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Employment: Courts Holding EEOC’s Background Check Agenda in Check
Earlier this year, I wrote about the Equal Employment Opportunity Commission’s (EEOC) Enforcement Guidance in relation to background checks. See EEOC Puts the Cuffs on Employers When it Comes to Criminal Backgrounds. Since that time the EEOC has unsuccessfully attempted to enforce its new agenda.The EEOC’s theory is that criminal background checks are discriminatory because minorities are more likely to have criminal records. This is known as disparate impact theory. Under disparate impact theory even a neutral practice can be discriminatory if it screens out a disproportionate number of a particular class. Even if, however, a neutral practice has a disparate impact, it still does not violate discrimination laws if it can be proven that the practice is job-related and consistent with business necessity.
Disparate impact cases rely on statistical analysis. The EEOC relies on generic national data which provides that conviction rates are higher for minorities to support its blanket policy that conviction records used to screen applicants will result in a disparate impact.
In EEOC v. Freeman, Case No. RWT 09cv2573, the United States District Court for Maryland took the EEOC statistical evidence to task. The Court began its opinion by correctly stating that “[f]or many employers, conducting a criminal history or credit record background check on a potential employee is a rational and legitimate component of a reasonable hiring process.”
The Freeman decision is instructive for employers that are developing a hiring process or have a process which includes criminal background and credit history checks. The employer in Freeman was a family owned business that provided services for expositions, conventions and corporate events. The background checks were designed with five goals in mind: (1) to avoid exposure to negligent hiring and retention lawsuits; (2) to increase security of the business’s assets and employees; (3) to reduce liability from inconsistent hiring or screening practices; (4) to proactively reduce risk of employee related loss; and (5) to mitigate the likelihood of an adverse incident occurring on company property that could jeopardize customer or employee confidence. As the court stated, these are legitimate goals. When developing a background check program, employers should have similar goals in mind.
In Freeman, the types of background checks varied for the nature of the job sought. General employees, those that did not hold credit sensitive jobs, were only required to undergo a criminal history check and social security verification. Credit sensitive positions were those that had access to client or company credit card information, handled money, checks, similar valuable items, had budgetary authority, had authority to make agreements with respect to customer invoices, or made purchases from vendors. Employees in these positions were lawfully subjected to credit checks. As Freeman instructs, employers should not perform credit checks for positions where it is unnecessary. Try to tailor such programs by thinking about job relatedness.
The employer’s standard application in Freeman stated “Have you ever pleaded guilty to, or been convicted of a criminal offense.” The application also stated the following:
- A conviction does not automatically mean you will not be offered a job. What you were convicted of, the circumstances surrounding the conviction and how long ago the conviction occurred are important considerations in determining eligibility. Give all the facts, so that a fair decision can be made.
In Freeman, a background check was run after an applicant was offered and accepted a job. The employer undertook a multi-step process when determining whether an individual was suitable to begin work Those who were dishonest on the application were automatically disqualified. Applicants with pending warrants were given a reasonable opportunity to resolve the matter and have the warrant resolved; failure to do so made it unlikely but not impossible for the applicant to be hired. Only convictions within the past seven years were considered. Convictions involving violence, destruction of private property, sexual misconduct, felony drug convictions, or job-related misdemeanors would generally disqualify an individual.
Furthermore, applicants whose credit histories revealed any of the following issues were excluded from credit sensitive positions: (1) More than two accounts of $300 or more that were 90 days past due; (2) More than three collection accounts that were not medically related; (3) More than two paid charge-offs in the prior 12 months; (4) Any unpaid charge-offs in the prior 12 months; (5) A car repossessed in the prior three years; (6) A house foreclosure in the prior three years; (7) Filed for bankruptcy in the prior seven years; (8) A judgment in the prior seven years (9) A default on student loans (10) Any unsatisfied liens; (11) Any satisfied liens in the prior three years; and (12) Any delinquency in paying child support.
It was important that the Employer in Freeman looked at job relatedness and did not automatically ban an individual with a conviction from working at the company. Employers must always look at job relatedness when determining whether an individual with a certain type of conviction should be prevented from performing a particular job. In addition, it is recommended that an employer look at the severity of the offense and the time that has passed since the offense was committed.
In Freeman, the EEOC did not even challenge any of the above criteria or procedures but merely challenged Freeman’s policy of conducting the background checks, as a whole, which produces a disparate impact on protected classes. The court found that the EEOC statistical evidence was so full of material flaws that it could not support its claims. The court also found that the EEOC could not rely on national statistics regarding credit history and conviction rates. National statistics cannot be used as a surrogate for the class of qualified job applicants, because they contain many people who have not and would not be applying for a job with the company.
In concluding, the court, on behalf of employers everywhere stated the following:
- The story of the present action has been that of a theory in search of facts to support it. But there are simply no facts here to support a theory of disparate impact resulting from any identified, specific practice of Defendant. Indeed, any rational employer in the United States should pause to consider the implications of actions of this nature brought based upon such inadequate data. By bringing actions of this nature, the EEOC has placed many employers in the ‘Hobson’s choice’ of ignoring criminal history and credit background, thus exposing themselves to potential liability for criminal and fraudulent acts committed by employees, on the one hand, or incurring the wrath of the EEOC for having utilized information deemed fundamental by most employers. Something more, far more, than what is relied upon by the EEOC in this case must be utilized to justify a disparate impact claim based upon criminal history and credit checks. To require less, would be to condemn the use of common sense, and this simply not what the discrimination laws of this county require.
Should you have any questions regarding background checks or the hiring process in general, please do not hesitate to contact Lynn Schonberg or Ryan Neumeyer at 216-447-1551