Seyfarth Synopsis: On June 18, 2021, the Iowa Supreme Court upheld a portion of the Waterloo, Iowa ban-the-box law’s restrictions on “when” employers can inquire about criminal history, but struck down restrictions on “what” types of information could form the basis for an adverse employment action.

As reported here, effective July 1, 2020, all private employers with at least 15 employees in Waterloo, Iowa became subject to a ban-the-box law, which did several things:

• Mandated that covered employers wait until after a conditional offer of employment to inquire about and consider a candidate’s criminal history;
• Prohibited employers from considering certain types of criminal records, including arrests and pending cases; and
• Prohibited employers from rejecting a candidate with a criminal record absent a “legitimate business reason” as defined in the ordinance.

After the ordinance received its final approval from the Waterloo city council, the Iowa Association of Business and Industry filed a lawsuit against the City of Waterloo and the Waterloo Commission on Human Rights, alleging that the ban-the-box ordinance violated Section 364.3 of the Iowa Code, a statute that limited municipality regulation of hiring practices to the extent they exceed or conflict with federal or state law. The Association requested an injunction against future enforcement.

On June 18, 2021, the Iowa Supreme Court partly agreed with the Association. It held that the Iowa Code preempted the ordinance to the extent it purports to regulate whether an employer can consider an employee's criminal history at all—i.e., to the extent it regulates a term and condition of employment. However, the Court found the ordinance not preempted to the extent it only regulated the timing of any criminal history inquiry as not being a term or condition of employment.

What does this mean for Waterloo, Iowa employers?

The decision does not change the ordinance’s requirement that employers wait until after a conditional offer to inquire about a candidate’s criminal history. As such, Waterloo employers should ensure they delay any criminal history inquiry until after a conditional offer. This is particularly important for nationwide employers given that many other jurisdictions, including New York City, Washington, D.C., and California, have a similar mandate on the timing of such inquiries.

The decision does mean, however, that Waterloo, Iowa employers are no longer subject to a heightened standard when determining whether to reject a candidate with a criminal record. That said, however, employers still should be mindful of the Equal Employment Opportunity Commission’s 2012 Enforcement Guidance on Employer Use of Arrest and Conviction Records, which recommends employers conduct an individualized, job-related assessment before rejecting a candidate or terminating an employee with a criminal record. Moreover, while the Waterloo restriction on consideration of arrests and pending cases is no longer a mandate, the EEOC places greater scrutiny on employment decisions based on non-convictions (e.g., arrests, pending cases, etc.). Thus, beyond “when” criminal history information can be sought, employers should continue to review and evaluate the substantive aspects of their policies to ensure they are defensible in the event of a legal challenge.