INTRO: Are criminal background checks in the hiring process discriminatory or simply an unnecessary burden? Employers have to maintain their balance as new laws and requirements in employment practices constantly shift. Attorney Richard B. Cohen helps break down some of the latest changes regarding the use of criminal background checks.

With ever-changing societal demographics, the workplace seems to sit directly on the fault lines. Employers are constantly being bombarded with new laws, regulations, requirements and restrictions from all manner of governmental and administrative agencies.

One of the latest and most contentious new regulations comes in the form of a U.S. Equal Employment Opportunity Commission guidance that deals with employment-related background checks and the anti-discrimination laws.

Employers are generally familiar with the anti-discrimination laws in employment — federal, state and local. Or at least they should be to avoid liability at the hands of employees and government agencies such as the EEOC. Last year, the EEOC alone received 100,000 claims of employment discrimination, demonstrating the magnitude of employment discrimination charges nationwide.

Since the Great Society ushered in Title VII — the first employment discrimination law in a century — we all know that employers cannot discriminate in the terms and condition of employment based upon a person's gender, race, religion, national origin and creed. Subsequent laws added other “protected categories” such as age, disability or the perception of disability, pregnancy status and more. And states and municipalities have added multiple layers of laws and regulations that have expanded the rights of employees, created new “protected categories” such as gender orientation, and added state and local administrative agencies to rival the EEOC.

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Moreover, as society and its demographics continue to change, so, too, have the pressures to expand the nature and coverage of a “protected class.” For instance, obesity is not considered a disability under the Americans with Disabilities Act, although the EEOC considers “morbid obesity” a disability. Yet people who are obese suffer medical conditions related to their obesity, such as diabetes or high blood pressure, which are considered disabilities. Therefore, an employer may be considered to have discriminated against an obese employee by firing him because he is obese, which is not otherwise discriminatory if not for the related medical condition. Moreover, given the recent proclamation of the American Medical Association that obesity is a disease, it is only a matter of time before it also becomes a recognized “disability.”

We know that discrimination comes in two flavors — it may be intentional, or it may involve an employment practice or policy that may have a “disparate impact” upon members of a protected class. That is, a facially neutral policy or practice may have a disproportionate effect upon people in a protected class. So, for example, a facially neutral hiring test for a police department: let's say dragging a 200-pound sack, may have a disparate impact upon female applicants, and therefore be in violation of Title VII. Intent is irrelevant — it is the “effect” that governs.

It is here that employment-related background checks fall.

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There is nothing in Title VII that deals with people with a criminal history being in a protected class. That is, Title VII does not, by its terms, bar employers from asking job applicants or employees about arrests, convictions or incarceration, or refusing to hire based upon such a record. The same is true about asking job applicants about their credit history.

However, in the case of criminal background checks, the EEOC has long been sensitive to the “disparate impact” that criminal background checks (as well as credit screening) may have on protected classes, such as African-Americans, and therefore be in violation of Title VII. As CNN Money noted: “Statistically, blacks and Latinos face criminal convictions at a rate disproportionately greater than their representation in the population.”

This is not a new issue; the EEOC has been wrestling with this issue since at least as far back as 1987. In 2012, the EEOC voted to approve its proposed “guidance” that deals with the use of arrest and conviction records in background checks used for hiring.

Basically, in the approved guidance, the EEOC found that “National data supports a finding that criminal record exclusions have a disparate impact based upon race and national origin. … Arrest and incarceration rates are particularly high for African-Americans and Hispanic men … (they) are arrested at a rate that is 2 to 3 times their proportion of the general population.” The use of such checks is almost universal among employers: “In one survey, a total of 92% of responding employers stated that they subjected all or some of their job candidates to criminal background checks.”

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Accordingly, based upon it's view as to “disparate impact,” the EEOC prohibits the use of criminal record information unless it is “job related” and “consistent with a business necessity defense.”

What does this mean? And how will this affect employment practices? And will this put an undue burden on employers?

Fulfilling a promise it made in its recent strategic plan, the EEOC recently launched two highly publicized lawsuits over the use of criminal background checks in the hiring process. The EEOC sued Dollar General Corp. in Illinois federal court, and BMW Group in South Carolina federal court.

In the BMW case, the EEOC claimed, “The gross disparity in the rates at which black and non-black employees … lost their employment on account of BMW's criminal history background check policy is statistically significant” — 80% of the affected employees were African-American at a facility whose workforce was 55% black.''

As expected, not everyone is happy with the EEOC's position and lawsuits (besides the defendants, of course). In July, nine state attorneys general wrote to the EEOC urging the agency to reconsider its position, claiming that it is “misguided and a quintessential example of gross federal overreach.”

In her August 29 response, which was publicized about a month later, EEOC Chair Jacqueline A. Berrien said the attorneys general position was based on a misunderstanding — “that the guidance urges employers 'to use individualized assessments rather than bright-line screens.' This is incorrect. … The guidance does not urge or require individualized assessments of all applicants and employees.”

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She flatly stated that the EEOC never said that an employer could not conduct a criminal background check, and reiterated the EEOC's previously published position about the guidance — that it merely “clarifies and updates the EEOC's longstanding policy.”

As to the BMW and Dollar General lawsuits, she said that the companies' screening policies have a “disparate impact” on African-Americans, and that they are neither “job related” nor of “business necessity.”

A strong editorial in Investor's Business Daily declared: “Aside from the inherent and insulting racism in that presumption — suggesting that black applicants have crime in their DNA because statistics show more have criminal records — the measure puts employers, in this case Dollar General and BMW, in an impossible position. On one hand, they may be sued if they don't hire criminals to satisfy the EEOC. On the other hand, if they do hire criminals, they could be sued later by customers and shareholders when employees of whatever race do their jobs under the influence of drugs, get violent with co-workers or customers, embezzle money, or steal from the company.”

Academia also weighed in. Well-known Chicago law professor Richard Epstein took on this issue in an article published by the Hoover Institution: “Antidiscrimination laws can wreak havoc on job creation,” Mr. Epstein wrote. “The Equal Opportunity Employment Commission, a federal agency tasked with enforcing antidiscrimination laws, has demonstrated just how destructive such laws can be.”

Mr. Epstein targeted as “folly” the EEOC's 2012 guidance, stating that this “newest confection out of the EEOC orders most employers to do exactly what the law forbids. It introduces an explicit classification into the hiring equation by imposing a higher standard for refusing to hire minority workers than for others. The Enforcement Guidance also applies even when it is clear that the employer's refusal to hire certain workers is not because of race but because of the evident risk that a criminal record could present to the employer, its other employees, and its customers.”

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Excoriating the EEOC, Mr. Epstein said that “nothing is more dangerous in public or private affairs than power without responsibility. It is therefore a fair question to ask how the EEOC guidance took its final shape.” After a long exegesis of the law and its enforcement, Mr. Epstein concluded that employers and employees suffer because “by raising transaction costs, the EEOC will continue on its mindless job-killing path. Once again, the EEOC seems utterly oblivious to the harm that it causes to the groups that it most wants to help — and indeed to everyone else.”

Perhaps most significantly, the EEOC suffered a setback in a Maryland federal court when the judge excoriated it for filing a meritless case that did not support a disparate impact theory. The court found that the expert date submitted by the EEOC was “laughable”; “based on unreliable data”; “rife with analytical error”; contained “a plethora of errors and analytical fallacies” and a “mind-boggling number of errors”; “completely unreliable”; “so full of material flaws that any evidence of disparate impact derived from an analysis of its contents must necessarily be disregarded”; “distorted”; “both over- and under-inclusive”; “cherry-picked”; “worthless”; and “an egregious example of scientific dishonesty.”

As if channeling Investor's Business Daily, the court concluded, “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.”

In fairness, this particular judge is a well-known conservative from whom one would expect such a ruling. In any event, the decision is not likely to deter the EEOC from future filings.

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While the EEOC's position is not the “law of the land,” you can be certain that the EEOC will continue to press this position in court and, at a minimum, apply its guidance in administrative enforcement actions. That said, what can employers do?

An employer is always well-advised to act conservatively in order to minimize possible risk. This much is clear: Employers should not use criminal record information unless it is job-related and consistent with a business necessity defense.

The EEOC (and this author) recommends, among other things, that to implement these two basic requirements an employer should:

1. “Narrowly (tailor) written policy and procedures for screening for criminal records,” showing that the particular company policy “effectively link(s) specific criminal conduct and its dangers with the risks inherent in the duties of a particular position" — a complete and detailed “job description” is therefore more essential than ever.

2. Perform an “individualized assessment” of each applicant, consisting of a review of several factors that the EEOC sets forth on its website.

3. Refrain from asking about convictions upfront, or in the initial interview, but wait until later in the hiring process, perhaps after a “conditional offer” of employment is made.

4. Train managers and hiring officials about this issue and about maintaining criminal record information confidentially. And never ask about arrest records.

Richard B. Cohen is an attorney with Fox Rothschild L.L.P. in New York. He can be reached at 212-878-7906 or at rcohen@foxrothschild.com.