Workplace Be Careful What You Ask For Avoiding Liability in the Hiring Process 2014 BOND, SCHOENECK & KING, PLLC

Transcription

1 Workplace 2014 Be Careful What You Ask For Avoiding Liability in the Hiring Process 2014 BOND, SCHOENECK & KING, PLLC

2 TABLE OF CONTENTS I. THE EEOC S STRATEGIC FOCUS ON EMPLOYERS HIRING PRACTICES... 1 A. EEOC s E-RACE Initiative... 1 B. EEOC s Strategic Enforcement Plan Eliminating Barriers in Recruitment and Hiring Preventing Harassment Through Systemic Enforcement Addressing Emerging Issues in EEO Law... 4 II. THE USE OF BACKGROUND CHECKS IN HIRING... 5 A. Criminal Background Checks EEOC Enforcement Guidance EEOC Litigation Efforts Regarding Disparate Impact State Attorney Generals Challenge to the EEOC Enforcement Guidance Ban the Box Legislation B. Credit History Checks Federal Legislation State Legislation Case Study: EEOC v. Kaplan Higher Education Corp C. Federal and New York Fair Credit Reporting Act Requirements Federal Fair Credit Reporting Act New York Fair Credit Reporting Act Employer Education Act Surge in FCRA Class Action Litigation III. EMPLOYERS USE OF SOCIAL MEDIA IN HIRING AND RECRUITMENT A. Current and Pending Legislation Governing Access to Social Media State Legislation Federal Law and Legislation B. Potential Legal Pitfalls Federal Anti-Discrimination Statutes New York State Statutes The 2013 Carnegie Mellon Study Case Study: Neiman v. Grange Mutual Casualty Co Bond, Schoeneck & King, PLLC i

3 IV. OTHER EMERGING ISSUES IN THE HIRING PROCESS A. Genetic Information Nondiscrimination Act of 2008 (GINA) GINA What is Genetic Information? Application of GINA to the Hiring Process EEOC v. Fabricut, Inc EEOC v. Founders Pavilion, Inc B. Discrimination Against Unemployed Individuals New York City Human Rights Law Protection for the Unemployed in Other States C. Application of EEOC Guidance on Domestic Violence, Sexual Assault & Stalking to Applicants Bond, Schoeneck & King, PLLC ii

4 BE CAREFUL WHAT YOU ASK FOR AVOIDING LIABILITY IN THE HIRING PROCESS I. THE EEOC S STRATEGIC FOCUS ON EMPLOYERS HIRING PRACTICES A. EEOC s E-RACE Initiative The EEOC has continued to develop and implement its multi-year E-RACE Initiative (Eradicating Racism and Colorism from Employment), which is intended to identify new strategies to enforce claims of race discrimination under Title VII of the Civil Rights Act of The EEOC s initiative is intended to address what the EEOC perceives as prevalent discriminatory practices in the hiring process. Under this initiative, the EEOC will identify issues, criteria and barriers that contribute to race and color discrimination, explore strategies to improve the administrative processing and the litigation of race and color discrimination claims, and enhance public awareness of race and color discrimination in employment. A summary describing the E-Race Initiative can be found on the Commission s website at The EEOC has developed a list of E-Race Goals and Objectives to accomplish its goal of eliminating race discrimination in areas including recruitment and hiring. One of the areas the EEOC has pursued aggressively in connection with this initiative is employers use of pre-employment background checks. B. EEOC s Strategic Enforcement Plan On December 17, 2012, the U.S. Equal Employment Opportunity Commission ( EEOC ) approved a Strategic Enforcement Plan ( SEP ) for Fiscal Years One of the stated objectives of the SEP is to focus and coordinate the EEOC s programs to have a sustainable impact in reducing and deterring discriminatory practices in the workplace. See As part of its SEP, the EEOC has identified six national enforcement priorities, with the goal and expectation that a concentrated and coordinated approach will result in reduced discrimination in these areas. As stated in the SEP, the EEOC s main enforcement priorities for the next few years will include: (1) Eliminating Barriers in Recruitment and Hiring; (2) Protecting Immigrant, Migrant and Other Vulnerable Workers; (3) Addressing Emerging and Developing Issues in equal employment law; 2014 Bond, Schoeneck & King, PLLC

5 (4) Enforcing Equal Pay Laws; (5) Preserving Access to the Legal System; (6) Preventing Harassment Through Systemic Enforcement and Targeted Outreach. The SEP is a roadmap to the EEOC s enforcement and litigation strategy through Eliminating Barriers in Recruitment and Hiring The EEOC views itself as uniquely qualified to handle claims regarding hiring and discrimination. Its SEP provides that because these claims raise challenging and complicated issues affecting all of the protected classes, which EEOC is better situated than the private bar to address given its investigatory authority and access to data. The SEP indicates that the EEOC will target class-based intentional recruitment and hiring discrimination and facially neutral recruitment and hiring practices that adversely impact particular groups. The EEOC s SEP claims that racial, ethnic, religious groups, older workers, women, and people with disabilities are frequently confronted with discriminatory policies and practices at the recruitment and hiring stages. Since 2013, the EEOC has focused its efforts on examining exclusionary policies and practices, restrictive applicant processes, and the use of pre-employment screening tools, such as pre-employment tests, background checks, and date of birth inquiries. Consistent with its recent focus on employers pre-employment practices, the EEOC has filed several lawsuits against employers alleging discrimination against applicants. For instance, in December 2013, the EEOC brought a lawsuit in a Virginia federal court against Lee s Food Corp. (EEOC v. Lee s Food Corp., Case No. 3:2013-cv (E.D. Va., Richmond Division)), alleging that the grocery store owner refused to hire a qualified female van driver on the basis of her sex in violation of Title VII of the Civil Rights Act of In its complaint, the EEOC alleges that when the plaintiff applied for the job, a store manager told her that he would not hire a woman because she would be at greater risk of being the victim of a crime while performing the job. The EEOC also alleged that the plaintiff met the minimum requirements of the job, having a valid driver s license and a good driving record, and that the company subsequently hired a man to fill the position. Similarly, in January 2014, the EEOC brought a lawsuit in New Jersey federal court against Genesis Healthcare LLC (EEOC v. Genesis Healthcare LLC, Case No. 2:14-cv (Dist. Ct. Dist. N.J.)), alleging that Genesis violated the Americans with Disabilities Act when it refused 2014 Bond, Schoeneck & King, PLLC

6 to hire a deaf applicant to work in the food service department. In its complaint, the EEOC alleges that the plaintiff was initially offered part-time positions as a dietary aide and assistant cook after an initial interview, but that he was later asked to participate in a second interview with different managers. The EEOC alleges that the second group of managers questioned the plaintiff about his ability to communicate. Following the second interview, Genesis told the plaintiff that they were not going to hire him and ultimately hired someone with less experience. The EEOC is seeking injunctive relief, lost wages, compensatory and punitive damages. Both of the Lee s Food Corp and Genesis Healthcare cases are currently pending. 2. Preventing Harassment Through Systemic Enforcement The EEOC s systemic initiative is essentially based on the notion that where there is smoke (one EEOC charge), there is likely to be fire (discrimination against a group of employees). The EEOC defines systemic discrimination as a pattern or practice, policy, or class case where the alleged discrimination has a broad impact on an industry, profession, company or geographic area. In order to identify potential cases of systemic discrimination, the EEOC is examining whether employers have been named in several charges over the years in which the employer has been accused of engaging in a certain type of discriminatory practice (e.g., race discrimination). If a pattern is found, the EEOC may undertake a systemic discrimination investigation. The EEOC is examining employer policies and practices when it investigates individual charges, in an effort to identify broader discriminatory practices. The EEOC is also reviewing EEO-1 reports filed by employers and is comparing those EEO-1 reports with industry-wide demographics. The EEOC has followed through with its goal of pursuing systemic discrimination initiatives throughout As just one example, in November 2013, the EEOC filed suit against an Atlanta-area nightclub claiming that it violated Title VII by subjecting female servers to a pattern of sexual harassment, including requests for sexual favors. The EEOC claims that when the sexual favors were refused by the women, they were assigned to less profitable sections of the restaurant or were scheduled to less profitable shifts. (See EEOC v. Sirdah Enterprises, Inc., Case No. 1:13-cv (N.D. Georgia 2013)). During the 2013 fiscal year, the EEOC filed 131 merit lawsuits. Merit lawsuits are those which include direct suits alleging violations of the substantive provisions of the statutes enforced by the EEOC. These included: 89 individual suits; 21 non-systemic class suits; and 21 systemic suits. In its 2013 Performance and Accountability Report, the EEOC s goal is to ensure that systemic cases make up 22% to 24% of its litigation docket by 2016, with at least 20% of its annual litigation docket made up 2014 Bond, Schoeneck & King, PLLC

7 of systemic cases. This report is available on the EEOC s website at The EEOC is well on its way. At the end of 2013, systemic cases comprised 23% of the EEOC s active docket. This data reflects a continuing transformation of the EEOC docket aimed at bigger lawsuits intended to get more bang for its buck. During the 2013 fiscal year, the EEOC resolved 209 merit lawsuits that resulted in total monetary recovery of $39 million dollars. The recovery for Title VII claims was the highest but the resolution of ADA lawsuits was a close second. This falls in line with the EEOC s heightened focus on these types of claims. Although the types of systemic claims pursued by the EEOC are notable for employers, the way in which the EEOC has litigated systemic lawsuits and carried out systemic investigations has attracted a great deal of attention. Several courts have thrown out the EEOC s systemic claims and scolded the EEOC for its shoot first, aim later tactics. Some of these high-profile cases, including EEOC v. Peoplemark, Inc., are described in detail later on in these materials. The bottom line to these cases is that the EEOC has failed to implement any meaningful internal controls or oversight to the pursuit of systemic cases which has resulted in significant setbacks and monetary penalties for the EEOC. Nevertheless, the EEOC has indicated that it will continue to actively and aggressively pursue systemic lawsuits against employers in the years to come. 3. Addressing Emerging Issues in EEO Law One of the EEOC s six national enforcement priorities is to address emerging issues in the area of employment law, including developing theories, judicial decisions and administrative interpretations. One of the many ways in which the EEOC has actively pursued this priority has been through expanding into new territory by commencing lawsuits aimed at enforcing the recently enacted Genetic Information Nondiscrimination Act of 2008 ( GINA ). GINA makes it unlawful for an employer to request or require employees or applicants to provide their own genetic information or the genetic information of family members. In September 2013, the EEOC filed charges against a seed and fertilizing manufacturer, the Abatti Group, for discrimination based on both disability and genetic information for allegedly forcing applicants to undergo illegal physical examinations and answer questions about their medical condition. (See EEOC v. All Star See, Abatti Companies, et al., Case No. CV (C.D. California 2013)). In January 2014, the EEOC settled the first lawsuit in which it alleged systemic discrimination under GINA. (EEOC v. Founders Pavilion, Inc.) In announcing the settlement, the EEOC expressed its intent to continue pursuing alleged violations of GINA against employers Bond, Schoeneck & King, PLLC

8 II. THE USE OF BACKGROUND CHECKS IN HIRING The use of background checks in the hiring process and for other employment purposes is coming under increased scrutiny by federal, state and even local governments, and has sparked several noteworthy lawsuits in recent years. The use of background checks for employment purposes imposes a number of critical requirements which employers must follow, and additionally raises other important legal issues which must be taken into consideration. Further, there have been a number of legal developments in this area in recent years, with more likely to come in the future, which must also be kept topof-mind. Nonetheless, the use of background checks for employment purposes has remained prevalent. In 2012, 69% of employers surveyed by the Society for Human Resources Management ( SHRM ) reported that they performed background checks on all job candidates. Indeed, background checks can be useful tools to uncover any misconduct or dishonest behavior at previous jobs or outside of work, and to determine whether the applicant possesses the positive traits desired in an employee. In this regard, these checks are sometimes required by law based on a particular job or industry. They can also be useful to avoid later claims of negligent hiring if things go wrong with a new hire. However, the decision to use background checks should be carefully considered and implemented. Employers who proceed unwittingly in this area do so at their own risk, and, as explained below, the stakes can be very high. A. Criminal Background Checks The EEOC has of late made it abundantly clear that it views the use of criminal background checks for employment purposes with great skepticism and is willing to doggedly and aggressively litigate what it views as the improper use of such background checks. This recent litigation activity was preceded by the issuance of the EEOC's Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions under Title VII of the Civil Rights Act of 1964 which addresses the lawfulness of using criminal background checks for employment purposes. Although the Guidance is not law, the EEOC clearly strives to legitimize and codify its views contained in the Guidance by way of lawsuits alleging disparate impact claims based on the use of background checks. A copy of the Guidance can be found on the EEOC s website at 1. EEOC Enforcement Guidance a. The EEOC s Justification for the Guidance The EEOC believes that the updated guidance was necessary, in part, because technology has made criminal history information much more accessible to employers in recent years. It also cites the increasing percentage of people with criminal records in the working-age population, and especially the relatively high arrest 2014 Bond, Schoeneck & King, PLLC

9 and incarceration rates among African American and Hispanic males. Since providing prior guidance on the use of criminal records in policy statements issued in 1987 and 1990, the Civil Rights Act of 1991 was enacted to codify the disparate impact analysis within the framework of Title VII of the Civil Rights Act of 1964 ("Title VII"). Additionally, there had been case law analyzing Title VII's requirements for criminal record exclusions as well as initiatives at both the state and federal level to promote the employment of exoffenders which the EEOC reasons warranted an update and consolidation of the EEOC's prior policy statements. b. The Effect of the Guidance The EEOC's new guidance does not make it a per se violation of Title VII to consider criminal history information. It does, however, send a clear signal that the EEOC intends to scrutinize employment decisions that are based on an individual's criminal past because they may violate Title VII's prohibitions on racial and national origin discrimination. The EEOC stresses that criminal history information may be relevant to both "disparate treatment" claims - where people with the same criminal history are treated differently because of a legally protected characteristic - and "disparate impact" claims - where an employer's facially neutral policy has a disproportionately adverse impact on a specific protected group. However, the EEOC's emphasis on national conviction rates for certain minority groups suggests that it is more inclined to litigate claims under a disparate impact theory. c. Disparate Impact of Criminal Record Screening (1) An employer violates Title VII where the evidence shows that the employer s neutral criminal record screening practices or policies disproportionately screen out a Title VII protected group and the employer cannot demonstrate that the practices or policies are job-related for the relevant positions and consistent with business necessity. (2) Determining Disparate Impact (a) The EEOC does not go so far as (but comes very close to) saying there is a presumption of disparate impact, but it has stated that the national data cited above supports a finding that criminal record 2014 Bond, Schoeneck & King, PLLC

10 exclusions have a disparate impact based on race and national origin. (b) The EEOC will assess the following to determine whether the employer s criminal records screening policy causes a disparate impact on protected groups: (i) (ii) (iii) (iv) (v) (vi) Applicant flow information; Workforce data; Criminal history background check data; Demographic availability statistics; Incarceration/conviction data; and Relevant labor market statistics (3) Employer s Ability to Contest Disparate Impact (a) During the course of an EEOC investigation, employers have the opportunity to show that their employment policy or practice does not cause a disparate impact on the protected group of applicants or employees. (i) (ii) (iii) Employers may rely on regional or local data, rather than national data, showing that African American and/or Hispanic men are not arrested or convicted at disproportionately higher rates in their particular geographic region. They may also rely upon their own applicant tracking data to show that their policy or practice did not cause a disparate impact. Employers will not be able to disprove disparate impact simply by providing evidence of a racially balanced workforce. (4) Analysis of Whether an Employer s Policy is Job-Related and Consistent with Business Necessity (a) Even where a disparate impact is found, employers can avoid liability by showing that the policy at issue 2014 Bond, Schoeneck & King, PLLC

11 is job-related for the position at issue and consistent with business necessity. (b) (c) (d) (e) Under the EEOC s guidance, employers will not typically satisfy this showing by merely tying their criminal backgrounds check policy to general concerns for property or safety. Instead, employers are expected to conduct a multifactor analysis to confirm that the underlying policy is appropriately applied to a specific individual. In order to establish that an applicant s prior criminal conduct is a proper exclusion and is job-related and consistent with business necessity, an employer will need to establish that the policy or practice is intended to connect specific criminal conduct with the risks inherent in the duties of a particular position. The EEOC has identified two circumstances in which employers will consistently meet the job-related and consistent with business necessity standard: (i) (ii) The employer validates the criminal records screen for the position in question per the Uniform Guidelines on Employee Selection Procedures, 29 C.F.R. 1607, et seq. ( Uniform Guidelines ); or The employer develops a targeted screen considering the nature and gravity of the offense or conduct, the time that has passed since the offense, conduct and/or completion of the sentence, the nature of the job held or sought, and then provides an opportunity for an individualized assessment for people excluded by the screen. A policy or practice requiring automatic, across the board exclusion from all jobs because of any prior criminal conduct is inconsistent with the preceding factors because it fails to focus on the dangers of particular crimes and the risks in particular positions. (5) Arrest Records The EEOC has specifically noted that an exclusion based on an arrest record alone will not be job-related and consistent 2014 Bond, Schoeneck & King, PLLC

12 with business necessity because an arrest does not establish that criminal conduct occurred. However, employers may make an employment decision based on the conduct underlying the arrest where that conduct makes the individual unfit for the job in question. (6) Less Discriminatory Alternatives Even where an employer successfully shows that its policy or practice is job-related for the position and consistent with business necessity, a plaintiff may still prevail under Title VII by showing that there is a less discriminatory alternative employment practice that serves the employer s legitimate goals as effectively as the challenged practice that the employer refused to adopt. d. Disparate Treatment of Individuals with Criminal Records It is a violation of Title VII to treat individuals with similar criminal history differently because of a legally protected characteristic (i.e., race, national origin, etc.) Examples: (1) Rejecting an African American applicant based on criminal record while hiring a similarly situated white applicant with a comparable criminal record; (2) Giving white applicants but not racial minorities the opportunity to explain their criminal history; (3) Subjecting racial minorities to more or different criminal background checks; (4) Rejecting a job applicant based on racial or ethnic stereotypes about criminality; and (5) Applying different standards for evaluating criminal history for different racial or ethnic groups. e. EEOC s Recommended Best Practices for Utilizing an Arrest or Conviction in the Hiring/Screening Process (1) Evaluate and eliminate discriminatory policies and practices. (a) Eliminate blanket exclusions based on any criminal record Bond, Schoeneck & King, PLLC

13 (2) Develop a narrowly tailored screening policy (a) (b) (c) (d) (e) (f) Identify essential job requirements and the actual circumstances under which the jobs are performed. Identify specific offenses tied to unfitness for job. Identify time limits for considering offenses. Record the justification for the policy and procedures. Document all research and consultations considered in drafting the policy and procedures. Provide individualize assessment before making final decisions. (3) Train managers, hiring officers and decision makers on implementing the policy and procedures in accordance with Title VII (4) Limit inquiries about criminal records (a) Only ask about criminal records that are job-related and consistent with business necessity. (5) Ask about criminal convictions later in the application process, rather than on the job application (6) Maintain confidentiality (a) (b) Keep criminal record information confidential. Only use it for the purpose for which it was intended. (7) Keep in mind and comply with any applicable state or local law (e.g., Article 23A of the New York Corrections Law). f. Positions Subject to Prohibitions or Restrictions on Individuals with Records of Certain Criminal Conduct As noted in the EEOC Guidance, in certain industries, employers are subject to federal statutory and/or regulatory requirements that prohibit individuals with certain criminal records from holding particular positions or working in certain occupations. Compliance with federal laws and/or regulations is a defense to a charge of discrimination. However, if an employer imposes an exclusion that goes beyond the scope of a federally imposed restriction, the 2014 Bond, Schoeneck & King, PLLC

14 discretionary aspect of the policy would be subject to Title VII analysis. However, if an employer s exclusionary policy or practice is not job related and consistent with business necessity, the fact that it was adopted to comply with a state or local law or regulation does not shield the employer from Title VII liability. See Waldon v. Cincinnati Public Schools, 941 F. Supp. 2d 884 (S.D. Ohio 2013) (rejecting defendant s argument that raced-based disparate impact lawsuit should be dismissed because plaintiffs terminations were based on state law precluding employment of persons with certain convictions in schools; finding compliance with state law did not establish actions were job related and consistent with business necessity ). g. Relationship of EEOC Guidance Concerning Consideration of Criminal Conviction and Arrest Records to New York State law requirements In addition to issues raised by the EEOC s Guidance, it is important to remember that many states, like New York, have passed laws to prohibit discrimination on the basis of an individual s criminal history. Employers must ensure their compliance with both federal and state laws as they could face potential liability under both for discriminatory use of criminal history information. (1) New York State Law Requirements (a) (b) It is unlawful for nearly all employers in New York to inquire about, or to take an adverse employment action based upon, an arrest or criminal accusation not then pending that never led to a conviction. (N.Y. Exec. Law 296). It is also unlawful for employers to base employment decisions on a prior criminal conviction unless the employer can demonstrate either: (i) (ii) A direct relationship between the criminal offense and the employment sought; or That granting the employment sought would create an unreasonable risk to the property or safety of others. (N.Y. Corrections Law 752). (c) New York employers are required to post a copy of Article 23-A of the Corrections Law and also provide a printed or electronic copy of Article 23-A of the 2014 Bond, Schoeneck & King, PLLC

15 Corrections Law to any individual who is going to be subject to a criminal background check. A violation of Article 23-A is considered an unlawful discriminatory practice in violation of the New York Human Rights Law. (2) Nexus test (N.Y. Corrections Law 753) (a) Eight-Factor Analysis: In determining whether an employment decision may be based upon an individual s criminal record in any given situation, the employer must consider each of the following factors: (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) The public policy of New York State to encourage employment of persons with criminal records; The specific duties and responsibilities of the position; The bearing the underlying offense will have on the person s fitness or ability to perform those duties and responsibilities; The time elapsed; The age of the person when the offense was committed; The seriousness of the offense; Any information concerning the person s rehabilitation and good conduct; and The legitimate interest of the employer in protecting property or safety or welfare of individuals or the public. h. Updated Guidance from EEOC and Federal Trade Commission ( FTC ) In March 2014, the EEOC and FTC jointly issued new, additional guidance on employment-related background checks for employers. The publication, entitled Background Checks: What Employers Need to Know, seeks to guide employers on how to comply with the FCRA and non-discrimination laws when conducting criminal background checks Bond, Schoeneck & King, PLLC

16 (a) Using Background Information. The EEOC/FTC guidance reminds employers of the restrictions governing the use of criminal records information in connection with the various anti-discrimination statutes. The joint guidance recommends that employers: (i) Apply the same standards to everyone, regardless of their race, national origin, color, sex, religion, disability, genetic information (including family medical history), or age (40 or older). For example, if you don t reject applicants of one ethnicity with certain financial histories or criminal records, you can t reject applicants of other ethnicities because they have the same or similar financial histories or criminal records. (ii) Take special care when basing employment decisions on background problems that may be more common among people of a certain race, color, national origin, sex, or religion; among people who have a disability; or among people age 40 or older. For example, employers should not use a policy or practice that excludes people with certain criminal records if the policy or practice significantly disadvantages individuals of a particular race, national origin, or another protected characteristic, and does not accurately predict who will be a responsible, reliable, or safe employee. In legal terms, the policy or practice has a disparate impact and is not job related and consistent with business necessity. (iii) Be prepared to make exceptions for problems revealed during a background check that were caused by a disability. For example, if you are inclined not to hire a person because of a problem caused by a disability, you should allow the person to demonstrate his or her ability to do the job - despite the negative background information Bond, Schoeneck & King, PLLC

17 unless doing so would cause significant financial or operational difficulty. (b) Disposing of Background Information The EEOC/FTC Guidance reminds employers of certain federal record retention requirements. The Guidance provides: Any personnel or employment records you make or keep (including all application forms, regardless of whether the applicant was hired, and other records related to hiring) must be preserved for one year after the records were made, or after a personnel action was taken, whichever comes later. (The EEOC extends this requirement to two years for educational institutions and for state and local governments. The U.S. Department of Labor also extends this requirement to two years for federal contractors that have at least 150 employees and a government contract of at least $150,000.) If the applicant or employee files a charge of discrimination, you must maintain the records until the case is concluded. The Guidance also reminds employers of the need to dispose of background check reports in a secure manner, such as by burning, pulverizing or shredding the documents and disposing of electronic information so that it cannot be read or reconstructed. 2. EEOC Litigation Efforts Regarding Disparate Impact As mentioned above, the EEOC has aggressively applied its updated Enforcement Guidance since 2012 and has initiated high-profile litigation against several notable, large employers. In some instances, this litigation has proven less-than-fruitful and extremely costly for the EEOC. Even so, there is every indication that the EEOC remains undeterred in pursuing what it perceives to be the illegal use of criminal background checks for employment screening purposes and is willing to take a no-holds-barred approach through heavy-handed litigation. The following cases illustrate this recent trend Bond, Schoeneck & King, PLLC

18 a. Pepsi Settles with the EEOC for $3.13 Million In January 2012, the EEOC announced that Pepsi Beverages had agreed to pay $3.13 million and change its background-check policy following allegations that the company had discriminated against African American job applicants. See EEOC v. Pepsi Beverages, Case No. 09-CV-4594 (N.D. Ca. 2012). As part of this settlement, Pepsi instituted a new background check policy and also agreed to hire over 300 African American applicants identified by the EEOC as having been adversely affected by the company s allegedly unlawful acts. Under Pepsi s former policy, according to the EEOC, job applicants who had been arrested pending prosecution were not hired for a permanent job even if they had never been convicted of any offense. Pepsi s former policy also reportedly denied employment to applicants who had been arrested or convicted of certain minor offenses. In its press release announcing the settlement with Pepsi, the EEOC wrote: When employers contemplate instituting a background check policy, the EEOC recommends that they take into consideration the nature and gravity of the offense, the time that has passed since the conviction and/or completion of the sentence, and the nature of the job sought in order to be sure that the exclusion is important for the particular position. Such exclusions can create an adverse impact based on race in violation of Title VII. We hope that employers with unnecessarily broad criminal background check policies take note of this agreement and reassess their policies to ensure compliance with Title VII. b. EEOC v. Freeman, Civ. No. 8:09-cv (D. Md. 2009) In August 2013, a federal district court judge in Maryland dismissed a lawsuit filed by the EEOC against a national event planning company, Freeman. The lawsuit, which was filed in 2009, claimed, among other things, that Freeman s use of criminal background and credit checks resulted in disparate impact against African American and male job applicants. Freeman s background checks were typically performed after an individual had been offered a job but prior to the commencement of actual work. For general employees, i.e., those who did not hold credit sensitive jobs, the check included only a criminal history investigation and social security verification. For credit sensitive positions, the check also included a credit history review. A position 2014 Bond, Schoeneck & King, PLLC

19 was deemed credit sensitive if the employee holding that position had access to client or company credit card information, handled money, checks, or similar valuable items, had budgetary authority, had authority to make agreements with respect to customer invoices, or made purchases from vendors. Finally, for company officers, general managers, and department heads, Freeman performed an education and certification verification in addition to the above checks. Freeman s standard employment application form asked: Have you ever pleaded guilty to, or been convicted of, a criminal offense. If the applicant responded in the affirmative, they were given space to describe the date and circumstances. The form also contained the following advisement: A conviction does not automatically mean you will not be offered a job. What you were convicted of, the circumstances surrounding the conviction and how long ago the conviction occurred are important considerations in determining your eligibility. Give all the facts, so that a fair decision can be made. Applicants were also required to sign a form authorizing Freeman s third-party vendor to conduct the background investigation; this form contained the same questions as the employment application regarding prior criminal offenses. For credit checks, the vendor obtained credit histories from TransUnion, a national credit bureau; for criminal checks, the vendor collected information on convictions and their equivalents and active criminal warrants, but not arrests. Freeman limited its consideration of convictions to those that occurred within seven years of the application date. Freeman would then undertake a detailed, multi-step evaluation process to review the information obtained by the vendor and determine whether an applicant was qualified to begin work. In dismissing the EEOC s case, the judge noted that the agency had not challenged any of the specific criteria or procedures used by Freeman, but has merely alleged that its policy of conducting criminal and credit background checks, as a whole, produced a disparate impact on protected classes. On the merits, the judge found that the analysis performed by the EEOC s supposed experts ostensibly showing that Freeman s practices had a discriminatory impact was flawed, full of errors, laughable, and an egregious example of scientific dishonesty. Even if this evidence was admissible (and it was in fact deemed inadmissible), the judge found that dismissal of the case was still appropriate because the expert reports in question failed to identify a specific policy or policies that produces the alleged disparate 2014 Bond, Schoeneck & King, PLLC

20 impact. According to the judge: Under Title VII, it is not enough for the plaintiff to show that in general the collective results of a hiring process cause disparate impact. The judge also rejected the EEOC s claim that national statistics, e.g., showing higher rates of arrest and incarceration among protected classes, provided sufficient evidence of disparate impact with respect to Freeman s background check practices. In conclusion, the judge wrote: The story of the present action has been that of a theory in search of facts to support it. The judge also noted the dilemma faced by employers in connection with the EEOC s opposition to the use of background checks, noting that by bringing actions of this nature, the EEOC has placed many employers in the Hobson s Choice of ignoring criminal history... 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. Seemingly undeterred with this notable defeat, the EEOC has appealed the judge s decision to the Fourth Circuit Court of Appeals. c. EEOC v. Peoplemark, Inc., No (6 th Cir. 2013) The Sixth Circuit Court of Appeals dealt a major blow to the EEOC when it dismissed the EEOC s lawsuit against a temporary employment agency, Peoplemark, Inc., which had challenged the agency s background check screening process under a disparate impact theory. Moreover, the Court awarded $751,942 in attorneys fees and other costs to Peoplemark, Inc. as a result of the EEOC s failed lawsuit. The EEOC reportedly filed the lawsuit after Peoplemark s in-house counsel mistakenly stated that the company had a blanket policy of not extending job opportunities to candidates with prior felony convictions. In turn, the EEOC claimed this practice had an adverse impact on African American job applicants. In the course of litigation, it later became clear that Peoplemark had no such blanket policy in place. Yet the EEOC continued to pursue its claim. This was an error according to the Sixth Circuit and the EEOC should have dismissed the lawsuit instead. Because the EEOC continued to pursue the litigation (before eventually consenting to a dismissal of the case some five months later), the underlying federal district court judge found, and the Sixth Circuit affirmed, that Peoplemark should be made whole for its unnecessary litigation costs Bond, Schoeneck & King, PLLC

21 d. EEOC v. BMW Manufacturing Co., Civ. No. 7:13-cv-1583 (D. S.C.) & EEOC v. Dollar General, Civ. No. 1:13-CV (N.D. Ill.) In mid-year of 2013, the EEOC filed federal lawsuits against two notable employers BMW and Dollar General alleging the companies criminal background check policies have an adverse impact on African American individuals. According to the EEOC, BMW disproportionately screened-out African Americans from jobs in a manner that was not job-related and consistent with business necessity. The workers in question were actually employees of a third-party vendor that provided logistic services to BMW at its South Carolina facility, although the EEOC has claimed that BMW was a joint employer with respect to these individuals. The EEOC also claimed that BMW applied a criminal conviction policy that denied facility access to workers with certain criminal convictions without a limitation of the look-back period and without distinguishing between felony and misdemeanor convictions. More specifically, the EEOC s lawsuit alleges that BMW s criminal conviction background check policy excludes individuals with convictions for the following crimes: murder, assault & battery, rape, child abuse, spousal abuse (domestic violence), manufacturing of drugs, distribution of drugs, weapons violations, and other convictions of a violent nature. The EEOC also claimed that BMW excludes from employment individuals with criminal convictions involving theft, dishonesty, and moral turpitude. According to the EEOC, BMW s policy constituted a blanket exclusion without any individualized assessment of the nature and gravity of the crimes, the ages of the convictions, or the nature of the claimants respective positions. Regarding the alleged disparate impact of BMW s policy, the EEOC has claimed: BMW s criminal conviction policy operates to exclude disproportionate percentages of blacks. Of all the employees assigned by [the third-party vendor] to work at the BMW facility, 355 or 55% were black and 290 or 45% were nonblack. BMW denied plant access pursuant to its criminal conviction background check policy to a total of 88 employees assigned by [the third-party vendor], or around 14% of all employees assigned by [the third-party vendor] to work at the BMW facility. Of those 88 employees, 70 (80%) were black and 18 (20%) were non-black. The gross disparity in the rates at which black and non-black employees were denied access to the BMW facility and 2014 Bond, Schoeneck & King, PLLC

22 therefore lost their employment on account of BMW s criminal history background check policy is statistically significant. With respect to the Dollar General case, the EEOC filed a nationwide lawsuit based on discrimination charges filed by two rejected black applicants. According to the EEOC, the lawsuit charges that Dollar General conditions all of its job offers on criminal background checks, which results in a disparate impact against African Americans. According to the EEOC, one of the applicants who had filed a charge with EEOC was given a conditional employment offer, although she had disclosed a six-year-old conviction for possession of a controlled substance. Her application also showed that she had previously worked for another discount retailer as a cashier-stocker for four years. Nevertheless, her job offer was allegedly revoked because Dollar General s practice was to use her type of conviction as a disqualification factor for 10 years. The other applicant who filed an EEOC charge was fired by Dollar General although, according to the EEOC, the conviction records check report about her was wrong she did not have a felony conviction attributed to her. The EEOC asserts that although she advised the Dollar General store manager of the mistake in the report, the company did not reverse its decision. As in the BMW lawsuit, the EEOC s claim against Dollar General asserts that the company applied so-called bright line disqualifications that were not proven to be job-related and consistent with business necessity. Further, the EEOC asserts that the policy wrongfully does not include an individualized assessment of applicants who do not pass the background check. By way of statistics supporting its disparate impact theory, the EEOC s lawsuit claims the following: According to data produced to EEOC by [Dollar General]... of all the conditional offers of employment [it] made... nationwide, approximately 259,600, or 75%, were made to non-blacks and approximately 84,700, or 25%, were made to Blacks. Of the conditional non-black employees, approximately 18,300, or 7%, were discharged for failing the background check. In comparison, of the conditional Black employees, approximately 8,400, or 10%, were discharged for failing the background check. The gross disparity in the rates at which Black and non-black conditional 2014 Bond, Schoeneck & King, PLLC

23 employees were discharged on account of [Dollar General] s criminal background check policy is statistically significant. As of March 2014, the BMW and Dollar General cases remain pending in federal court. 3. State Attorney Generals Challenge to the EEOC Enforcement Guidance The Attorney Generals from nine states West Virginia, Alabama, Colorado, Georgia, Kansas, Montana, Nebraska, South Carolina, and Utah wrote jointly to the EEOC in July 2013, objecting to its position on criminal background checks and its lawsuits against Dollar General and BMW. The following are highlights from that letter provided: We believe that these lawsuits and your application of the law, as articulated through your Enforcement Guidance, are misguided and a quintessential example of gross federal overreach. The letter emphasizes that the EEOC is mistaken in its apparent position that it is unlawful for employers to implement bright line screening tools that exclude individuals from employment based on targeted convictions for crimes such as murder, assault, reckless driving and possession of drug paraphernalia. Specifically, the letter states: Although your agency does not rule out that a bright-line screen might be appropriate, the guidance document makes clear that it would be the rare exception, [stating]: [s]uch a screen would need to be narrowly tailored to identify criminal conduct with a demonstrably tight nexus to the position in question. We believe that your policy guidance and the recently filed lawsuits incorrectly apply the law. It defies common sense to suggest that a bright-line criminal conviction screen will on rarely be job related and consistent with business necessity. An employer may have any number of business-driven reasons for not wanting to hire individuals who have been convicted of rape, assault, child abuse, weapons violations, or murder all crimes specifically mentioned in the complaints [against Dollar General and BMW]. According to the Attorney Generals, the EEOC s true motive in issuing the Enforcement Guidance and pursuing litigation against Dollar General and BMW is to impermissibly (i.e., without legislative action from Congress) expand the scope of Title VII to cover convicted criminals and protect them from employment discrimination on the basis of these convictions. In turn, the EEOC responded to the letter from the Attorney Generals, essentially reiterating its position, but providing some insight of how its 2012 Enforcement Guidance should be interpreted and applied. The EEOC s response to the attorney generals provided: [I]t is not illegal for employers to conduct or use the results of criminal background checks, and the EEOC never has suggested that it is. The EEOC s mission is to 2014 Bond, Schoeneck & King, PLLC

24 prevent and remedy employment discrimination prohibited under federal law. The EEOC claimed that it was not requiring employers to use individualized assessment of all applicants and employees rather than bright-line screens. Rather the EEOC encourages a two-step process, with individualized assessment as the second step. The first step should involve a targeted screen on the part of the employer, i.e., one that considers at least the nature of the crime, the time elapsed, and the nature of the job. Once the targeted screen has been administered, the Enforcement Guidance encourages employers to provide opportunities for individualized assessment for those people who are screened out. Using individualized assessment in this manner provides a way for employers to ensure that they are not mistakenly screening-out qualified applicants or employees based on incorrect, incomplete, or irrelevant information. a. Texas v. EEOC et al., Civ. No. 5:13-cv (N.D. Tex. 2013) In November 2013, the State of Texas filed suit in federal court, challenging the EEOC s 2012 Enforcement Guidance on the use of criminal background checks. In the lawsuit, Texas claims that the EEOC has overstepped its statutory authority by, among other things, requiring employers to prove their screening-out of candidates based on prior convictions is job related and consistent with business necessity. The lawsuit also challenges the EEOC s position that bright-line screening as required by state law in Texas prohibiting convicted felons from holdings jobs such as state troopers, jailers and school teachers may violate Title VII. According to representatives of the State of Texas, such absolute bars do not violate Title VII. Subsequently, attorneys for the State of Texas filed an amended complaint which bolstered its previous arguments. In turn, the EEOC filed a motion to dismiss the lawsuit on procedural grounds, which, as of April 2014, was still pending with the court. b. New York State Attorney General Investigates and Reaches a New Agreement with Leading Background Check Vendors In contrast with Texas and with the State Attorney Generals from the nine other states referenced above, New York s Attorney General, Eric Schneiderman, has been investigating four, large background check agencies specifically, HireRight, Inc., First Advantage, General Information Systems, Inc. and Sterling Infosystems and their allegedly unlawful screening-out of job candidates based on prior criminal convictions Bond, Schoeneck & King, PLLC