EEOC loses – again – in challenge to background checks

In the latest blow to the Equal Employment Opportunity Commission’s (the “EEOC”) attempts to regulate employers’ use of background checks, the Fourth U.S. Circuit Court of Appeals threw out a case in a scathing opinion that expressed disappointment in the agency’s litigation conduct.

The controversy began in April 2012, when the EEOC released guidance on the issue of criminal background checks for employers. The “Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964” emphasized that while the use of criminal history does not violate the statute per se, an employer may run afoul of the law if the checks result in systemic discrimination based on a protected category like race, color, national origin, religion, or sex.

As an alternative, the agency suggested employers strive to perform individualized assessments of prospective employees, and consider factors such as the nature of the crime and its relation to the potential job, as well as the individual’s rehabilitation efforts and the length of time that has passed since the conviction.

The EEOC then followed up with multiple lawsuits alleging that certain employers engaged in the discriminatory use of background checks, disproportionately screening out African-American workers in cases filed against BMW Manufacturing in South Carolina, Dollar General in Illinois, Kaplan Higher Education Company in Ohio, and Freeman Company in Maryland.

To date, all of the lawsuits have been dismissed and the agency has faced criticism about its efforts to pursue such cases from both industry and lawmakers. The most recent critic: the Fourth Circuit.

In the agency’s case against Freeman Company, the EEOC alleged the company’s use of criminal background checks for all applicants and credit checks for “credit sensitive” positions had an unlawful disparate impact on black and male job applicants. To support its case, the agency produced expert reports by an industrial/organizational psychologist. But the federal district court granted summary judgment for Freeman, finding the psychologist’s reports “rife with analytical errors” and “completely unreliable.”

The Fourth Circuit affirmed the ruling, identifying “an alarming number of errors and analytical fallacies” in the reports, “making it impossible to rely on any of his conclusions.” Freeman provided complete background screening logs for thousands of applicants to the EEOC but the psychologist “cherry-picked” data, the court said, omitting information from half of the company’s branch offices while purporting to analyze all the background checks, and further failed to utilize an appropriate sample size, selecting the vast majority of data to focus on before October 14, 2008.

Although the relevant time period extended to August 31, 2011 and Freeman conducted over 1,500 criminal checks and more than 300 credit reviews between October 14, 2008 and August 31, 2011, the psychologist used data from only 19 applicants during that time, just one of whom passed the check.

A “mind-boggling number of errors and unexplained discrepancies” existed in the psychologist’s database, the panel added, rejecting the EEOC’s argument that the mistakes originated in Freeman’s data. The psychologist introduced the errors, the court said, and further managed to introduce fresh errors when he tried to supplement his original reports with corrections.

“The sheer number of mistakes and omissions in the analysis renders it “outside the range where experts might reasonably differ,” the three-judge panel wrote. One of the panelists added a concurring opinion expressing concern with the “EEOC’s disappointing litigation conduct” and continued efforts to defend the psychologist’s work despite other courts reaching similar conclusions about his reports.

“The Commission’s conduct in this case suggets that its exercise of vigilance has been lacking,” according to the concurring opinion. “It would serve the agency well in the future to reconsider how it might better discharge the responsibilities delegated to it or face consquences for failing to do so.”

With public criticism, zero litigation victories, and a counterargument from one defendant that its background check procedures are the same as those conducted by the agency itself, the Fourth Circuit’s decision does not bode well for the future of EEOC challenges to background checks. That said, employers should still be cautious and utilize background reports in a non-discriminatory manner.

Read the EEOC guidance.

Read the opinion in EEOC v. Freeman.

May 8th, 2015|Employment Decisions|

Congress proposes bill that protects regulated employers’ background checks

While the Equal Employment Opportunity Commission (the “EEOC”) is continuing its challenge of employers’ use of criminal history and credit report information in personnel decisions, and new “ban-the-box” laws are rapidly gaining momentum, on September 9, 2014, Congress proposed legislation that protects certain regulated employers from EEOC, state agency and private actions when they strive to comply with the screening laws that are particular to their industries. The Certainty in Enforcement Act of 2014 would amend Section 703 of the Civil Rights Act of 1964 (42 U.S.C. 2000e-2), and cover employers that include those engaged in “health care, childcare, in-home services, policing, security, education, finance, employee benefits, and fiduciary duties.”

October 15th, 2014|Employment Decisions, Legislation|

Sixth Circuit affirms dismissal of EEOC’s suit regarding employment credit checks

Last month, the 6th Circuit affirmed a lower court order granting summary judgment in favor of educational institution Kaplan  (6th Cir. April. 9, 2014;  No. 13-3408:   EEOC v. Kaplan Higher Education Corp.) where the EEOC charged that Kaplan’s use of credit checks causes it to screen out more African-American applicants than white, creating a disparate impact in violation of Title VII of the Civil Rights Act. In granting summary judgment to Kaplan, the district court stated that “proof of disparate impact is usually statistical proof in the form of expert testimony, and here the EEOC relied solely on statistical data compiled by Kevin Murphy, a PhD in industrial and organizational psychology.” The court excluded Murphy’s testimony on grounds that it was unreliable, as the EEOC presented “no evidence” that Murphy’s methodology satisfied any of the factors that courts typically consider in determining reliability under Federal Rule of Evidence 702; and, as Murphy himself admitted, his sample was not representative of Kaplan’s applicant pool as a whole. The EEOC argued that the district court “erred” when it excluded Murphy’s testimony.

This case was decided on narrow grounds, based on its particular facts and circumstances. Accordingly, employers still should review their screening policies to ensure that credit and (criminal history) checks are consistent with Title VII as interpreted by the EEOC. Additionally, ten states (California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont and Washington) and several municipalities already have legislation that limits the use of credit reports for employment purposes

Reminder that EEOC’s guide on criminal checks extends to contractors and subcontractors

The guidance issued in 2012 by the Equal Employment Opportunity Commission’s (EEOC) on using criminal checks in employment decisions was also incorporated into the directive of Office of Federal Contract Compliance Programs (the “OFCCP”). As provided in the EEOC guidance, the OFCCP discourages the use of blanket hiring exclusions against individuals with criminal records, and recommends that contractors follow the EEOC’s best practices for employers to avoid liability for discrimination. The OFCCP advises that contractors, as a general rule, refrain from inquiring about convictions on job applications, and if such inquires are made, “limit the inquiries to convictions that demonstrate unfitness for the particular position.”

May 14th, 2014|Employment Decisions|

FTC and EEOC jointly publish guides on employment-purpose background checks

The Federal Trade Commission (FTC) and the Equal Employment Opportunity Commission (EEOC) have co-published two brief guides on employment background checks that explain the rights and responsibilities of the people on both sides of the desk. See Background Checks: What Employers Need to Know and Background Checks: What Job Applicants and Employees Should Know. For employers, the guidelines cover only the basics that must be considered for procuring and using employment-purpose background checks and do not attempt to explain in detail the many compliance requirements of the Fair Credit Reporting Act, and analogous state and municipal consumer reporting laws, regulations, codes and statutes.

March 29th, 2014|Employment Decisions|

From hair styles to criminal records, increased employment regulations to continue

Recent enforcement efforts by the Equal Employment Opportunity Commission (the “EEOC”) combined with some local and state “ban-the-box” laws are causing trepidation among employers who must not only consider, but also apparently hire, applicants with a criminal history and unprofessional hairstyles.

The EEOC recently filed a lawsuit in Alabama alleging that an insurance claims company violated Title VII of the Civil Rights Act by discriminating against an African-American applicant because she wore dreadlocks. The EEOC’s position is that the company’s policy of requiring a professional/business look “focuses on the racial bias that may occur when specific hair constructs and styles are singled out for different treatment because they do not conform to normative standards for other races.”

The EEOC has also pushed its position that considering criminal convictions in hiring decisions can be racially discriminatory, issuing its well-publicized guidance and filing lawsuits against employers that use background checks. Based on EEOC’s logic, Massachusetts and Hawaii already have adopted “ban the box” laws that apply to both private and public employers, and on January 1, 2014, similar measures will take effect in Rhode Island and Minnesota. The cities of Buffalo, NY, Newark, NJ, Seattle, WA, and Philadelphia, PA, also have passed similar legislation affecting private employers. Many more states and municipalities have “ban-the-box” laws that apply only to public employers. (Generally, “ban-the-box” legislation calls for the removal of the criminal history box/question on the job application, and prohibits employers from asking about criminal records in the initial application process.)

Win or lose, the EEOC is unlikely to let up, and the trend of increased employment regulations will continue into 2014, according to legal commentators. Employers should review their policies and procedures at least annually to ensure that they meet EEOC’s guidelines, comply with all federal, state and local laws and regulations, are fair and consistent and aligned with the business model.

December 9th, 2013|Employment Decisions, Judgment|

EEOC fails to prove disparate impact in another case involving background checks

In August 2013, a Maryland federal judge dismissed without a trial a putative suit filed by the Equal Employment Opportunity Commission (the “EEOC”) against event-promoter Freeman for alleged discriminatory background screening practices. Calling the EEOC’s expert report “an egregious example of scientific dishonesty,” the court granted a summary judgment to Freeman based on its findings that the EEOC’s expert testimony was unreliable, and would not support a claim of disparate impact. According to the court’s opinion, the EEOC failed to establish an element of its case when it made no effort to analyze Freeman’s multi-step screening policies to identify the specific practices that caused the alleged disparate impact. The court went on to say: “By bringing actions of this nature, the EEOC has placed many employers in the ‘Hobson’s choice’ of ignoring criminal history and credit backgrounds, thus exposing themselves to potential liability for criminal and fraudulent acts committed by employees, or, on the other hand, incurring the wrath of the EEOC for having utilized information deemed fundamental by most employers.”

The EEOC most likely will appeal the decision, as it has done in another high-profile background check case in Ohio, where in January 2013 the court similarly ruled  that the EEOC failed to prove disparate impact. Although these rulings represent a victory for the employer, the EEOC has not reversed its position, and is expected to continue its attempts to severely limit, if not eliminate, the use of criminal and credit checks by private employers.

September 12th, 2013|Employment Decisions, Judgment|

EEOC files suits against two employers for use of criminal background checks

The Equal Employment Opportunity Commission (the “EEOC”) announced on June 11, 2013 that it filed lawsuits against two large employers accusing them of using criminal background checks to illegally discriminate against African American workers. The EEOC alleged that the companies, by requiring contracted employees and prospective employees to submit to criminal background checks, violated Title VII of the Civil Rights Act of 1964’s prohibition against race discrimination.

“Title VII of the Civil Rights Act of 1964 prohibits discrimination against job applicants and employees on account of their race,” said EEOC Chair Jacqueline A. Berrien.  “Since issuing its first written policy guidance in the 1980s regarding the use of arrest and conviction records in employment decisions, the EEOC has advised employers that under certain circumstances, their use of that information to deny employment opportunities could be at odds with Title VII.”  The EEOC issued updated enforcement guidance on employer use of arrest and conviction records in April 2012.

June 20th, 2013|Employment Decisions, Lawsuit|

What’s the practical meaning of EEOC’s new criminal records guidance?

On April 25, 2012, the U.S. Equal Employment Opportunity Commission (“EEOC”) approved new enforcement guidance regarding the use of arrest and conviction records in employment decisions. The guidance builds on longstanding court decisions and requirements that the EEOC issued over twenty years ago, focusing on employment discrimination based on race and national origin.

In brief, the new guidance’s position is more aggressive, affirming that employers cannot automatically disqualify applicants with criminal records, and that their screening policies need to be consistent and structured for “individual assessment.” The guidance’s main points state that:

  • An arrest record does not establish that criminal conduct has occurred, and an exclusion based on an arrest, in itself, is not job related and consistent with a business necessity. However, an employer may make an employment decision based on the conduct underlying an arrest if such conduct makes the individual unfit for the particular position.
  • A conviction record will usually serve as sufficient evidence that a person engaged in a particular conduct. In certain circumstances, however, there may be reasons not to rely on the conviction record alone when making an employment decision.
  • A violation may occur when an employer treats criminal history information disparately for different applicants or employees, based on their race or national origin (disparate treatment liability). An employer’s neutral policy (e.g., excluding applicants from employment based on certain criminal conduct) also may disproportionately impact protected-class individuals and may violate the law if not job related and consistent with a business necessity (disparate impact liability)

The EEOC specifies two circumstances in which employers will meet the “job related and consistent with a business necessity” defense:

  • The employer validates the criminal conduct exclusion for the particular position under the Uniform Guidelines on Employee Selection Procedures (i.e., if there is data or analysis about criminal conduct as being related to subsequent work performance or conduct;) or
  • The employer develops a targeted screen considering at a minimum the nature of the crime, the time elapsed, and the particular job. The employer’s policy then provides an opportunity for an individualized assessment for those individuals identified by the screen to determine if the policy, as applied, is job related and consistent with a business necessity.

The guidance further asserts that although Title VII does not require individualized assessment in all circumstances, the use of a screen that does not include such assessment is more likely to violate its provisions. As an example of individualized assessment process, the EEOC recommends providing the applicants an opportunity to explain why they should not be denied a position due to the criminal record. The guidance also specifies the following factors that employers should assess:

  • Facts or circumstances surrounding the offense or conduct;
  • Number of charges of which the individual was convicted;
  • Older age at the time of conviction, or release from prison;
  • Evidence that the individual performed the same type of work, post-conviction, with the same or different employer, with no known incidents of criminal conduct;
  • Length and consistency of employment before and after the offense or conduct;
  • Rehabilitation efforts, e.g., education/training;
  • Employment or character references and any other information regarding fitness for the particular position; and
  • Whether the individual is bonded under a federal, state, or local bonding program.

The guidance recognizes that some employers are subject to federal statutory and/or regulatory requirements that prohibit them from hiring individuals with criminal records for certain positions. The EEOC notes that its new guidance does not preempt such federal guidelines, and explains that employers may be subject to a claim under Title VII if they scrutinize individuals to a higher degree than required under applicable federal requirements.

As in its previous version, the EEOC’s new guidance is not meant to be a deterrent to conducting background checks. But it should serve as a reminder that hiring policies and practices must be structured in compliance with the law.  

June 1st, 2012|Employment Decisions|
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