Skip to main content
Join Now

< Back to All

Employers beware: Background checks are under attack

February 21, 2013

Article courtesy of SBAM Approved Partner ASE

By Frances Chapman and Anthony Kaylin

Does your company use credit or criminal background checks in your hiring process?  Do you have a three-year or seven-year blanket policy on criminal background checks?  Are you getting arrest information (which violates Michigan law) as well as conviction information?  If you answer yes to any of these questions, you could be targeted by the EEOC or OFCCP for violating Title VII.

Not quite one year ago, the EEOC issued guidance on using background checks in the hiring process. In it, the agency essentially warned employers to use background check carefully and wisely if they want to avoid violating Title VII. The reason: According to a study from the respected Pew Center, African-Americans comprise approximately 13% of the overall U.S. population, but they account for 28% of all those arrested and almost 40% of the incarcerated population. Therefore, the EEOC is concerned that widespread use of background checks—especially criminal background checks—could aggravate racial disparities in hiring.

What the EEOC wants is for employers to take a case-by-case approach—to review the nature, gravity, and age of an offense as it relates to the actual job before making an adverse hiring decision. Using a blanket policy (e.g., a seven-year rule) is unacceptable in the EEOC’s eyes. This guidance left many employers confused and concerned about their recruiting and hiring processes.

Prior to the guidance, the EEOC had already filed a lawsuit against Kaplan Higher Learning for Kaplan’s use of credit reports in its hiring process. Kaplan was seeking to a fill position within its financial aid department. The position would require handling large sums of money. The company used credit reports to determine if any applicant would be under financial pressure that might encourage theft.

The EEOC charged that Kaplan was using the credit reports unnecessarily as they related to business necessity, and that the practice adversely impacted a protected class of applicants. However, Kaplan had not maintained relevant demographic records of the applicants, and the court rejected the method the EEOC used (examining ID photos in Department of Motor Vehicle records) to determine how many rejected applicants were in a protected class and thus whether or not there was adverse impact.

On that basis the trial court dismissed the case, which is currently being appealed by the EEOC.

After the trial court dismissed the case, the Office of Federal Contract Compliance Programs (OFCCP) jumped into the fray by issuing Directive 306.  The OFCCP endorsed the guidelines set forth by the EEOC, but also added more restrictions, especially with respect to criminal background checks.  A federal contractor or subcontractor needs to determine whether criminal-conduct exclusion is job-related and consistent with business necessity. The determination must take into account (1) the nature and gravity of the conduct, (2) the amount of time passed since the offense and/or completion of the sentence; and (3) the nature of the job held or sought. The assessment should be individualized and narrowly tailored to job requirements. Additionally, employers should refrain from making inquiries about arrests and convictions on job applications.

The OFCCP takes the EEOC guidance further by adding additional requirements for federal Contractors and Subcontractors. These include, among other things, posting with American Job Centers job  announcements that incorporate the EEOC’s Training and Employment Guidance Letter (TEGL) 31-11 issued on May 25, 2012 on the relevance of exclusions based on criminal records.  In addition, contractors should use a “system” (automated or otherwise) for identifying vacancies that include restrictions based on arrest/conviction records.

The difference between the EEOC requirements and the OFCCP requirements is that the EEOC enforces Title VII which applies to all employers with 15 or more employees.  OFCCP enforces Executive Order 11246 and applies to all federal contractors and subcontractors.

The EEOC has not given up on the Kaplan case. Regardless of how it comes out, however, employers should expect the EEOC to continue down this road of investigating background checks. For its part, the OFFCP will review all contractor hiring activity to ensure they are meeting the guidance.

Employers can be sure that the EEOC and OFCCP will hit on an approach to fact-finding that will be just as aggressive as the one they used in the Kaplan case while being more acceptable to the courts.

Meanwhile, employers should carefully review their screening and recruiting practices. They should implement necessary changes to carefully align their pre-employment practices with the guidance issued by the EEOC and OFCCP if applicable. And as always, it will be important to make sure their job descriptions are up-to-date.

Share On: