Criminal Background Check Policies under Fire from the EEOC


The Equal Employment Opportunity Commission (EEOC) continues to crack down on allegedly discriminatory employer policies and practices involving criminal background checks. For financial institutions subject to laws that bar certain individuals with criminal convictions from the industry, this means applying such requirements strictly in accordance with the governing mandate and being prepared to defend policies and practices that exceed the strict legal requirements.

EEOC Attack on Policy at Dollar General

On June 11, 2013, the EEOC filed a lawsuit in federal court against Dollar General, alleging that the employer's use of criminal background checks to screen job applicants disproportionately excluded African Americans from employment in violation of Title VII of the Civil Rights Act of 1964. The agency has long warned that criminal record exclusions have a disparate impact on race and national origin and that basing employment decisions on these records may violate the law if not job-related and consistent with business necessity.

According to the EEOC complaint, Dollar General maintains a policy whereby the company conditions all job offers on the results of a criminal background check. Two applicants filed EEOC charges against the company, alleging that they were unlawfully denied employment as a result. Dollar General granted the first applicant a conditional employment offer even after she had disclosed a six-year-old conviction for possession of a controlled substance. The complaint goes on to allege that Dollar General revoked the offer upon receiving the results of her background check, because company policy regarded her type of conviction as a bar to employment for 10 years. Dollar General similarly revoked the second applicant's offer after a background check erroneously indicated a criminal conviction, according to the complaint, and Dollar General refused to reinstate the offer even after she advised the store manager that the report was in error.

The Dollar General lawsuit provides a clear message that the EEOC is bringing renewed scrutiny to the use of background checks and other policies that broadly screen and disqualify applicants from employment. The EEOC has placed "eliminating barriers in recruitment and hiring" as its top priority in the most recent Strategic Enforcement Plan, stating that the agency will renew enforcement efforts regarding pre-employment tests, background checks, date-of-birth inquiries, and other "screening tools" that restrict the application process or "channel" individuals into specific jobs due to their status in a particular group. An Enforcement Guidance issued by the EEOC in April 2012 advises employers on crafting background check policies that may stand up to administrative scrutiny.

Implications for Financial Industry Employers

The lawsuit against Dollar General also raises questions about how the EEOC will continue to regard pre-employment background checks conducted under state or federal laws that prohibit individuals with criminal records from holding particular positions or engaging in certain occupations.

Federal laws restrict individuals with specified criminal histories from employment in federally insured banks, among others. Continuing developments affecting these federal requirements could create tension with the EEOC's increasingly aggressive stance. The Consumer Financial Protection Bureau (CFPB), for example, recently issued a final rule to implement amendments to the Truth in Lending Act (TILA) made by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). These amendments, which become effective in January 2014, expand the scope of employees in the mortgage loan industry who are subject to criminal background check requirements.

While the EEOC affirms in its Guidance that background checks conducted in compliance with federal laws or regulations will continue to be a defense to a charge of discrimination, the agency also notes that it will narrowly construe federal requirements and carefully consider whether a particular background check policy exceeds the mandate set forth under federal law. For example, if a financial institution excludes from employment all applicants with a financial- or fraud-related conviction within the past 15 years, the EEOC may scrutinize this practice, given that federal law only addresses employees with access to customer financial information and only requires a 10-year restriction.

Title VII preempts any state or local law that requires or permits any act that would be an unlawful employment practice under statute. State or local laws, consequently, do not legitimize background check policies that otherwise would violate Title VII. Employer policies involving positions subject to state or local restrictions must ensure that their criminal background check practices are job-related and consistent with business necessity.

Employers should be aware of the EEOC's developing approach to employment screening tools and review their policies and procedures to ensure continued compliance with the law. Employers must tailor existing policies to strictly follow applicable federal law and apply screening mechanisms consistently and in a manner that considers the duties and risks involved with each affected position.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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