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When Should Employers Be Liable for Factoring Biased Customer Feedback into Employment Decisions?

When Should Employers Be Liable for Factoring Biased Customer Feedback into Employment Decisions?

By Dallan F. Flake. Full text here.

In today’s customer-centric business environment, firms seek feedback from consumers seemingly at every turn. Firms factor customer feedback into a host of decisions, including employment-related decisions such as who to hire, promote, and fire; how much to pay employees; and what tasks to assign them. Increasingly, researchers are discovering that customer feedback is often biased against certain populations, such as women and racial minorities. Sometimes customers explicitly declare their biases, but more often their prejudices are harder to detect—either because they intentionally hide their biases in their ratings or because the customers do not realize their own biases, and thus unknowingly allow such biases to skew their perceptions, and consequently their ratings, of service exchanges.

When firms rely on tainted customer feedback to make employment decisions, they indirectly discriminate against employees. Although the law makes clear that employers cannot discriminate against employees based on customers’ explicit discriminatory preferences, it has yet to address whether and to what extent employers are liable for factoring biased customer feedback into employment decisions. This Article argues that employers should not get a free pass to discriminate simply because it is the customers who bear the discriminatory animus; but should employers be liable in every instance where biased customer feedback taints an employment decision.

To strike an appropriate balance, employers should be held to a negligence standard, whereby their liability for using biased feedback depends on whether they knew, or reasonably should have known, the data was tainted, and if so, whether they acted reasonably in response by taking appropriate preventive or corrective measures. A major advantage of this framework is that it works in both the easy cases, where discriminatory feedback is explicit and obvious, as well as in the hard cases, where bias in customer feedback is obscured, by tying employer liability to the ease with which customer bias can be detected. Where customer bias is obvious, the law would impose on employers a heightened duty in terms of both knowledge and response, whereas if bias is hidden, employers would be held to a lower standard.