Losing Ground: The EEOC's Ongoing Struggle to Restrict the Use of Criminal Background Checks in Employment Decisions

The EEOC’s April 2012 Enforcement Guidance on employers’ use of criminal record screens has led many employers to question, or at least revisit, their background review procedures. This guidance not only urges employers to conduct “targeted” background screens (which consider the nature of each crime reported by prospective employees, the nature of the job in question, and the time elapsed after each crime reported), but further calls employers to engage in individualized assessments of those individuals screened out because of a background review.

Since this guidance, the EEOC has filed lawsuits in both South Carolina and Illinois (EEOC v. Dolgencorp LLC d/b/a Dollar General, (E.D. Ill. 2013)and EEOC v. BMW Manufacturing Co., LLC (S.D.S.C. 2013)), each alleging that the employer’s background review procedures violate Title VII because they have a disparate impact on minorities and are not job related and consistent with business necessity.

These lawsuits have been met with significant criticism – not only from employers stressing the need for uniform screening procedures, but from states’ Attorneys General describing the EEOC’s position and related lawsuits as “federal overreach.” Indeed, in July 2013, Attorneys General from nine different states (Alabama, Colorado, Georgia, Kansas, Montana, Nebraska, South Carolina, Utah, and West Virginia) sent a strongly worded letter to the EEOC, urging it to reconsider its stance on background checks and accusing it of unlawfully expanding the scope of Title VII to cover “former criminals.”

But despite widespread criticism, the EEOC continued to defend its position on criminal background checks in its own strongly worded response to the Attorneys General in late August 2013 – which expressly declined to reconsider pending litigation on this issue. And while this response may cause employers continued heartburn, the EEOC’s recent track record in litigation seeking to enforce its prior guidance should provide some limited relief.

In a recent federal case, EEOC v. Freeman, No. 09-cv-2573, 2013 WL 4464553 (D. Md. Aug. 9, 2013), a Maryland district court judge granted summary judgment to an employer in an EEOC case alleging that the employer’s criminal and credit review processes disproportionately impacted African-Americans, Hispanics, and males. Specifically, the Court held that the EEOC had failed to present reliable evidence to show a disparity between the number of protected individuals in the qualified applicant group and those in the relevant segments of the workforce.

And earlier this month, in EEOC v. PeopleMark, Inc., No. 11-2582, 2013 WL 5590158 (6th Cir. Oct. 7, 2013), the Sixth Circuit struck another blow to the EEOC by awarding significant damages against the EEOC for pursuing the case after learning its allegations were erroneous. The EEOC had initially filed the case after receiving information that the employer had a company-wide policy of refusing to hire felons. Even after receiving documentation confirming that no such policy existed, the EEOC chose not to dismiss or amend the lawsuit. Chastising the EEOC for pursuing allegations even after learning they were inaccurate, the Court awarded the employer fees and costs totaling $751,942.48.

These cases will undoubtedly cause the EEOC to reexamine its litigation strategy in cases challenging employer background review procedures. They may even cause the EEOC to think twice before pursuing these cases.

However, it’s important for employers to remember that neither case rejected the EEOC’s August 2012 Enforcement Guidance, or categorically rejected challenges to employer criminal and credit background checks. Rather, the Freeman decision centered on the EEOC’s failure to present sufficient evidence, while the PeopleMark, Inc. decision centered on the EEOC’s failure to dismiss erroneous allegations. The result may be very different in a case where the EEOC is able to produce reliable expert testimony and competent statistical evidence of a potential disparate impact. Only time will tell whether the courts will ultimately endorse or discount the EEOC’s guidelines.

To avoid costly litigation over this issue in the meantime, employers should familiarize themselves with the EEOC’s 2012 Enforcement Guidance, and reexamine their background review procedures in light of such guidance. Consider replacing uniform screening procedures with a process that evaluates the nature of the convictions or credit problems reported by applicants, the timing of the conviction/problem, and its relationship to the job being applied for. In addition, employers should ensure that their background review procedures are in line with applicable state law, as many states restrict the type of background information employers may solicit from an applicant.