In 1985 The Equal Employment Opportunity Commission (EEOC) brought a suit against a small company providing janitorial and cleaning services in Chicago (EEOC v. Consolidated Service Systems). The owner of the company, a Korean immigrant, was hiring mostly Koreans. He did it by relying on word of mouth rather than traditional means of advertising. The EEOC claimed that the company was discriminating in favor of the persons of Korean origin.
Title VII of the Civil Rights Act of 1964 explicitly prohibits any discrimination in hiring based on “race, color, religion, sex, or national origin.” The court was looking for any evidence of an intentional discrimination, because the mere fact that the employees were mostly Koreans was not enough to make a conclusion of any intent to discriminate.
The first question was why the owner of the company was relying exclusively on word of mouth in his hiring practice. It turned out that there is a simple reason for that – it is the cheapest way to hire. Consolidated Service Systems is a small company, which simply could not afford to spend a lot of money on recruitment.
Besides being the cheapest method of recruitment, word of mouth turned out to be very effective in attracting reliable new employees. First, when a prospective employee is referred by someone working in the company, a new candidate can get a firsthand info and thus more accurate picture of the working conditions. As the result there is a higher probability of a good match between a prospective employee and the company. Second, an employee would be reluctant to refer someone who is not a good worker and risking getting in trouble because of that.
The court ruled that this is not discrimination if an owner simply sits back and waits for people to come to his office to apply for job. People of the same ethnic origin who share common culture tend to work together, socialize together and marry together. There is no evidence of any illegal discrimination here.
Finally the district judge dismissed the suit because the EEOC failed to prove any discrimination.