MINNEAPOLIS—Pepsi Beverages has agreed to pay $3.1 million and provide job offers and training to resolve a race discrimination charge filed in Minneapolis that its criminal background checks allegedly discriminated against blacks in violation of Title VII of the Civil Rights Act of 1964.

The EEOC on Wednesday said an investigation of Pepsi Beverages—formerly known as Pepsi Bottling Group—which is a unit of Purchase, N.Y.-based PepsiCo Inc., revealed that more than 300 blacks were adversely affected when Pepsi applied a criminal background check that disproportionately excluded black applicants from permanent employment.

Under Pepsi's former policy, job applicants who had been arrested pending prosecution were not hired for a permanent job even if they had never been convicted of any offense.

The EEOC also said Pepsi's former policy had denied employment to job applicants who had been arrested or convicted of certain minor offenses, which was a Title VII violation.

EEOC Chair Jacqueline A. Berrien said in a statement, “The EEOC has longstanding guidance and policy statements on the use of arrest and conviction in employment. I commend Pepsi's willingness to re-examine its policy and modify it to ensure that unwarranted roadblocks to employment are removed.”

The EEOC has stated some employers make job selection decisions based on names, arrest and conviction records, “all of which may disparately impact people of color,” and that its E-RACE initiative is intended to “identify issues, criteria and barriers that contribute to race and color discrimination.”

The EEOC said in its statement Wednesday that during the course of its investigation, Pepsi adopted a new criminal background check policy. It said that in addition to the monetary relief, Pepsi will offer employment opportunities to qualified victims of its former policy who still want Pepsi jobs. The company also will provide the EEOC with regular reports on its hiring practices under its new policy and conduct Title VII training for its hiring personnel and all of its managers, the EEOC said.

Julie Schmid, acting director of the EEOC's Minneapolis area office, said in a statement, “When employers contemplate instituting a background check policy, the EEOC recommends that they take into consideration the nature and gravity of the offense, the time that has passed since the conviction and/or completion of the sentence, and the nature of the job sought in order to be sure that the exclusion is important for the particular position. Such exclusions can create an adverse impact based on race in violation of Title VII. We hope that employers with unnecessarily broad criminal background check policies take note of this agreement and reassess their policies to ensure compliance with Title VII.”

“We obtained significant financial relief for a large number of victims of discrimination, got them job opportunities that they were previously denied, and eradicated an unlawful barrier for future applicants,” said EEOC Chicago District Director John Rowe. “We are pleased that Pepsi chose to work with us to reach this conciliation agreement, and that through our joint efforts we have been able to bring about real change at Pepsi without resorting to litigation.”

Pepsi said in a statement, “We have always maintained a neutral criminal background check policy and the EEOC has not found any intentional discrimination by the company. After this issue was raised to Pepsi Bottling Group in 2006, we worked in cooperation with the EEOC to revise our criminal background check process to further advance our efforts to create a workplace that is as diverse and inclusive as possible. We are committed to promoting diversity and inclusion and we have been widely recognized for our efforts for decades.”