Fair Credit Reporting Act & Background Checks – Part Four


EEOC Actively Challenging Employer Use of Criminal Information

Thus far in this series, we have examined the basic requirements of the Fair Credit Reporting Act, while highlighting potential challenges for employers as it pertains to litigation and ban the box legislation. The final installment of this series focuses another aspect of background screening that employers are wise to focus on – the Equal Employment Opportunity Commission (EEOC) and its challenges to use of criminal information in employment decisions.

EEOC’s Updated Enforcement Guidance

In April 2012, the EEOC issued its highly anticipated Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964 (Guidance). This Guidance focuses on how an employer’s use of arrest and conviction information may lead to discrimination under Title VII. Note, the EEOC does not have enforcement or rulemaking authority with regard to the Fair Credit Reporting Act.

Disparate Treatment and Disparate Impact Discrimination

The Guidance explains “disparate treatment discrimination” using several examples, including “where the evidence shows that a covered employer rejected an African American applicant based on his criminal record but hired a similarly situated White applicant with a comparable criminal record.” Evidence of disparate treatment may include biased statements made by the employer or inconsistencies in the hiring process (such as requiring a particular race to submit criminal history information more often than others).

The Guidance then defines “disparate impact discrimination” as when an individual can demonstrate that an “employer’s neutral policy or practice has the effect of disproportionately screening out a Title VII-protected group and the employer fails to demonstrate that the policy or practice is job related for the position in question and consistent with business necessity.” As highlighted in recent litigation covered later in this article, employers should acquaint themselves with these terms particularly analyzing how screening practices may be impacted.

The Green Factors

After providing this definitional background, the Guidance cites to the 1975 Eighth Circuit case, Green v. Missouri Pacific Railroad, in which three factors were identified as important to assess the issues of “related” and “consistent with business necessity”:

  • Nature and gravity of the offense or conduct
  • Time that has passed since the offence, conduct and/or completion of the sentence, and
  • Nature of the job held or sought

Collectively known as the “Green factors”, these three key items form the backbone of the EEOC’s Guidance and recommendations to employers when considering an individual’s criminal history in an employment decision.

Individualized Assessment

Next, the Guidance recommends employers develop “targeted screen[s]” using the Green factors in conjunction with an “individualized assessment” to help demonstrate the job-related and business necessity requirements. As described by the Guidance, an individualized assessment provides notice to the individual along with an opportunity to explain or present additional evidence that a criminal conviction should not result in a denial of the employment opportunity.

The Guidance cites to the following as potentially relevant evidence to consider:

  • The facts or circumstances surrounding the offense or conduct;
  • The number of offenses for which the individual was convicted;
  • Older age at the time of conviction, or release from prison;
  • Evidence that the individual performed the same type of work, post conviction, with the same or a different employer, with no known incidents of criminal conduct;
  • The length and consistency of employment history before and after the offense or conduct;
  • Rehabilitation efforts, e.g., education/training;
  • Employment or character references and any other information regarding fitness for the particular position; and
  • Whether the individual is bonded under a federal, state, or local bonding program.

Beyond that information, the Guidance does not provide examples or suggestions as to what truly constitutes a proper individualized assessment process which has created a great sense of uncertainty in the employer community. Employers with larger hiring volumes and higher turnover especially may find this concept challenging and a constraint on internal resources.

However, the EEOC Guidance notes that an individualized assessment is not always required, particularly if the employer can “justify a targeted criminal records screen solely under the Green factors” which is “narrowly tailored to identify criminal conduct with a demonstrably tight nexus to the position in question.” To be on the safe side in terms of potential liability, the Guidance does recommend employers conduct individualized assessments regardless of if a targeted screen is used.

Arrest-Only Information

The Guidance also takes a particularly focused look at arrest records, noting that “an exclusion based on an arrest, in itself, is not job related and consistent with business necessity.” Employers are well advised to carefully consider whether using arrest-only information – which should be distinguished from pending cases – is appropriate given this Guidance.[1]

Recent Litigation

First and foremost, it is important to remember that the EEOC’s Guidance is not law as the EEOC does not possess legislative authority. Further, the EEOC has repeatedly claimed that this Guidance does not represent a major shift in how the agency viewed employer’s use of criminal information. However, in practice, the EEOC has become more aggressive in pursuing investigations. Most recently, the EEOC filed lawsuits against two employers – Dollar General and BMW.[2]

EEOC v. Dollar General

In the Dollar General case, the EEOC filed suit claiming the nationwide retailer committed racial discrimination based on its use of criminal information in hiring decisions. As alleged in the complaint, Dollar General extended conditional offers of employment to individuals prior to conducting a criminal background check. The results of the background check were marked as “Pass” or “Fail” depending on specific felonies and misdemeanors that were identified on the employer’s adjudication matrix. According to the complaint, if a candidate received a “Fail”, the district manager for the store would be notified via voicemail and would then instruct that the individual could not be hired.

The EEOC outlined that the use of criminal records by Dollar General was not job-related and consistent with business necessity, and that the company did not provide for an individualized assessment of individuals receiving the “Fail” designation. The EEOC claimed that this practice resulted in disparate impact discrimination against “a class of Black Applicants” as these individuals were adversely impacted by the company’s policy.

EEOC v. BMW Manufacturing Co., LLC

Similar to the Dollar General case, the EEOC filed suit against BMW alleging the company’s background check policy has a “disparate impact on black employees and applicants.” Prior to 2008, a separate company screened and provided contracted employees to work in BMW’s facility. This company did not adhere to BMW’s criminal record policy which allegedly excluded individuals from employment based on particular criminal convictions. However, in 2008, BMW used a new company and required previously contracted employees to re-apply in order to retain their positions. This new company applied BMW’s criminal conviction policy which resulted in the termination of several contracted employees who had already been working in BMW’s facility. As alleged in the complaint, this practice did not allow for an individualized assessment and was not job-related and consistent with business necessity.

State of Texas v. EEOC

The State of Texas filed suit in November 2013 over the EEOC’s claim in the Guidance that a state law requirement to exclude individuals with a specific criminal history may not shield an employer from potential liability.[3] In the complaint, the State alleges the Guidance has a “direct and immediate impact on the day-to-day business” and has placed the State in a difficult position to either violate state and local laws that ban individuals with particular conviction histories from specific employment positions, or violate the EEOC Guidance by adhering to these state law requirements. Amongst other claims for relief, the State requested the EEOC’s Guidance be held as unlawful and set aside. The EEOC has responded by essentially claiming the Guidance is not law and thus cannot be subject to suit. This case remains ongoing.

EEOC Setbacks

While the EEOC continues to investigate employers over use of criminal information, the agency has faced recent setbacks. In EEOC v. Kaplan Higher Education Corp., the EEOC originally filed suit claiming the company’s credit and criminal background check policies resulted in disparate impact discrimination. To prove this claim, the EEOC’s expert presented a “race rating” study in which five “race raters” assigned driver’s license photographs belonging to individuals in the class to particular race designations. Based on a lack of scientific evidence and reliability associated with this method, the district court excluded this expert testimony and granted Kaplan’s motion to dismiss.

Upon appeal, the Sixth Circuit began its opinion noting that “the EEOC sued the defendants for using the same type of background check that the EEOC itself uses.”[4] In upholding the district court’s opinion, the Sixth Circuit concluded that the “EEOC brought this case on the basis of a homemade methodology, crafted by a witness with no particular expertise to craft it, administered by persons with no particular expertise to administer it, tested by no one, and accepted only by the witness himself.”

The same expert was used in EEOC v. Freeman,[5] with largely the same results. Previously, the EEOC filed suit alleging Freeman’s use of credit and criminal information in hiring decisions led to disparate impact discrimination despite the employer’s policy being “facially neutral”. In granting summary judgment on behalf of Freeman, the district court noted the experts’ conclusions were “based on unreliable data” and were “rife with analytical errors”. The court also appeared to empathize with employers, noting that the “EEOC has placed many employers in the ‘Hobson’s choice’ of ignoring criminal and credit background” making them susceptible to potential negligent hiring liability on one hand or “incurring the wrath of the EEOC” on the other. This case is currently pending appeal in the Fourth Circuit.


Although the EEOC’s Guidance has come under strict scrutiny by other agencies[6] and several state Attorneys General,[7] the EEOC remains committed to pursuing investigations into employers’ use of criminal history. Employers of all sizes should invest time to revisit background screening policies related to criminal information in particular to determine whether there are any “bright line disqualifications” that automatically exclude individuals from employment. Particularly, if there are any automatic “fails” built into an adjudication matrix used to evaluate candidates, employers would be well advised to consider whether there is a solid basis in a law or regulation to adequately defend any claims. If not, employers should consider developing a more narrowly tailored policy that allows for the inclusion of an individualized assessment into the hiring process.

In addition, the Guidance recommends to employers that any inquiry into criminal history be removed from an initial employment application unless the inquiry is tailored to those convictions which are job-related and consistent with business necessity. Many employers may find that qualifier challenging as one job application is likely used for multiple different positions. However, given the proliferation of ban the box laws as discussed in Part Three of this series and the recommendation in the EEOC Guidance, employers should invest time to consider whether the benefit of the criminal history portion of an application outweighs the increasingly burdensome restrictions of these laws.

Employers continue to struggle with the EEOC’s Guidance more than two years after its issuance. Combined with the stringent requirements under the Fair Credit Reporting Act and an increase in laws and litigation, we strongly recommend employers engage with qualified legal counsel to review any internal hiring policies and practices.

[1] Some states, such as California, specifically prohibit employers from considering and/or receiving arrest-only information when making a hiring decision.

[2] Please note, typically our policy is to avoid inclusion of party names when discussing pending litigation. However, given the widespread publicity and discussion associated with these cases, we have chosen to include the names for purposes of clarity.

[3] The Guidance does highlight that an employer’s obligation to exclude individuals with particular criminal conviction history if required under an applicable Federal law or regulation does provide a defense against liability.

[4] During the course of this litigation, it was uncovered that the EEOC conducts credit checks on 84 out of its 97 positions.

[5] The EEOC v. Freeman opinion from the District of Maryland in particular is a “must read” for employers. The Court pointed to Freeman’s multi-step evaluation process when considering individuals for employment as it pertains specifically to criminal and credit history, and cited Freeman’s diligent and thorough record-keeping practices.

[6] The United States Commission on Civil Rights issued a 350+ page briefing assessing the impact of the EEOC’s Guidance. Although not a unanimous position amongst all commissioners, several noted that the ambiguity and confusing nature associated with the Guidance, and its negative impact on employers.

[7] In July 2013, the Attorneys General from nine states sent a strongly worded letter to the EEOC expressing concern following the lawsuits filed against BMW and Dollar General. In the letter, the AGs noted that they “are troubled [the EEOC’s] true purpose may not be the correct enforcement of the law, but rather the illegitimate expansion of Title VII protection to former criminals.” The EEOC responded in August 2013 characterizing the AGs concerns as a “misunderstanding.”

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