Will The EEOC Back Off Its Position On Background Checks?

In a year filled with controversy, the EEOC outdid itself when it charged two employers with discrimination based on their use of routine criminal background checks.  But now after some well-publicized losses, the EEOC may be forced to back off.

Although the EEOC’s 2012 Guidance Bulletin on criminal background checks does not expressly prohibit them, the EEOC famously took the position that if criminal background checks have a  disparate impact on racial minorities, they cannot be performed except in very limited circumstances.

Of course, other federal laws expressly permit employers to conduct criminal background checks.  And for good reason.  Does the EEOC really maintain that schools, banks or military contractors cannot screen applicants if such tests impact racial minorities disproportionately?

In any event, the EEOC has taken a number of stabs at pursuing disparate impact litigation against employers with criminal background check policies with decidedly mixed results. One “win” for the EEOC occurred in early 2012 when Pepsi paid a $3 million settlement to resolve the agency’s claims that Pepsi’s criminal background policy unfairly weeded out black applicants.

When efforts to resolve similar disparate impact complaints were unsuccessful, the EEOC has taken employers to court.  On June 11, 2013, the EEOC filed two federal lawsuits alleging Title VII disparate impact violations.  The first complaint, pending in South Carolina district court, alleges that BMW’s criminal conviction background check policy disparately impacts black employees and applicants.  The EEOC charges that BMW does not individually assess the nature or seriousness of the criminal offense, how old the conviction is, or the nature of the position at issue in screening candidates.  In the complaint, the agency identifies statistical data showing black employees were denied jobs at a significantly higher rate than non-black employees at BMW’s Spartanburg plant.  In the second lawsuit, filed in Illinois federal court against Dollar General Stores, the EEOC asserts that Dollar’s criminal convictions policy has a disproportionate impact on black applicants, and is not job-related and consistent with business necessity.  Dollar does not automatically disqualify applicants with criminal records, but considers the age and type of the conviction.  Still, the EEOC believes that Dollar’s policy violates Title VII due to the gross disparity in the hiring of black to non-black employees and the absence of a legitimate business reason for its policy.  Both lawsuits are pending.

In response, Attorney Generals from eight states penned a joint letter to the EEOC Commissioners expressing concerns that the EEOC’s Enforcement Guidance and litigation against BMW and Dollar are “quintessential example[s] of gross federal overreach.”  The Attorney Generals opine that the EEOC is unlawfully expanding Title VII to make criminals a protected class.  The EEOC responded to the Attorney Generals that they have misunderstood the Commission’s Guidance to require individualized assessments rather than bright-line screening tests, and individualized assessments of criminal histories are not necessary.

This past summer, the district court of Maryland dismissed the EEOC’s claim against Freeman, a family-owned company, for utilizing a criminal background check that the EEOC believed unfairly impacted African-American males.  Freeman used a multi-step process to evaluate applicants with convictions, including an analysis during the hiring process whether the criminal conduct underlying the reported conviction made the applicant unsuitable for employment.  In a strongly-worded opinion granting summary judgment to the employer, the judge found that the EEOC’s statistical evidence that African-American males were more likely to be rejected as a result of Freeman’s policy to be “unreliable” and based on inaccurate data.  The court called the conclusions of the EEOC’s statistical expert “laughable.”

In another setback for the agency, in an October 7, 2013 ruling, the Sixth Circuit Court of Appeals agreed with a lower court’s decision that the EEOC must pay $750,000 in attorney and expert fees and costs to Peoplemark, a temporary staffing agency.  In that case, the EEOC filed a class action lawsuit against Peoplemark alleging a companywide policy of rejecting felon applicants, which had a disparate impact on African-Americans.  The EEOC relied on a statement from Peoplemark’s General Counsel during the EEOC’s investigation that Peoplemark had such a policy.  However, a year after the lawsuit was filed, Peoplemark produced 200,000 pages of documents that clearly showed Peoplemark in fact referred candidates with convictions to placement agencies and that some other class members did not even possess felony convictions.  Peoplemark also formally represented that it did not have a companywide policy as the General Counsel had verbally indicated before the lawsuit was filed.  Since the Sixth Circuit court found that the EEOC unreasonably continued with litigation after learning that Peoplemark did not have an employment practice to flatly reject felony convicts, the agency was responsible for Peoplemark’s attorney and expert fees.

Finally, this month, the state of Texas took a bold step in filing a federal Complaint in which it asks the court to declare that the EEOC is infringing on state sovereign authority in applying the Enforcement Guidance and that Texas government agencies can bar convicted felons from state jobs without adverse action from the EEOC.  Texas also asks the court to find that the EEOC’s April 2012 Enforcement Guidance is unlawful and unenforceable.

Despite the recent legal blows to, and the criticism of, the EEOC’s agenda, the agency is aggressively pursuing administrative complaints and litigation against employers using blanket criminal screening policies that do not provide for an individualized assessment.  The EEOC is taking action even when employers use some type of evaluation process in reviewing applicants with a criminal history.  Thus, questions remain.  Which criminal background policies will the EEOC declare violate Title VII?  Will the agency continue to apply its Enforcement Guidance calling for employers to conduct a targeted screen of criminal records and a subsequent case-by-case analysis of criminal histories before denying employment?  As we watch this issue unfold in the courts and in the administrative arena, private employers should steer clear of blanket policies that automatically bar convicted felons from hire.

- Kristin Oliveira

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