Pre-Employment Screening:

Pre-Employment Screening: How EEOC Guidance Affects Criminal Background Checks and Potentially Increases Employer Risks Tamika R. Nordstrom Ogletree, Deakins, Nash, Smoak & Stewart, P.C. One Ninety One Peachtree Tower 191 Peachtree St. NE, Ste 4800 Atlanta, GA 30303 (404) 870-1754 Tamika.Nordstrom@ogletreedeakins.com

Tamika R. Nordstrom is a shareholder with Ogletree Deakins Nash Smoak & Stewart, P.C., in the firm s Atlanta office. Ms. Nordstrom is an experienced litigator whose legal practice focuses on management defense in the areas of labor and employment law. She specializes in all areas of employment litigation and also provides ongoing counseling for management on a full range of day-today employment issues. Ms. Nordstrom was consistently named a Rising Star by Minnesota Law & Politics during her 10 years of practice in Minneapolis and was selected as an Up and Coming attorney by Minnesota Lawyer Magazine in 2007. Since practicing in Georgia, she has been selected as one of Georgia Trend Magazine s Legal Elite and was selected for inclusion in Georgia Rising Stars. Ms. Nordstrom was recently selected as one of the Best Lawyers in America for 2013 in labor and employment litigation.

Pre-Employment Screening: How EEOC Guidance Affects Criminal Background Checks and Potentially Increases Employer Risks Table of Contents I. Introduction...93 II. EEOC s Guidance on Employers Consideration of Arrest and Conviction Records...93 A. The Decision...93 B. Title VII Concerns...93 C. Affirmative Defense of Job Relatedness...94 D. Criticism...95 E. Enforcement...96 III. State Laws Regulating Inquiries About and Use of Criminal Records...96 A. States Limiting Inquiries About Criminal Records...96 B. State Laws Regulating Use of Criminal Record Information...96 C. State Laws Requiring Criminal Background Checks...97 IV. Best Practices...97 V. Conclusion...98 Pre-Employment Screening: How EEOC Guidance Affects Criminal... Nordstrom 91

Pre-Employment Screening: How EEOC Guidance Affects Criminal Background Checks and Potentially Increases Employer Risks I. Introduction Hiring has never been harder. Traditional screening practices such as criminal record searches have come under increasing scrutiny by state and federal legislators. Many states have enacted or recently introduced laws limiting the practice and usage of criminal record information in order to protect the privacy of applicants and prevent potentially discriminatory hiring practices. The result is not only a patchwork of different laws that may trap an unwary employer, but also the loss of potentially valuable hiring tools. The first section of this paper will review recent EEOC Guidance on criminal background checks and required changes to employer practices. The second section of this paper will examine the various state laws preventing the request and usage of criminal records in hiring. The third section of this paper will review best practices and guidance in navigating hiring with the new guidelines. II. EEOC s Guidance on Employers Consideration of Arrest and Conviction Records A. The Decision On April 25, 2012, the Equal Employment Opportunity Commission (EEOC) issued, after a vote of 4-1, an updated Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions under Title VII (the Guidance ). The Guidance, which took effect immediately, is a summary of the EEOC s long-held position that employers reliance on arrest and conviction records may have a disparate impact on individuals because of their race or national origin, with significant changes in certain areas that are important to most employers. Republican-appointee Commissioner Constance S. Barker dissented, while Republican-appointee Commissioner Victoria A. Lipnic voted with the majority, after reportedly securing some employer-friendly concessions in the Guidance. There was a push to get the Guidance approved before Democrat-appointee Commissioner Stuart J. Ishimaru steps down later this month. B. Title VII Concerns The Guidance is part of the EEOC s broader effort to crack down on the alleged misuse of arrest and conviction records. The EEOC s increased efforts in this area are due, in part, to the growing disparity in arrest and incarceration rates for Hispanics and African Americans compared to Caucasians. The Guidance notes that African Americans and Hispanics are arrested at a rate that is two to three times their proportion of the general population. Incarceration rates for male Hispanics (17.2 percent) and African Americans (32.2 percent) are also much higher than for Caucasian men (5.9 percent). The EEOC relies on these disparities in concluding national data supports a finding that criminal record exclusions have a disparate impact based on race and national origin. Pre-Employment Screening: How EEOC Guidance Affects Criminal... Nordstrom 93

The Guidance differentiates arrests from convictions, noting that because arrests are not proof of criminal conduct they cannot serve as a proper basis for excluding an individual from employment. The EEOC acknowledges, however, that while an arrest record standing alone may not be used to deny an employment opportunity, an employer may make an employment decision based on the conduct underlying the arrest if the conduct makes the individual unfit for the particular job position. According to the EEOC Guidance, Title VII violations may occur in two employment background check situations: 1. When employers treat criminal history differently for different applicants/employees, based on their race or national origin (disparate treatment) or 2. When an employer s neutral background check policy or practice disproportionately impacts protected individuals (disparate impact), unless the policy is job-related and consistent with business necessity. Not surprisingly, the majority of the Guidance discusses the second disparate impact type of Title VII race or national origin discrimination, although not before the Commission reminds employers that it may find disparate treatment when employers make distinctions between two applicants/employees of different races based on the employer s judgment as to the relative severity of past criminal convictions. The Guidance explains that, for a disparate impact claim, the EEOC first must identify the policy or practice causing the disparate impact and then confirm that there is a disparate impact. The commentary associated with the second confirmation step suggests employers may expect more EEOC requests for voluminous applicant and hiring data, in evaluating disparate impact. C. Affirmative Defense of Job Relatedness Once the EEOC has established disparate impact, the employer has the burden of proving the affirmative defense that its policy or practice is job-related and consistent with business necessity. In the Guidance, the Commission repeats its long-held position that an arrest, by itself, is never job-related and consistent with business necessity because an arrest does not establish that criminal conduct has occurred, individuals are presumed innocent until proven guilty, and many arrests do not result in convictions. Although the EEOC identifies two circumstances allowing employers to establish the job-related and consistent with business necessity defense, only one is likely to be useful for most private-sector employers a targeted screening process that takes into account the following factors: 1. The nature and gravity of the offense or conduct; 2. The time that has passed since the offense, conduct, and/or completion of the sentence; and 3. The nature of the job held or sought. For any individuals screened out by this targeted screening process, the EEOC explains, the employer s policy should then provide an opportunity for an individualized assessment. While the EEOC stops just short of actually requiring employers to conduct individualized assessments as part of their targeted screening process, the Guidance repeatedly stresses that a screening process that does not include individualized assessments is more likely to violate Title VII. The between-the-lines message is that individualized assessments are now expected. The Guidance provides several factors for consideration during the individualized assessment, including some directly-relevant ones like a showing that the individual was incorrectly identified in the background check and less-relevant ones like employment or character references. 94 Employment and Labor Law May 2013

The second way an employer can satisfy the job-related and consistent with business necessity defense is complicated and costly for each position, the employer must validate the criminal conduct exclusion, by using the Uniform Guidelines on Employee Selection Procedures, including its statistical models, to validate that criminal conduct data relates to subsequent work performance. Even the Guidance seems to acknowledge that issues about the availability of criminal conduct data and the application of validation studies may be tough hurdles for employers to clear. D. Criticism Many in the business community have complained that the Guidance was rushed through with no public rulemaking or the associated process for public comment a refrain recently echoed by the Senate Appropriations Subcommittee responsible for EEOC funding and Commissioner Barker in her dissent. Although the EEOC did hold a hearing about the use of criminal background checks in employment, only nine witnesses were invited to testify, and of those nine, eight supported efforts to reduce the use of criminal background checks, whereas only one witness represented the interests of businesses that would be adversely affected by greater restrictions on the use of such checks. The U.S. Commission on Civil Rights held a hearing on December 7, 2012 regarding the new guidelines and concerns. Seventeen witnesses testified, including representatives of several national employer associations, major security firms, and victims advocacy groups, as well as ex-offenders advocacy groups. None of these employers or employer associations had been invited to testify before the EEOC. The witnesses cited numerous problems with the guidance, one particularly troubling problem being that the guidance provides no safe harbors for employers attempting to comply with conflicting state laws. Many states reasonably bar individuals convicted of certain crimes from working in particular jobs. Yet the EEOC specifically maintains that compliance with state law is not a defense to an EEOC charge under the guidance. The EEOC will honor a state-law exemption only if the EEOC determines that the state law complies with the EEOC guidance. So the decision becomes 1) determining whether a state law complies with the guidance, and if unsure, then 2) deciding whether it s better to be sued for violating state law or for discrimination under Title VII. The Society for Human Resource Management (SHRM) was one of the agencies that gave testimony regarding its concerns. Jonathan Segal, a partner at Duane Morris LLP in Philadelphia and the Pennsylvania legislative director for SHRM, testified on behalf of SHRM that clarification is needed on the EEOC s interpretation of disparate impact. Segal said, the guidance s interpretation of disparate impact appears to make employers vulnerable to an EEOC investigation any time they take an adverse employment action against individuals of certain races or national origins based on criminal background checks regardless of whether they have conducted a valid individualized assessment seemingly making criminal convictions a new protected status. Other witnesses before the Commission on Civil Rights included the National Small Business Association (NSBA) and the National Retail Federation (NRF), both of which urged the EEOC to clarify its guidance, so that expectations are made clear and so businesses can effectively meet those expectations. NSBA President, Todd McCracken, stated This is not a guidance at all. It provides no meaningful rules about how to proceed. It s really just a threat that the EEOC may proceed against employers if, in hindsight, it decides it wants to do so. NRF Vice President of Loss Prevention, Richard Mellor, said the guidelines are unclear and open to interpretation. Retailers who ask about criminal backgrounds run the risk of being charged with discrimination, but those who do not are not provided with any legal protection against lawsuits if an unscreened hire later commits a crime on the job, he said. Pre-Employment Screening: How EEOC Guidance Affects Criminal... Nordstrom 95

E. Enforcement While courts are required to defer to EEOC guidance like this to some extent, EEOC guidance is not controlling on courts interpretation of Title VII and is not entitled to the high level of deference given to federal regulations. Instead, courts and litigants may refer to the EEOC s interpretation for guidance, based on the guidance s thoroughness, the validity of its reasoning, and its consistency with earlier EEOC pronouncements. III. State Laws Regulating Inquiries About and Use of Criminal Records In addition to the federal considerations regarding the inquiries and usage of criminal records in the hiring process, employers must also arm themselves with knowledge regarding individual state laws and regulations. The federal rules and guidelines in many instances are more permissive than their state equivalents. The states have laws and rules ranging from prohibitions on asking any questions regarding arrest records to restricting the employer s use of conviction data in making an employment decision. In some states, while there is no restriction placed on the employer, there are protections provided to the applicant with regard to what information they are required to report. Also, as noted earlier, several states require criminal background checks for certain job functions and industries. Accordingly, this becomes an extremely tangled web of considerations. A. States Limiting Inquiries About Criminal Records A number of states (e.g. Massachusetts and Minnesota) and cities (e.g., Philadelphia) have recently enacted so called Ban the Box laws prohibiting employers from asking applicants about their criminal records during the initial phases of the hiring process. Several similar laws have been introduced in other states and at the federal level (e.g., HR 6220). The enacted and pending laws generally prohibit making inquiries about criminal convictions until after a conditional job offer has been made. In New Jersey, a bill was introduced in 2012 (A 2300) that would prohibit inquiries about convictions on an initial written application and would permit inquiries during a subsequent interview if a review of the initial written application indicates the applicant has preliminary eligibility for the position. B. State Laws Regulating Use of Criminal Record Information Several States have laws that prohibit employers from refusing to hire an applicant based on a criminal record, except under limited circumstances. New Jersey legislators have introduced several bills in recent years designed to restrict the use of applicants criminal histories, but none have progressed very far. New York has enacted one of the most restrictive laws An employer may not reject an applicant unless (1) there is a direct relationship between the criminal offense and the specific position sought or (2) employment of the person would involve or unreasonable risk to the safety or welfare of specific individuals or the general public. An employer must make an individualized assessment in each case considering 8 specified factors, such as the specific duties of position, the nature of these offense, the passage of time, and evidence of rehabilitation. A copy of the laws, known informally as Article 23-A, must be posted in a conspicuous location in the workplace. Also, if an employer conducts a background check (i.e., basic consumer report ) on an applicant using a third party company which reveals criminal conviction information, in additional to all other FCRA requirements, the employer must include a copy of Article 23-A with the pre-adverse action letter. Additionally, if an employer intends to conduct an investigative consumer report the employer must provide 96 Employment and Labor Law May 2013

the applicant with a copy of Article 23-A prior to procuring the report when the authorization is obtained. Finally, any person who has a criminal record who is denied employment (whether or not because of the prior record) must upon request be provided with a written statement setting forth the reasons for the rejection within 30 days. C. State Laws Requiring Criminal Background Checks Even some of the states perceived to be most employee friendly have mandatory criminal background checks for certain jobs and industries. For example, California requires that all private employers conduct criminal background checks on tow truck owners and operators (Cal Vehicle Code, Sec. 2432.3). California also requires, as do most states, that individuals who will have direct contact with minors be checked for criminal background concerns. Similarly, all applicants to become toll enforcement officers in Florida must have their criminal history screened prior to hire (Fla. Admin. Code, r 14-100.001). In Texas, all companies providing in-home services and/or residential deliveries must obtain criminal histories on their employees (Tex, Civ Prac & Rem. Code Ann., Section 145.002). These are the kind of state law requirements that pose a distinct and direct problem to the EEOC s guidance. The situation will surely arise where there is a combination of the following facts: (1) a criminal background check was performed in accordance with state law requirements; (2) a member of a racial minority is not selected for a position based, in part, on this criminal background information; and (3) that individual proceeds with a claim for race discrimination pursuant to Title VII and the EEOC s stated guidance. If there also happens to be a disproportionate number of racially diverse employees working for that employer, this becomes a significant liability risk. IV. Best Practices The EEOC s guidance also provides an Employer Best Practices section with recommendations and suggestions on avoiding liability under Title VII. The EEOC recommends the following: (1) eliminating blanket policies or practices that automatically exclude individuals from employment based on any criminal record; (2) limiting inquiries into criminal convictions to those types of convictions that are potentially jobrelated for the position in question and consistent with business necessity; (3) developing a narrowly-tailored written policy and procedure for screening applicants and employees that provides for individualized consideration of criminal history; and (4) training managers, hiring officials and decision makers on how to implement the policy and procedures consistent with Title VII. Perhaps most significant is the EEOC s recommendation that employers not ask about convictions on job applications. Instead, the EEOC recommends that if and when employers make such inquiries, the inquiries be limited to convictions for which exclusion would be job-related for the position in question and consistent with business necessity. As we know, this is not always possible without violating certain state laws. Accordingly, it would be in all employers best interests to ensure that all applicable state laws are reviewed and considered prior to issuing any blanket determinations regarding prohibiting or limiting inquiries into the criminal background of its applicants. Individualized assessments and documentation supporting any jobrelated concerns are also extremely important. While no one has expressly stated it, the racial makeup of the workforce will undoubtedly come into play if an employer is ever put in the position of justifying the use of criminal histories with the EEOC or in Title VII litigation. Employers continuing to use criminal background checks should also be prepared to explain any disproportionate representations in the workforce racial demographics to the extent they exist. Pre-Employment Screening: How EEOC Guidance Affects Criminal... Nordstrom 97

V. Conclusion The old phrase the devil is in the details has never been more apt than with this new EEOC Guidance. Although the EEOC opines that this guidance is a natural evolution of its prior guidance, there are some huge changes, including the section on individualized assessment of applicants and employees. Employers would be wise to reexamine their background check policies and practices, in light of the new Guidance. Only time and, unfortunately, lawsuits are likely to determine whether courts think all or only some of the EEOC s new Guidance is correct. 98 Employment and Labor Law May 2013