JAILHOUSE BLUES: EEOC TRIES TO ADDRESS CONCERNS OVER CONTROVERSIAL GUIDELINES ON CRIMINAL BACKGROUND CHECKS

The Equal Employment Opportunity Commission (“EEOC”) has responded to complaints from nine state attorneys general, over the federal agency’s enforcement actions against employers who use criminal background checks in making employment decisions.

However, the EEOC’s assurances are unlikely to address the concerns raised by the states, and the Commission’s enforcement guidelines are already faring poorly in the courts.

It has been over a year since the EEOC issued its revised enforcement guidance on the extent to which employers may rely on an individual’s criminal history in making hiring or other employment selection decisions. The stricter guidelines made it clear that an improper reliance on such information may constitute a violation of Title VII of the Civil Rights Act of 1964 (“Title VII”). The stated rationale for the EEOC’s position is that employers’ reliance on criminal records as a factor in hiring decisions disproportionately affects minorities, who statistically have higher rates of arrest and criminal conviction. This theory of liability is called “disparate impact.”

The complaints from the states were prompted by two high profile lawsuits filed by the EEOC against BMW Manufacturing in South Carolina and Dollar General Stores, based in Illinois. In the suits, the EEOC alleged the companies discriminated against minorities by excluding them from employment opportunities based on improper reliance on criminal background checks. The states take issue with the Commission’s reliance on the disparate impact theory of liability and accuse the EEOC of improperly and illegitimately seeking to expand Title VII’s protections to "former criminals."

In its letter  responding to the complaints, the EEOC claims criticism of the new guidelines is based on a “misunderstanding” of how employers should implement the Commission’s suggestions. The EEOC also claims that the employee screening proposed by the guidelines should not result in "significant costs" to employers.

Although employers may continue to struggle to determine how to best comply with the guidance, as demonstrated by a recent U.S. District Court decision, they are also not defenseless to claims that their policies are discriminatory.

On August 9, 2013, a District Court in Maryland granted summary judgment in favor of the defendant employer Freeman, dismissing the plaintiff EEOC’s claim that Freeman’s background check policies violated Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-2(k). EEOC v. Freeman, Case No. RWT 09cv2573 (D. Md. Aug. 9, 2013). In so doing, the District Court recognized an employer’s policy of conducting criminal history or credit record background checks on potential employees as “a rational and legitimate component of a reasonable hiring process.” The District Court chastised the EEOC for pursuing a disparate impact discrimination claim based on “a theory in search of facts to support it,” disregarding the EEOC’s expert’s report as “an egregious example of scientific dishonesty.”

The EEOC’s expert’s report was pivotal to the success or failure of its claim. To prevail on a claim of disparate impact discrimination, a plaintiff must show that a certain class of applicants is disproportionately and adversely impacted by a particular employment practice on the basis of their race, color, religion, sex, or national origin. 42 U.S.C. § 2000e-2(k). In its revised guidance, the EEOC essentially presumes that, based on national statistics, the use of criminal records to exclude individuals from employment has a disparate impact on individuals of certain races and national origins. This presumption, however, may not be sufficient in court where the plaintiff bears the burden of proving disparate impact by showing statistical disparities between the number of protected class members in the qualified applicant group and those in the relevant segment of the workforce. More often, the plaintiff’s burden requires reliable and accurate statistical analysis performed by a qualified expert.

Freeman challenged the EEOC’s use of an unreliable expert report to establish a prima facie case of disparate treatment discrimination and prevailed. The District Court, in excluding the EEOC’s expert’s report, found that the report was based upon an inaccurate database containing “cherry-picked” data and a “mind-boggling number of errors.” The District Court was also unpersuaded by the EEOC’s arguments that national statistics were sufficient to create an inference of disparate impact, noting that the national statistics relied upon by the EEOC were not representative of the relevant applicant pool.

With neither national statistics nor expert analysis to support its allegations of disparate impact, the District Court concluded that the EEOC’s claim could not survive and granted summary judgment in favor of Freeman. This decision strikes at one of the pillars for the EEOC in pursuing disparate impact litigation based on the use of criminal background checks; namely, the ability to move easily past (or effectively skip) the plaintiff’s burden to prove that a particular policy has a disparate impact on a class of applicants based on their race or other protected characteristic. The EEOC cannot rest on its presumption that the mere existence of a background check policy creates a disparate impact; it must prove the existence of this disparate impact with reliable expert testimony and statistics.

Despite the Freeman decision, employers should still expect the EEOC to rely upon its presumption of disparate impact during the investigation stage. What is less clear is what impact this decision may have on the two currently pending lawsuits the EEOC has filed against BMW and Dollar General. It is clear, though, that despite some direction from the federal courts, employers still continue to struggle when determining how to comply with the EEOC’s revised guidance more than a year after its issuance.

Notably, employers who operate in states that have their own requirements regarding the hiring of applicants with criminal backgrounds face a particularly arduous task. At least one federal court has recognized this dilemma but has concluded that “Title VII trumps state mandates.” See Waldon v. Cincinnati Public Schools, Case No. 1:12-CV-00677 (S.D. Ohio Apr. 24, 2013). In Waldon, the defendant employer Cincinnati Public Schools complied with a state law that required background checks of current school employees, even those whose duties did not involve the care, custody, or control of children. As a result, two long-term employees were fired, and they subsequently filed suit, alleging that their terminations were based on state legislation that had a racially discriminatory impact.

The school system moved to dismiss, asserting that it was simply following Ohio law by terminating the plaintiffs’ employment, that it maintained no particular employment practice that caused a disparate impact, and that it was a business necessity to follow Ohio law. A District Court in Ohio disagreed, recognizing that although it was clear that the school system did not intend to discriminate, it implemented a policy that had a disparate impact on African-Americans. The District Court did not believe that the school system was “compelled to implement the policy” and stated that the school system “could have raised questions with the state board of education regarding the stark disparity it confronted.”

The District Court’s suggested course of action for employers facing such a quandary is not particularly instructive, especially when multiple state leaders themselves have expressed to the EEOC the difficulty of complying with its guidance. On July 24, 2013, the attorneys general for nine states sent a letter to the EEOC expressing concerns about its revised guidance and the position the EEOC has taken in recent lawsuits regarding criminal background checks. View the letter here. The letter described the EEOC’s claim that its revised guidance document supersedes state and local hiring laws as “particularly egregious” and expressed concern that many of the states’ laws could be affected.

Thus, the propriety of criminal background check policies remains uncertain, and the EEOC’s pursuit of litigation has not added clarity. If anything, the EEOC has muddied the waters by pursuing cases with theories like it advanced in Freeman, which cause employers to wonder whether they should consider ignoring the EEOC, or expend resources trying to comply with guidance that has not been well received in federal court litigation, as well as a patchwork of competing state laws. Nevertheless, Freeman is but one case, state law continues to evolve, and the jury is still out on whether the states that have publicly criticized the EEOC’s guidance will do more than jawbone about it. In the meantime, employers seeking to navigate the various laws should continue to monitor the developments and revisit their policies and practices as the situation develops.

Mark Fijman is a labor and employment attorney with Phelps Dunbar, LLP, which has offices in Louisiana, Mississippi, Florida, Texas, Alabama, North Carolina and London. To view his firm bio, click here. He can be reached at (601) 360-9716 and by e-mail at fijmanm@phelps.com.