Use of employment-related background checks by employers to discover information about the work history, education, criminal record, and financial history of job applicants has become ubiquitous. In one recent survey of employers, 92% of those responding stated that they subjected all or some of their job candidates to criminal background reports. The reasons for increased employer reliance on criminal record searches are straightforward – to control theft and fraud and address heightened concerns about potential liability for workplace violence and negligent hiring.

It is not illegal for an employer to ask questions about an applicant’s or employee’s background, or to require a record check. However, anytime an employer uses that information to make an employment decision, irrespective of how the employer has obtained the information, the employer must comply with federal anti-discrimination and credit reporting laws, and state and local restrictions.

This article summarizes briefly what has become a complex and rapidly evolving area of the law and the heightened risks to employers, especially those with high employee turnover, of utilizing criminal background checks in making employment decisions. Nationally, the United States Equal Employment Opportunity Commission (“EEOC”) has become increasingly aggressive in recent years in pursuing employment claims against employers who use blanket criminal background checks for all hiring decisions.

The Federal Trade Commission actively enforces the Fair Credit Reporting Act, which places additional limits on employers who gather employee background information from third party consumer reporting agencies. At the state and local levels, Virginia, Maryland and the District of Columbia, as well as Fairfax County, Montgomery County and Prince George’s County, all have recently implemented “ban the box” legislation that restricts, or affects the timing of, an employer’s use of employment-related criminal background checks.

The EEOC and Title VII of the Civil Rights Act

The EEOC is primarily responsible for enforcing federal employment discrimination laws, including Title VII of the Civil Rights Act of 1964 (“Title VII”), which prohibits employment discrimination based on race, color, religion, sex and national origin. In 1991, Congress amended Title VII to include disparate impact discrimination as a statutory basis for law suits against employers.

Disparate impact theory posits that any use of a job selection method that is factually non-discriminatory may still be considered discriminatory, if it affects proportionally more of one protected group than another. An employer can fend off a discrimination claim by showing that its selection criteria are job-related and consistent with business necessity.

In recent years, the EEOC has become increasingly vigilant, even overbearing according to some, in pushing its contention that the blanket exclusion by an employer of all applicants with a criminal history violates federal anti-discrimination law. This is because the employer’s decision to reject such job applicants is, in the EEOC’s view, based on racial or ethnic stereotypes about criminality, rather than qualifications and suitability for the position.

The EEOC finds support for its position in data showing that there has been a significant increase in the number of people with criminal records in the working-age population and arrest and incarceration rates are especially high for African American and Hispanic men, who are arrested at a rate two to three times higher than the general population of men.

In 2012, the EEOC issued updated enforcement guidance (“Guidance”) on employer use of arrest and conviction records in employment decisions. The Guidance makes it abundantly clear that the EEOC will treat any employer policy disfavoring individuals with criminal records as one that disproportionately impacts racial and ethnic minorities, in particular African Americans and Hispanics.

This would hold true, in the EEOC’s view, regardless of the type of crime, the type of job, the location or the nature of the employer’s business, unless the employer also uses a narrowly targeted filter that does not automatically exclude all persons with criminal records but instead carefully considers the circumstances of each applicant’s history to determine each candidate’s suitability consistent with the employer’s particular legitimate business justifications.

Whether a particular employer policy is related to the particular job and consistent with the employer’s business necessity has been assessed by the EEOC based on three factors.

(1) The nature and gravity of the offense. The nature of the offense relates to the harm caused by the crime, e.g., theft causes property loss, while felony theft involves deception, threat and intimidation. Gravity of the offense entails consideration of whether the offense was a misdemeanor, which are generally less severe, or a felony. Arrests are not proof of criminal conduct, according to the EEOC, and are insufficient to establish that criminal conduct has occurred. By contrast, a record of a criminal conviction generally will establish that the person engaged in the particular criminal conduct. This inquiry is the first step in determining whether a specific crime may be relevant to employer concerns about risks in a particular position.

(2) The time that has passed since the offense or conduct. The EEOC has not endorsed a specific duration for criminal conduct exclusions. It has posited, however, that permanent exclusions from all employment, based on any and all criminal offenses, is inconsistent with its business necessity standard.

(3) The nature of the job held or sought. This involves the employer’s factual inquiry into the particular job subject to exclusion, including consideration of the nature of the job’s duties (e.g., data entry, lifting boxes), and the circumstances under which it is performed (e.g., the level of supervision, oversight and interaction with co-workers or vulnerable individuals) and the environment in which the job is performed (e.g., out-of-doors, in a warehouse, in a private home).

Finally, the use of individualized assessments can help employers avoid potential Title VII liability by allowing them to consider more complete information on individual applicants or employees, as a part of a policy that is job related and consistent with business necessity. Individualized assessment generally entails the employer informing the individual that he may be excluded because of past criminal conduct and providing the individual with a reasonable opportunity to show that the exclusion does not properly apply to him (See Guidance, Section V.B.9, for examples).

There can be significant risk to an employer in adopting a policy of using employment-related criminal background checks in employment decisions that does not comport with the factors identified in the EEOC’s Guidance. Since June 2013, the EEOC has vigorously pursued civil litigation against BMW Manufacturing Co. and Dollar General Stores, alleging that both entities discriminated against minority job applicants by failing to engage in sufficiently individualized assessments of criminal background check results for job applicants.

While acknowledging that it is appropriate for employers to be concerned about physical or security risks to customers and other employees in making hiring decisions, the policies adopted by the EEOC also seem to expose employers to the whims of the agency as to individual hiring decisions.

Part II will cover the Fair Credit Reporting Act and state and local “ban the box” laws.