Franchisee discrimination law

In a recent LinkedIn discussion, one of the participants mentioned the fear that many franchisors have  – inadvertently but unlawfully discriminating by using a selection tool like a personality profile.

There is general lack of independent data that demonstrates the effectiveness of personality profiles in predicting performance of franchisees.

In fact, after nearly 50 years of use for employee selection, even the experts are questioning a personality profile’s effectiveness. 

An interesting book about the subject is The Cult of Personality Testing: How Personality Tests Are Leading Us to Miseducate Our Children, Mismanage Our Companies, and Misunderstand OurselvesAre You Unlawfully Discriminating When Recruiting Franchise Owners? by Annie Murphy Paul, a former senior editor for Psychology Today magazine.

Another concern is the possibility of discriminating on the basis of “race, color, religion, sex, or national origin”.

In Griggs v. Duke Power Co., the court found that even though the test in question did not discriminate on its face, in fact it did discriminate. The court’s opinion stated that businesses need to use tests that are designed “for the job and not the person in the abstract.”

From that finding, it would appear that if there was evidence of a meaningful study of their relationship to job performance ability, the two ability tests (under review) were related to job performance, then the Court would have found there was no Title VII violation. By the way, the two tests under review are still widely used even after this finding.

This case demonstrates the inadequacy of broad and general testing devices that have not been designed specifically for the position in question.

If not developed and validated properly, your potential legal ramifications can be huge.

The two most significant legal considerations in using personality and emotional intelligence tests are Title VII discrimination and discrimination under the Americans with Disabilities Act (“ADA”).

While intentional discrimination is certainly possible, the more likely risk for companies acting in good faith involves inadvertent discrimination through the use of valid and reliable instruments. (See PERSONALITY TESTS IN EMPLOYMENT SELECTION: USE WITH CAUTION by H. Beau Beaz III – Associate Dean for Academic Effectiveness & Professor of Law at the Charlotte School of Law – in the 2012 edition of Cornell HR Review

You can avoid some of these issues if you use a selection tool developed specifically for the job.

I will make three assumptions:

  1. Assume you’re using a performance prediction tool designed specifically for the position in question,
  2. It’s been validated using rigorous strict, scientific state-of-the-art methodology.
  3. It’s effectiveness has been verified by an independent 3rd party.

A claim has been filed against you alleging that you have discriminated against the candidate based on the results of the performance predictor. 

Formalizing the selection process helps you treat all franchise candidates equally. It’s much easier to prove your case that no discrimination exists when you can prove that you treat all franchise candidates the same. You examine each of them with the same questions using the same selection tools for everyone.

Since the performance predicting tool you’re using has been validated by an independent 3rd party, you’ll have proof that it can accurately predict how well a franchise candidate will perform. No judge will rule that you must award a franchise to an unqualified individual. Just as they would never rule that you must sell a franchise to a candidate that was not financially qualified.

A terrific selection tool!

Speaking of selection tools, many terrific franchisors use our FranchiZe Predictor because it predicts how a franchise candidate will perform. It gives them an unbiased, objective read on whether the candidate has what it takes to be successful.

When you have a formal selection process in place which includes structured interviews and other tools that provide an objective view of the candidate, arguing that a candidate does not meet your minimum requirements and therefore does not qualify for a franchise is really no different than the argument that every candidate needs to meet a minimum threshold for available cash-on-hand and financing.

Similarly, if you:

  1. Have a selection system in place that clearly specifies that a candidate must have a certain set of characteristics, beliefs and business acumen,
  2. Can prove that these have been found to be essential to the success of your franchisees and
  3. Measure all candidates on these characteristics.

You’re on safe ground.

So don’t take the concern about a lawsuit as a reason to accept anyone with the funding. Instead, take it as motivation to improve your selection process. You’ll rest easier, and your current franchisees will thank you for it.