U.S. District Court Decision Against EEOC: Use of Criminal Background and Credit History Checks in Making Hiring Decisions

by Benesch
Contact

A U.S. District Court judge in Maryland has dismissed a lawsuit that accused a nationwide marketing company of using background checks to discriminate against minority and male job applicants after finding the Equal Employment Opportunity Commission (EEOC) relied on flawed data that contained a “mind-boggling number of errors.”

The case, EEOC v. Freeman, Case No. RWT 09cv2573, is part of a series of actions the EEOC has filed against employers who rely on criminal background and credit history checks in making hiring decisions. They include recent lawsuits against Dollar General Corp. and car manufacturer BMW.

The agency alleges that criminal background checks can unlawfully discriminate against African Americans and men because they have higher rates of incarceration. However, as the court points out, the careful and appropriate use of criminal history information is also an essential part of the employee hiring process. 

“Any rational employer in the United States should pause to consider the implications of actions of this nature brought based on such inadequate data,” U.S. District Court Judge Roger Titus wrote.

In criticizing the agency, the judge pointed out that it recently encountered similar problems involving the same expert in another case,  EEOC v. Kaplan Higher Learning Education Corp., 2013 WL 322116 (N.D. Ohio Jan. 28, 2013).  In that case, the district court precluded the expert from testifying because his analysis was based on a “sample of a sample” that was not random and did not represent the applicant pool as a whole.

“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,” the judge noted. 

In order to demonstrate unlawful employment discrimination under Title VII of the Civil Rights Act of 1964, the EEOC must specifically identify what part of the background check process had a disparate impact on certain classes of employees. It must do this by relying on reliable and accurate statistical analysis by a qualified expert.

The EEOC alleged that Freeman engaged in a pattern or practice of discrimination against African-American job applicants by using poor credit history as a hiring criterion. It also alleged that Freeman discriminated against African-American, Hispanic and male job applicants by using criminal history as another hiring criterion.

Freeman, a family-owned company that employs 3,500 full-time employees and 25,000 seasonal employees, used a multi-step evaluation process in hiring applicants. It took into account convictions within the past seven years, any outstanding arrest warrants as well as any misrepresentations on the job application. The company generally disqualified an applicant with convictions involving violence, destruction of private property, sexual misconduct, felony drug convictions and job-related misdemeanors. For higher-level employees, Freeman also excluded applicants with serious financial issues.

The EEOC alleged that its expert statistical analysis proved that Freeman’s background system as a whole produced a disparate impact on certain protected classes under Title VII.

Freeman challenged the analysis, arguing the expert’s conclusions were based on unreliable data, were rife with analytical errors and failed to identify which aspect of the background check allegedly caused the discrimination. It argued the expert ignored vast amounts of data, double counted certain applicants and cherry-picked other applicants to bolster its claims.

The judge sided with Freeman in granting its motion for summary judgment.

“There are simply no facts here to support a theory of disparate impact resulting from any identified, specific practice of the defendant,” Judge Titus wrote. “Something more, far more, than what is relied upon by the EEOC in this case must be utilized to justify a disparate impact claim based upon criminal history and credit checks. To require less would be to condemn the use of common sense.”

Despite several setbacks, the EEOC continues to pursue companies that rely on criminal background and credit history checks in making hiring decisions. Employers should be aware that there are risks associated with conducting such checks. However, employers should also know that courts so far have not been persuaded by the EEOC’s 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.

© Benesch | Attorney Advertising

Written by:

Benesch
Contact
more
less

Benesch on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.