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Criminal background checks create dilemma for employers

Discrimination, negligent hiring among liabilities

Criminal background checks create dilemma for employers

Employers are struggling to deal with vague U.S. Equal Employment Opportunity Commission guidelines on how they should conduct criminal background checks.

A recent federal appeals court decision slammed statistical evidence provided by the EEOC to prove discriminatory employment practices based on criminal background checks, but it fell short of addressing the agency's aggressive stance pursuing perceived violations of Title VII of the Civil Rights Act of 1964.

Employers are caught between staying in the EEOC's good graces and risking a negligent hiring charge.

Further complicating the issue is “ban the box” legislation, which forbids employers from asking job applicants about their criminal records. Such legislation had been approved by 13 states, the District of Columbia, and 96 cities and counties as of January, according to the New York-based National Employment Law Project.

A related factor is the Fair Credit Reporting Act, which requires employers using third-party consumer reporting agencies to gather criminal background information to inform the applicant or employee that the information might be used in employment decisions. The Federal Trade Commission enforces that law, which gives applicants the right to dispute any findings.

Driving the EEOC policy is data showing that blacks and Hispanics are arrested at a rate that is as much as three times greater than the general population.

In guidance last updated in 2012, the EEOC said before excluding an applicant with a criminal record, employers should consider the nature and gravity of the offense, how long ago it was committed and the nature of the potential job. It also said applicants should be given the opportunity to show why they should not be rejected.

Subject to second-guessing

But observers say the guidelines are too general, leaving employers vulnerable to second-guessing by the agency.

In the latest rulings on the issue, a three-judge panel of the 4th U.S. Circuit Court of Appeals in Richmond, Virginia, ruled unanimously in Equal Employment Opportunity Commission v. Freeman Decorating Services Inc. to uphold a lower court's dismissal of the case. It strongly criticized the quality of the data EEOC used to allege the Dallas-based trade show firm's criminal background check had a disparate impact on minority job applicants.

In a statement, the EEOC said its criminal background check policy remains an agency priority and that it was disappointed in the ruling in Freeman.

The court rulings to date have not yet gone to the heart of the EEOC's criminal background policy, experts say.

“You want to respect the rights of that individual, but at the same time your ultimate duty is to protect your business, protect your customers and hire the best person for the job,” said Michael A. Warner Jr., a partner at law firm Franczek Radelet P.C. in Chicago.

Criminal background checks “are inherently problematic under the discrimination laws because there's nothing about it on its face that would be discriminatory” given the protected categories under Title VII, which include race and creed, said Richard B. Cohen, a partner at FisherBroyles L.L.P. in New York.

“The problem is the EEOC has sort of gone one level beyond the protected categories” in stating criminal background checks have a disparate impact on minorities, Mr. Cohen said.

The situation is particularly burdensome for larger employers with “thousands and thousands of applications online” to conduct individualized assessments, said Sheila B. Gladstone, who heads the labor and employment practice at Lloyd Gosselink, Rochelle & Townsend P.C. in Austin, Texas.

Furthermore, some states in certain highly regulated industries, such as health care, forbid hiring people with certain criminal offenses, which “kind of puts the employer in a conundrum,” said Caroline J. Berdzik, a partner at Goldberg Segalla L.L.P. in Princeton, New Jersey.

Observers expect the EEOC to find another statistician in response to the 4th Circuit ruling and an earlier appeals court ruling criticizing the same statistician.

The agency is “going to be a lot more careful” in pursuing criminal background check cases, but “it looks like they won't back off,” Ms. Gladstone said.

The EEOC also could look for a case where it can make a direct employment discrimination claim based on a criminal background check rather than a disparate impact argument, said Peter J. Gillespie, of counsel at Fisher & Phillips L.L.P. in Chicago.

“The main advice I give to clients is do not have any formal policy that automatically excludes anybody based on a conviction,” Mr. Warner said.

Employers should “be as cautious and conservative as possible,” Mr. Cohen said. They should follow the EEOC guidelines “as much as they can understand” and vet their policy or procedures with someone knowledgeable in the law, such as an attorney or knowledgeable human resources person.

But “if you're hiring a security guard or a hotel room service attendant, you shouldn't be hiring someone with any kind of violent criminal history,” Ms. Gladstone said.

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