Could Employee Criminal Background Checks Violate Title VII?

On January 18, 2011, President Barack Obama issued Executive Order 13563, which called for all agencies in the executive branch to undergo a process of increased regulatory review. This meant that each agency was to review its current protocols and procedures to determine if there existed any that could be considered outdated or totally obsolete. On May 24, 2011, in response to the president’s order, the EEOC released the “Equal Employment Opportunity Commission Preliminary Plan for Retrospective Analysis of Existing Rules.”

Prior to its release, the EEOC sought comments from the public at large. The most striking comments included the recommendation by the AARP and comments from both the National Partnership for Women & Families and the National Leadership Conference on Civil and Human Rights, urging the EEOC to issue guidance on discrimination against the unemployed; guidance on employer use of credit checks in hiring; and updated guidance on the use of arrest and conviction records for screening. These groups noted that the EEOC had held meetings about these topics in recent years, most notably the following: (1) November 20, 2008: Employment Discrimination Faced by Individuals with Arrest and Conviction Records; (2) October 20, 2010: Employer Use of Credit History as a Screening; and (3) July 26, 2011: Arrest and Conviction Records as a Hiring Barrier.

It can be surmised that these various entities wanted and needed more clear-cut guidance on how employers could better tailor their hiring practices to comply with state and federal law and what employees should expect when filling out job applications. With the current state of the U.S. economy, the possibility of substantial legal changes regarding the use of criminal-background checks in employment could have drastic and dire effects on both employer and potential employee alike. For the employer, proposed changes against the use of an applicant’s criminal history could include stiff monetary sanctions. Conversely, unemployed Americans seeking jobs should be aware that a previous conviction could prevent them from even receiving a call for an interview, much less an offer of employment.

To be clear, Title VII does not prohibit an employer’s use of an applicant’s criminal history when making employment decisions. 42 U.S.C. § 2000e-2(a), (h), (k). It does, however, prohibit any blanket policy of excluding all job applicants with conviction records in certain circumstances. On December 1, 2005, the EEOC issued informal guidance that stated that

The EEOC, in its 1987 Guidance, maintained that to establish that a business necessity exists, an employer must take into account the following criteria: (1) the nature and gravity of the offense, (2) the amount of time that has passed since the conviction, and (3) the nature of the job sought.

Despite the EEOC’s guidance on the topic, employers have notoriously erred on the side of caution when it came to the hiring or recruiting of applicants with prior arrest and conviction records. Employers have supported this position by reasoning that their fear of civil liability for negligent hiring justifies their consideration of an applicant’s criminal history. Additionally, employers support the notion that criminal-background checks contribute not only to workplace safety, but also to the public’s confidence in their business. A recent survey conducted by the Society for Human Resource Management found that more than 90 percent of employers claim to conduct background checks for certain positions, and that nearly three-quarters of employers do so for all applicants.

The EEOC, the agency tasked to ensure effective enforcement of federal equal-employment-opportunity laws, has taken a distinctly different position on employers’ use of criminal background checks. Title VII does not prohibit pre-employment inquiries about an applicant’s criminal history, but it does prohibit both disparate-treatment and disparate-impact discrimination in the use of the information obtainedthrough such an inquiry. Disparate treatment occurs when a person’s race, color, sex, religion, or national origin is all or part of the motivation for an employment decision. Disparate-impact discrimination, on the other hand, occurs when a uniformly applied neutral selection procedure disproportionately excludes people on the basis of race, color, religion, sex, or national origin and the procedure is not job-related and consistent with business necessity, or when the employer’s business goals can be served in a less discriminatory way. Here, the EEOC claims that the use of criminal-background checks and a company’s refusal to hire anyone with a criminal record has a disparate impact on African-Americans and Hispanics, and thus constitutes a violation of law under Title VII unless the company’s policy is job-related and consistent with business necessity. See EEOC v. Freeman, Case No. RWT 09cv2573 (D. Md. 2010).

Although representing only 25 percent of the world’s population, the United States maintains the highest rate of incarceration, with the African-American community disproportionately represented. One in twelve African-Americans are behind bars in this country, compared with one in eighty-seven Caucasians. Statistically, an African-American male between the ages of 20 and 34 who lacks a high-school diploma is more likely to be in prison than to be employed. Those ex-offenders who find themselves fortunate enough to be employed can expect an 11 percent reduction in hourly wages compared to non-offenders. With the unemployment rate for African-Americans hovering above 15 percent and Hispanics at 12 percent (compared with 8.7 percent for whites), the correlation between previous incarceration and lack of employment can hardly be ignored. The EEOC has also taken issue with the accuracy, or lack thereof, when it comes to an applicant’s criminal-background check. According to The Attorney General’s Report on Criminal History Background Checks, (June 2006), FBI background checks are out of date 50 percent of the time and often fail to reflect whether an arrest led to a conviction.

Due to the nature of this debate—an intersection between equal employment, employer’s rights, and racial equality—the courts were bound to get involved and did so in the landmark case El v. Southeastern Pennsylvania Transit Authority (SEPTA),479 F. 3d 232 (3d. Cir. 2007). In SEPTA, the Third Circuit upheld an employer’s policy that barred applicants who had a previous criminal record. Douglas El was employed as a paratransit driver for SEPTA, which operates Philadelphia’s mass-transit system. El’s primary passengers were physically and mentally disabled. Shortly after his employment began, it was discovered that El had been convicted, at the age of 15, of second-degree murder 40 years earlier. Upon this discovery, SEPTA terminated El’s employment. El sued on a disparate-impact theory, but lost on summary judgment.

The court held that SEPTA had demonstrated that individuals with violent convictions are a greater risk for committing violent acts in the future, and that people suffering from mental and physical disabilities run a higher risk of being victims of abuse and as such, SEPTA’s policy was a justified business necessity. Although the Third Circuit ruled for SEPTA, the reservations the court showed for the lower court’s ruling and the concern over El’s failure to offer expert testimony rebutting the defense’s expert testimony—leading criminologist Dr. Alfred Blumstein—which stated that someone who has committed a violent crime in the past is more likely to commit a violent crime in the future, should give pause to any premature judgments on the future of pre-employment background checks. In fact, the court noted that, if the plaintiff had provided evidence to refute Dr. Blumstein’s testimony, it would have been a “different case.”

The significance of this case is evidenced not only by the court’s refusal to adopt the three-part test the EEOC had created to determine “justified business necessity,” but also in the court’s outright criticism of the EEOC’s historical enforcement guidance. In its opinion, the court stated, “[t]he EEOC’s Guidelines . . . do not speak to whether an employer can take these factors into account when crafting a bright-line policy, nor do they speak to whether an employer justifiably can decide that certain offenses are serious enough to warrant a lifetime ban.” Id. at 243. Instead, the court ruled that an employer must show “empirical evidence” justifying a challenged screening policy to establish business necessity, thereby going beyond the EEOC’s historical three-part enforcement guidance and focusing on whether the results of SEPTA’s screening process could be squared with the recidivism statistics, and particularly with the statistics suggesting that the risk of recidivism declines as the time “clean” since release from incarceration increases.

After the Third Circuit’s decision in SEPTA, the EEOC pursued other disparate-impact lawsuits against employers resulting from their conviction-based screening policies. In September 2008, the EEOC filed a suit against Peoplemark, Inc., alleging the corporation violated Title VII when it refused to hire anyone with a criminal record because such a policy has a disparate impact on African-Americans. Although the case was dismissed in Peoplemark’s favor, the court’s decision is indicative of the standards of proof required if an employer wishes to defend its screening policy citing “business necessity.”

Undeterred, on September 30, 2009, the EEOC filed a nationwide-action lawsuit alleging that Freeman Co. had unlawfully discriminated against African-American, Hispanic, and male job applicants by using criminal-background checks as one of its selection criteria.EEOC v. Freeman, supra. The EEOC alleged that the use of screening criteria such as criminal-background checks: (1) is not job related; (2) is notconsistent with business necessity; and (3) ignores other less discriminatory procedures that are available. Ultimately, the significance of the Freeman case is that it addressed the applicable statute of limitations in pattern-and-practice litigation initiated by the EEOC; the court did not, unfortunately, state its position on the merits of the EEOC’s disparate-impact-discrimination claims.

The third significant setback for the EEOC’s position came in NASA v. Nelson, 131 S.Ct. 746 (2011). In NASA, the Supreme Court, in an 8–0 unanimous decision, acknowledged an employer’s legitimate interests in conducting employment-related background checks. Here, 28 employees at NASA’s Jet Propulsion Laboratory in California were, after working without incident for a number of years, required to undergo background checks. This consisted, in part, of each employee completing Standard Form 85. The form asks, inter alia, whether the employee has used or possessed any illegal drugs within the past year, and for any details regarding any treatment that the employee may have received for illegal drug use. The court dismissed the plaintiffs’ claims by stating, “[l]ike any employer, the Government is entitled to have its projects staffed by reliable, law-abiding persons who will ‘efficiently and effectively’ discharge their duties.’” The court also referenced a study that negatively correlates illicit drug use with workplace productivity as a rationale for the drug-use inquiries.

To date, there is no clear answer regarding possible changes the EEOC may implement to its 1987 policy. Although there seems to be ample evidence that the use of background checks, when used to obtain information wholly unrelated to the nature or function of an employee’s job, result in disparate-impact discrimination against countless individuals. However, the rights of employers to maintain a safe work environment continue to counterbalance these concerns.

The aforementioned cases underscore the fact that all employers, whether public or private, must draw a clear corollary between the role-related risks of the job and the type and scope of background checks they will perform. For employers, an undeniable dichotomy exists that must be contended with until clear guidance is given by the EEOC: (a) If employers’ conduct overzealous background checks, they are subject to investigation and litigation by the EEOC; or (b) if the employers are not careful enough, they open themselves up to liability from a negligent hiring standpoint. Employers, as a matter of due diligence, should periodically review its selection and screening criteria and be able to validate the criteria used as being consistent with a genuine business need. Most importantly, employers with conviction-based screening policies should monitor developments, not only with respect to the EEOC’s enforcement guidelines, but also at the state level, making certain that they are in compliance with all state fair-employment laws.

As for the EEOC, if it declines to issue updated guidance regarding employers’ use of arrest and conviction records, it is highly likely that the courts will continue to uphold employers’ rights to conduct criminal-background checks on employees, provided that the employer refrain from a blanket policy regarding all applicants. If the EEOC does choose to update its 1987 Guidance Policy, potential applicants and current employees alike should be aware that they could be facing a whole new set of problems. A possibility exists that a bar of background checks in the employment process could lead to an increase in workplace discrimination. Studies have found that employers who use background checks are in reality more likely to hire African-Americans than employers who do not use background checks. In the absence of accurate information about individuals’ criminal histories, employers who are interested in weeding out those with criminal records may choose to rely instead on racial and gender stereotypes. In effect, employers may be more likely to assume the prejudicial view that non-whites have criminal records, absent the ability to discover this information through background screens.

Should the EEOC issue a ban on the use of background checks, employers will not be at an insurmountable disadvantage. There are several alternative steps that employers may take. For example, an applicant’s education history could be verified, in writing, to counter applicants who exaggerate their level of education or degrees earned to boost their résumés. The applicant’s work history may also be scrutinized with greater care, coupled with seeking detailed information to explain extended gaps in employment.

No matter the outcome, both employers and employees should be honest, forthcoming, and accountable with matters concerning employment. An individual who has moved on with his or her life and is seeking gainful employment generally should not be excluded from a pool of applicants because of a 40-year-old conviction; however, applicants also have a responsibility not to provide a potential employer with half-truths and unsubstantiated facts about a past criminal history.

Signing the Second Chance Act into law, former President George W. Bush stated:

Keywords: employment and labor relations law, EEOC, SEPTA, E-RACE, Second Chance Act

_{Holly J. Clemente practices labor and employment law in Birmingham, Alabama.}

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