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EEOC Pressures Employers to Show Business Necessity of Rejecting Applicants Based on Criminal Records and Credit Scores

Online Exclusive: EEOC Focus On Criminal Background Checks Raises Negligent Hiring Concerns

In fall 2009, the Equal Employment Opportunity Commission (EEOC) accused Freeman, a convention and corporate events marketing company, of discriminating against blacks, Hispanics and males by routinely rejecting job applicants based on their criminal background records and credit histories. That violated Title VII, the agency said, because it had the effect of excluding minorities and males, who have disproportionately higher conviction rates and lower credit scores than the general population.

The lawsuit, filed in the U.S. District Court for the District of Maryland, followed a similar case filed in 2008 against Peoplemark Inc. in the Western District of Michigan alleging that a policy of excluding applicants with criminal records had a disparate impact on black people.

These cases signal renewed EEOC interest in the use of criminal and credit records in hiring. They come at a time when the use of criminal checks is widespread--80 percent of large employers use them, according to the American Civil Liberties Union. Employers cite their OSHA obligation to provide a safe workplace, their liability for negligent hiring claims following incidents of violence or harassment, and the need to pare down huge volumes of applicants in a time of high unemployment as reasons for greater reliance on such screening tools.

The EEOC's focus on background checks is part of its E-RACE (Eradicating Racism and Colorism from Employment) initiative, announced in 2007. Heightened enforcement is just one element. At a November 2008 hearing, the commission heard testimony on the negative impact of criminal background screening on minority applicants. It is expected to issue revised guidance on the issue in the near future.

"If you read the tea leaves on who they called to testify and take note of the prevailing political winds in Washington, it is more likely than not that the commission will take a harder stance on the issue of criminal convictions," says David Gevertz, a shareholder at Baker, Donelson, Bearman, Caldwell & Berkowitz.

Matter of Choice

With more than 2.3 million people in U.S. prisons, 900,000 of whom are black and 95 percent of whom will eventually be released, advocates for ex-offenders argue that widespread use of criminal background checks is creating a permanent underclass of unemployable people who are disproportionately minorities. They also contend that past convictions are not good predictors of employee behavior and performance, and that some Web sites offering criminal background records rely on databases that are riddled with errors.

Others say the worldwide economic meltdown has victimized many people, leaving them with poor credit histories that unfairly limit their employment opportunities.

On the other hand, employers in this economy typically have plenty of qualified applicants for open positions. They assert their right to screen out people whose backgrounds raise questions about their dependability, temperament, judgment or trustworthiness. Some argue that there is a fundamental difference between discrimination based on a factor a person can't control--such as race, age and gender--versus discrimination based on something that is a matter of choice--committing a crime or spending beyond one's means.

"There is a lot of resonance with the argument that you can't take something that is a matter of choice and mix it with things that are immutable characteristics such as age, race and sex," Gevertz says.

Nonetheless, the EEOC seems to be embarking on the course of tightening the rules for using background checks.

Three-Pronged Test

Some employment lawyers acknowledge that more specific guidance would be helpful, though they fear the EEOC will erode employers' rights in the process.

Currently, the EEOC tells employers to consider three factors when using criminal records in a hiring decision: the nature of the job, the nature and seriousness of the offense, and the length of time since it occurred. Guidance issued in 2006 states employers are legally justified in rejecting ex-offenders "when the conduct that was the basis of the conviction is related to the position, or if the conduct is particularly egregious." For example, an employer hiring for a restaurant cashier's position could probably justify excluding applicants with a larceny record, but could have difficulty establishing that the conviction was relevant to a cook's position, Gevertz says.

But many situations aren't as clear, leaving employers to make judgment calls on whether there is a legitimate business necessity for excluding an applicant based on criminal background or credit history.

"What we do know from the EEOC is that if an employer has an absolute or blanket rule that would preclude someone from being hired based on any conviction, that would be unlawful discrimination," says Teresa Jakubowski, a partner at Barnes & Thornburg. Beyond that, the EEOC isn't very specific about where discriminatory use of background checks starts and ends.

Ban the Box

The issue of whether employment applications can ask the applicant if he or she has a criminal record is one area where clarification would help. While some states restrict language used on applications, there is no federal standard. But Gevertz says the EEOC may heed testimony at the 2008 hearing from those who want the agency to "ban the box."

"The EEOC's position is that asking conviction-related questions on the face of applications leads most interviewers to stop reading the application," he says. "Once the applicant gets an interview and the employer starts to relate to the person, then subsequently learning about a conviction does not act as the same bar as if you are looking at a piece of paper."

As a result, Gevertz advises employers who are not already asking for conviction information on their applications not to start doing it.

Additionally, Clint Robison, a partner at Hinshaw & Culbertson, suggests that employers develop criteria for how background information would apply to specific categories of jobs, based on business necessity.

"You may want to classify a warehouse job differently from dealing with customers one on one," he says, adding that hiring managers must be trained on the rules so the criteria are applied uniformly.

Peter Gillespie, of counsel at Fisher & Phillips, suggests another precautionary step for employers.

"If they have a history of using background checks and credit reports as screening tools, it may be prudent to see what effect, if any, that has had on the composition of their workforce," he says. "That's another factor someone making a [disparate impact] claim would look at."

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