Using Criminal Convictions in the Hire Process: A Hobson's Choice for Employers?

Hinshaw & Culbertson LLP

Is the government really telling employers that they are not allowed to disqualify an applicant because of past criminal activity?  In a word, yes.  That is increasingly becoming the case on the state level and has been the focus of federal enforcement efforts over the past several years, ever since the EEOC updated its guidance on this topic in 2012.  This flurry of activity has made what was historically a simple hiring practice into a legal minefield.

For decades, companies have managed their hire process relying on a few simple requirements—an application or résumé, reference checks and, more often than not, a background check.  In fact, the norm was to have a bright line policy disqualifying any candidate with a conviction.  Further, a background check has often been run regardless of the nature of the position being filled or the industry within which the company operates.  The only limitations on this practice comes in the form of the Fair Credit Reporting Act (FCRA) which, though replete with technical requirements that in and of themselves cause employers difficulty, does not strictly prohibit an employer from disqualifying an applicant because of a conviction.  In fact, that technically is still the case—apart from the technical requirements of the FCRA, there currently is no federal law that prohibits an employer from using conviction information in the hiring decision or maintaining a ban on hiring anyone with convictions.  What is becoming increasingly clear, however, is that if the EEOC has its way, those days are behind us.  Additionally, given the number of states taking action in this area each year, companies cannot rely on the lack of an outright federal ban as protection for a process increasingly coming under attack by stricter state regulations.

By the Numbers

So why is the EEOC (or state or local governments, for that matter) concerned with whether your company disqualifies applicants because of convictions?  To be clear, the EEOC's interest is not new.  In 1987 and 1991 the EEOC issued three policy statements on this issue.  In April of 2012, the EEOC updated its guidance and in doing so, noted that in the twenty years since it last addressed the issue, there had been a significant increase in the number of Americans who had contact with the criminal justice system.  Specifically, in 1991, roughly 1.8% of the population served time in prison (estimated at 4.6 million people).  Ten years later, in 2001, that number jumped to 2.7%, roughly 7.7 million people or 1 in 37 adults.  Those numbers have continued to rise, with 3.2% or roughly 9.6 million people being under some form of correctional control by 2007.  Based on statistics projected by the Department of Justice's Bureau of Justice Statistics, it is expected that an estimated 6.6% of those born in 2001 will serve time in state or federal prison.   

Employers may think that these statistics should actually bolster the need for background checks and "no convictions" hire policies. (And, for any company that has faced a negligent hiring claim, that may be right.)  A problem arises, however, when these same statistics are viewed through a racial lens.  In 2010, 28% of arrests reported involved African-Americans when African-Americans were 14% of the overall population.  The EEOC reported that if current incarceration trends continue, 1 in 3 African Americans will serve time in prison, with that same statistic impacting 1 in 6 Hispanics and 1 in 17 Caucasians.  If these statistics are accurate, the answer to why the EEOC is concerned with corporate America's use of background checks and convictions in hire because clear: doing so may have a greater negative impact (or “disparate impact”) on minorities, particularly African-Americans.  This is particularly concerning for the EEOC, as 92% of employers responding to Society for Human Resources survey confirmed the use of background checks in their hire process for candidates.  Without ever intending to discriminate, utilizing background check information in a bright line "no convictions" hire policy may expose an employer to a disparate impact claim.  The updated EEOC Guidance broadcasts that fact. 

Lay of the Land

Though there is currently no federal statute which prohibits basing a hire decision on a candidate's criminal conviction, it is clear that the EEOC intends to challenge such policies pursuant to the agency's strategic plan to eliminate barriers in hiring.  Since 2009, the EEOC has filed three separate federal suits against companies for their use of background checks/convictions, asserting that the policies in question discriminated against minorities.  Two of those cases (filed in 2013) remain pending, and the third resulted in a victory for the employer.  While these cases are proving to be hard fought battles for the EEOC, there is no sign the agency intends to retreat.

But where the federal government has remained legislatively silent, states and municipalities have been on the move.  As of the preparation of this article, there are 18 states that have enacted "ban the box" or fair chance statutes, with seven of those laws applying to both public and private employers.  Additionally, 100 cities and counties have enacted some form of fair chance laws.  "Ban the box" or other similar fair chance statutes typically do not prohibit an employer from running background checks or using the information obtained in a hire decision, but seek to delay when in the hire process the information can be obtained.  For example, in Illinois, a covered employer must first identify a potential candidate for an interview or make a conditional offer of employment before being allowed to inquire into and consider conviction records.  Beyond just delaying when the information can be obtained, however, New York City employers are subject to restrictions that dictate when employment decisions can be based on convictions at all, and failure to meet these restrictions can be discrimination under the city's Human Rights Ordinance.  By varying degrees, these statutes seek to have employers assess candidates' substantive credentials for a position before (if ever) having the door closed due to a criminal conviction. 

This trend places employers in a difficult position—deciding between compliance with the law and increasing the company's exposure to claims that may arise if criminal records are not considered.  When employers do not screen for criminal records or do not utilize the information obtained therein, they may risk claims such as negligent hiring, negligent supervision or face vicarious liability if an employee with a criminal record injures others in the scope of their employment.  Of course, if the employer obtains and uses conviction information in the hire process, the company may now face increased risk of discrimination claims, statutory or other penalties if provided for under the fair chance laws.  Whether this is a Hobson's Choice, Morton's Fork, or Catch 22, the choice spells trouble.  It will be critical for human resources staff or any other professionals involved in the hire process to be familiar with the laws that exist in each of the jurisdictions (state and local) in which companies operate.    

Best Practices

Though the current state of affairs may be panic-inducing, there are steps that companies can take that should permit the continued use of criminal convictions while staying within the bounds of the law.  First and foremost, those involved in the hire process need to be aware of the specific limitations which exist in the states in which you operate.  If you use a third-party vendor or internet service to post and screen applicants, make sure their process complies with any state specific requirement you may have.

Setting those state and local requirements aside, there are other ways in which employers can manage their process that will also help to keep the company out of the EEOC’s cross-hairs.  Specifically, employers can eliminate any bright light policy that prohibits anyone with a criminal conviction from being hired.  Such policies should be replaced with an individualized assessment of each candidate's background check/conviction history.  The EEOC Guidance confirms that the desired approach is to have employers considering the duties and responsibilities of the specific position at issue, along with the nature and gravity of any criminal convictions, and the time since any conviction occurred.  Employers should be looking to determine whether the conviction and conduct implicated pose a real concern with the duties the candidate would be performing, ideally as supported by the written job description.  As part of this process, if a candidate's background check turns up a conviction, the candidate should be given an opportunity to explain the record and provide any other information that he or she thinks is relevant before making a final decision. 

Next, employers should designate an individual who will be the gate keeper of this process and the documentation generated, and should retain documents pertaining to the company's process and decision-making.  The EEOC has recently sought to enforce hiring document retention requirements under Title VII against one employer in this context, marking perhaps a new type of attack by the EEOC on background check policies.  Relatedly, employer should train these gate keepers and decision makers in the hire process about Title VII and state and local requirements applicable to your operations.  Additionally, and this may be a given, employers should not reject candidates absent a conviction—arrests are not proof of criminal conduct and most jurisdictions prohibit the consideration of arrests, as well as expunged or sealed records.   

In short, restrictions on the use of criminal convictions are here to stay and likely will become even more restrictive over time.  There is no sure-fire way to avoid a claim of discrimination.  By putting the above practices into place, however, companies will stand a far better chance in defending the practice when such a claim does arise.

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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