Thursday, August 15, 2013

Judge Hammers EEOC Over Alleged Discriminatory Background Checks in Employer Win

If you think you were disturbed over the Equal Employment Opportunity Commission’s crackdown on the use of background checks in hiring, wait until you hear what a Maryland federal judge had to say.  

This summary is a shortened version of what Rod Fliegel and Jennifer Mora wrote at Littler in EEOC v. Freeman

On August 9, 2013, a federal district court judge in Marylanddismissed, without a trial, the Equal Employment Opportunity Commission’s (EEOC) Title VII suit against Freeman over alleged discriminatory background checks based largely on fatal flaws in the EEOC’s expert report—described by the court as “an egregious example of scientific dishonesty.”  The opinion acknowledges the legitimate, even “essential,” business reasons for conducting criminal background checks and highlights significant challenges the EEOC faces when prosecuting such suits.  Although the court did not slam the door shut on the EEOC’s ability to challenge background checks in general, an appeal to the U.S. Court of Appeals for the Fourth Circuit seems likely....

Below, we summarize the court’s opinion, with an emphasis on how the court construed the governing legal standard under Title VII, including the court’s flat-out rejection of the EEOC’s central premise that, because of disproportionate conviction rates, any consideration of criminal or credit background checks has an unlawful disparate impact.  In the court’s words, the mere consideration of such information is not a matter of concern under Title VII, but what is important is the specific information an employer uses and how it uses that information. ...

Freeman’s Background Screening Program

The defendant-employer ordered different types of background checks for different positions.  For some, the company ordered only a criminal check and verification of the applicant’s Social Security number.  (For “credit sensitive” positions, the company had ordered a credit check, but after the suit was filed, it stopped doing so.)  For other positions, such as general managers and department heads, the company added education and credential checks.

The company’s job application included a question about prior convictions, and stated that a “conviction does not automatically mean you will not be offered a job.”  Rather: “What you were convicted of, the circumstances surrounding the conviction and how long ago the conviction occurred are important considerations in determining your eligibility.  Give all the facts, so that a fair decision can be made.”  Space was provided for the applicant to provide an answer.  The company did not consider arrest records, but it did consider outstanding warrants, and it limited its consideration of conviction records to seven years. ...

The company used a multi-step evaluation process when considering any criminal records.  First, it determined whether the applicant honestly disclosed prior convictions on the application and “automatically disqualified” applicants for dishonesty.  Applicants with outstanding warrants were provided an opportunity to resolve the matter and have the warrant withdrawn.  Finally, the company evaluated whether the criminal conduct underlying a particular conviction made the applicant “unsuitable for employment.” ...

The district court granted summary judgment for the company based on its findings that the EEOC’s expert testimony (1) was unreliable and would not support a finding of disparate impact, and (2) failed to attribute any supposed disparate impact to a specific employment practice.  The court did not reach the question of whether the company could affirmatively demonstrate “business necessity."...

In another blow to the EEOC, the district court ruled that the EEOC could not demonstrate disparate impact based on national criminal justice statistics cited in Murphy’s report.  The court explained that such statistics may be used only where the general population is representative of the relevant applicant pool, a showing the EEOC failed to make.  The court also explained that such statistics related to factors not considered by the company, such as arrest and incarceration rates.

The court ruled that the EEOC failed to attribute any supposed disparate impact to a specific employment practice, and thereby rejected the EEOC’s attempt to impugn the company’s overall consideration of background checks.  The court emphasized that the company’s screening program did not involve a simple, one-step and across-the-board assessment, but rather considered several factors that could influence the ultimate employment decision.

Particularly telling are the court’s concluding comments about the suit, described as “a theory in support of facts to support it.”  In a stinging rebuke to the EEOC, the court noted:

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 is simply not what the discrimination laws of this country require.

... The court also acknowledged the legitimate business reasons for conducting criminal background checks. 

For 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 reasons for conducting such checks are obvious.  Employers have a clear incentive to avoid hiring employees who have a proven tendency to defraud or steal from their employers, engage in workplace violence, or who otherwise appear to be untrustworthy and unreliable.9


The court’s strongly worded opinion stops short of slamming the door shut on the EEOC’s efforts to challenge background checks and recognizes that “some specific uses of criminal and credit background checks may be discriminatory and violate the provisions of Title VII.”  The EEOC surely will appeal the decision – and has already done so in another high-profile credit check case in Ohio, where the court similarly ruled the EEOC failed to show any disparate impact.  Nonetheless, the court’s opinion confirms that:

  • the EEOC, as the plaintiff, cannot proceed to trial without making a threshold showing of disparate impact;
  • the EEOC can only sustain this showing with reliable expert statistical evidence, and cannot necessarily rely on nationwide criminal justice statistics (that is, in such cases, it is not necessarily enough to rely on disproportionate conviction rates for society at large); and
  • when, as in this case, the employer does not have a single-step, across-the-board screening process, the EEOC cannot merely challenge the process “as a whole,” but it must demonstrate that the alleged disparate impact stems from specific elements of the process.

 Employers that use criminal records or credit checks to screen applicants should continue to consider the following:

  • Employers that want to assess potential disparate impact risks should consider conducting a privileged review of their screening policies to help identify areas of opportunity to fortify Title VII compliance.10  Questions to consider include whether the policy:

o   incorporates variation for different roles within the company;

o   strategically sequences the consideration of criminal records and other types of background information;

o   accounts for the developing body of criminological literature discussing recidivism; and

o   requires confidential handling and destruction of sensitive information.

Employers also should continue to be mindful of, and comply with, the various laws that impact the use of criminal records in addition to Title VII, including state fair employment laws and federal and state fair credit reporting laws, such as the Fair Credit Reporting Act (where a new storm of class actions has been unleashed on employers).11

Full text: Littler.