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EEOC may have to rethink legal approach to criminal background cases

Posted On: Mar. 1, 2015 12:00 AM CST

The U.S. Equal Employment Opportunity Commission may change its approach to criminal background and credit check cases it brings against employers now that a second appeals court has criticized the quality of its statistical analysis.

“They'll need to rethink their methodology” in proving employers improperly used criminal and credit background checks in hiring, said Patrick M. Muldowney, a partner at law firm Baker & Hostetler L.L.P. in Orlando, Florida.

In the latest ruling, the 4th U.S. Circuit Court of Appeals in Richmond, Virginia, said the agency used poor-quality data as evidence in a case that accused Dallas-based trade show firm Freeman Decorating Services Inc. of using criminal background checks in hiring that had a disparate effect on minorities. In upholding a 2013 ruling by U.S. District Judge Robert W. Titus, the three-judge appeals court panel cited data collected by Kevin Murphy, an industrial/organizational psychologist. “The sheer number of mistakes and omissions in Murphy's analysis renders it "outside the range where experts might reasonably differ,'” the unanimous panel ruled.

Judge Titus had harshly criticized the EEOC in his 2013 ruling for the statistical evidence it presented to support its charges against Freeman, saying the case was “a theory in search of facts to support it.”

Freeman had credit and background check policies that excluded applicants whose histories revealed prohibited criteria such as a conviction for violent crime. In its 2009 suit, the EEOC alleged that Freeman's criminal background checks had a disparate impact on black and male job applicants, and that its credit checks had a disparate impact on black job applicants.

In a separate case last year, a three-judge panel of the 6th U.S. Circuit Court of Appeals also unanimously upheld dismissal of a lawsuit the EEOC had brought against Kaplan Higher Education Corp. That case also involved background checks and data prepared by Mr. Murphy, which the 6th Circuit panel also criticized. “The EEOC brought this case on the basis of a homemade methodology, crafted by a witness with no particular expertise to craft it, administered by persons with no particular expertise to administer it, tested by no one and accepted only by the witness itself,” the 6th Circuit panel ruled.

Mr. Muldowney said the courts have made it clear that the EEOC's method of analysis was insufficient to prove their case.

“I don't think this is going to deter the EEOC from going forward on these kinds of cases,” but the agency likely will use a different statistical methodology in the future, he said.

“It's a stunning opinion,” said Gerald L. Maatman Jr., a partner at Seyfarth Shaw L.L.P. in Chicago, of the 4th Circuit ruling.

The ruling affirms what many critics have said, that the “EEOC sues first and asks questions later,” Mr. Maatman said.

“We are disappointed but still studying the decision and have no further comment at this time,” the EEOC said in a statement on the 4th Circuit ruling.