican Federal Emergency Management Agency (“FEMA”) alleged FEMA’s decision to place them on a rotational staffing plan and then closing the FEMA facility in Puerto Rico had a disparate impact against them—they were denied work and then terminated. Since the First Circuit could have easily found FEMA’s decisions were compelled by the circumstances—not putting 300 employees to work in a fire trap and not spending $9 million to fix the problem—it is notable that the First Circuit utilized the management friendly defense outlined in Inclusive Communities. Following the Supreme Court, the First Circuit found that FEMA met its burden by showing “legitimate business justifications” for its action.

Separately, despite the failure of FEMA to raise the issue itself, the First Circuit found that because the plaintiffs sought to compare themselves to FEMA employees at other locations, FEMA was entitled to summary judgment based on a safe harbor position in Title VII. Section 703(h) of Title VII contains a number of safe harbors, among them, permitting an employer to apply “different terms, conditions or privileges of employment . . . to employees who work in different locations, provided that such differences are not the result of an intention to discriminate because of race, color, religion, sex or national origin.”

The extent other courts follow the First Circuit’s lead and defer to an employers’ business judgment will be a key issue for employers facing disparate impact claims. The EEOC is now heavily focused on policies and practices that have a disparate impact on protected groups. Likewise, private class action attorneys have an incentive to identify such company-wide policies or practices as an end run around the class certification limitations established by the U.S. Supreme Court in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 277 (2011).

In addition to the “location” safe harbor applied by the First Circuit, other practices receiving mention in 703(h) include “bona fide” seniority systems, merit systems, and systems measuring earnings by quantity or quality of production.    These defenses apply if a practice is not based on an intention to discriminate.   Section 703(h) also permits differentiating upon the basis of sex in determining the amount of wages or compensation to be paid to employees if such differentiation is authorized under the Equal Pay Act.