J. Scott Applewhite/AP/File
Entrepreneur Peter Thiel speaks during the final day of the Republican National Convention in Cleveland, July 21. The US Department of Labor has filed a lawsuit accusing Palantir Technologies, which was founded by Mr. Thiel, of systematically discriminating against Asian job applicants.

Biased against Asians? Feds sue Silicon Valley firm

Palantir Technologies, which was co-founded by prominent tech financier Peter Thiel, has been hit with a federal lawsuit alleging systematic discrimination against Asians in hiring practices.

The US Department of Labor has filed a lawsuit accusing a fast-growing Silicon Valley software company of systematically discriminating against Asian job applicants.

Palantir Technologies was co-founded by prominent tech financier Peter Thiel, with backing from an investment arm of the CIA, and was recently valued at $20 billion. The privately held company makes powerful data-analytics software used by U.S. military, intelligence, and law-enforcement agencies, along with banks, insurance companies, and other non-government clients.

The unusual lawsuit – which comes as Silicon Valley is grappling with broader criticism for a lack of diversity – claims Palantir "routinely eliminated" Asian job candidates during the resume-screening and telephone-interview stages of the company's hiring process. The claims are based on a statistical analysis conducted by federal officials responsible for making sure government contractors comply with anti-discrimination rules.

Palantir denied the allegations Monday and said it will contest the suit. It argued in a statement that the government's case "relies on a narrow and flawed statistical analysis relating to three job descriptions from 2010 to 2011."

A spokeswoman didn't respond to questions about the ethnic makeup of Palantir's workforce. But the statement added: "The results of our hiring practices speak for themselves." Palantir is based in Palo Alto, Calif., and employs more than 1,800 people.

The federal lawsuit comes as leading Silicon Valley tech companies are struggling to answer criticism about a lack of diversity in staffing. One legal expert said the federal lawsuit may reflect a broader aim by the government "to shed more light and get more accountability" from the tech industry.

"It's the new economy, but we still want to make sure there aren't new forms of discrimination in these industries," said Orly Lobel, a University of San Diego law professor who's studied Silicon Valley hiring patterns.

Another leading tech company recently agreed to pay $750,000 in back wages to settle discrimination claims brought by the Labor Department, without admitting wrongdoing. Those charges involved African-Americans, Asians, and Hispanics who sought inside sales jobs at an Arkansas data-processing facility operated by Hewlett Packard Enterprise, the government announced last week. In a statement, HPE said, "we are confident in our hiring processes and we will continue to promote and build a diverse and inclusive workforce."

In recent years, Apple, Google, Facebook, and other prominent Silicon Valley corporations have acknowledged they employ disproportionately low numbers of women, African-Americans, and Latinos, compared with the general population. Hiring figures released by those larger companies generally show that employees of South and East Asian descent are better represented.

The federal lawsuit against Palantir, however, focuses on Asian job candidates because they applied in relatively large numbers. Rose Darling, a senior trial attorney for the Labor Department, said the government's analysis showed a disproportionate number of Asian applicants were rejected for positions at the company.

For example, the suit alleges that Asians made up 77 percent of a pool of more than 730 qualified applicants for the job of quality assurance engineer at Palantir. The company hired one Asian and six non-Asians, according to the Labor Department's compliance office, which calculated the statistical likelihood of that result is one in 741.

For another position, described as an engineering intern, the lawsuit said there's a "one in a billion" chance that Palantir's hiring pattern occurred by chance.

While the analysis involved hiring statistics for 2010 and 2011, Darling said the company hasn't shown evidence that it has changed its practices since then.

Appellate courts have allowed the use of statistical analyses in discrimination claims because it's rare to find more explicit evidence, like a memo that says "Don't hire" from a certain group, Lobel said.

"You used to have 'smoking guns,' but that's more rare these days," she said. "So the courts are recognizing that you can prove discrimination by showing that the odds that this would be the result, without discrimination, are just so low."

The lawsuit is the first of its kind brought against a Silicon Valley company in recent years, Darling said. She declined to say if other investigations are pending.

The suit was filed with the Labor Department's Office of Administrative Law Judges, which is a quasi-judicial system within the department. The outcome of the case can be appealed to the regular federal court system.

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