The EEOC’s War on Hiring

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July 31, 2018

One of the most important responsibilities of managers and human resource professionals is to hire new employees. Making hiring decisions is important because employees are the foundation and the future of any business. The hiring process is time consuming because the employer’s job includes screening applications, interviewing applicants and resumes, checking references, conducting background investigations, and making assessments about the respective qualifications of any number of individuals to perform the particular job in question. Faced with a hiring deadline, the path of least resistance might seem to be skipping the screening process and hiring the first three applicants who are breathing. Unfortunately, the path of least resistance is a not so straight and ever so narrow path that may sometimes lead to a lawsuit by the EEOC.

The EEOC approved a Strategic Enforcement Plan (“SEP”) for Eliminating Barriers in Recruitment and Hiring. The SEP states that the agency will continue to target class based recruitment and hiring practices that discriminate against protected classes. Such policies that are potentially discriminatory and should be avoided are: Channeling/steering individuals into specific jobs due to their status in a particular group; restrictive application processes; and the use of screening tools (e.g. pre-employment tests, background checks, date-of-birth inquiries). Some of the areas the EEOC will specifically look at are:

• The consideration of criminal arrest and conviction records;
• The consideration of credit background checks;
• The consideration of unemployment history;
• The requirement of a high school diploma; and
• The use of Social Media when choosing an applicant.

Using Arrest and Conviction Records as Hiring Criteria
When making criminal background checks, employers should be aware that employment policies against hiring employees with arrest and/or conviction records may violate Title VII of the Civil Rights Act of 1964, as well as some state discrimination laws. Generally, such violations occur when an employer’s policy results in a discriminatory disparate impact on a particular class of prospective employees. However, such policies will be upheld if the employer can show that the policy is related to the job at issue and is justified by a business necessity.

In April, 2012, the EEOC issued Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964. The Guidance updates, consolidates, and supersedes the EEOC’s earlier policy statements on the issue. In sum, the EEOC’s position is that the use of arrest and conviction records when making employment decisions disparately impacts Black and Hispanic men. The statistical data used by the EEOC to support this claim includes:

• In 1991, only 1.8% of the adult population had served time in prison.
• After ten years, in 2001, the percentage rose to 2.7% (1 in 37 adults).
• By the end of 2007, 3.2% of all adults in the United States (1 in every 31) were under some form of correctional control involving probation, parole, prison, or jail.
• The Department of Justice’s Bureau of Justice Statistics (DOJ/BJS) has concluded that, if incarceration rates do not decrease, approximately 6.6% of all persons born in the United States in 2001 will serve time in state or federal prison during their lifetimes.
• African Americans and Hispanics are arrested at a rate that is two to three times their proportion of the general population.
• Assuming that current incarceration rates remain unchanged, about one in 17 White men are expected to serve time in prison during their lifetime; by contrast, this rate climbs to one in six for Hispanic men; and to one in three for African American men.

On July 24, 2013, the Attorney Generals from nine states wrote to the EEOC urging the Commission to reconsider its position on the use of arrest and conviction records. The states were: West Virginia, Alabama, Kansas, Montana, Colorado, Georgia, Nebraska, South Carolina and Utah. The letter called the EEOC’s actions in filing lawsuits against Dollar General and BMW as “gross federal overreaching.” The letter also pointed out that some state positions, like police officers, require criminal background checks by law and the EEOC’s position purports to invalidate these state laws.

The EEOC responded on August 29, 2013. The Commission did not change its position on the matter. The state of Texas filed suit against the EEOC on November 4, 2013, seeking declaratory and injunctive relief for issuing the guidance on the use of arrest and conviction records. Texas claims the EEOC does not have authority to issue the guidance.

Additionally, it claims that the EEOC’s position that Title VII would trump state laws which require certain state employees to be felony-free, is a violation of state sovereignty. At the time of publication of these materials, this case is still pending.

Arrest Records

The EEOC guidance discourages the use of arrest records for employment decisions. An arrest does not establish that criminal conduct has occurred and many arrests do not result in criminal charges, or the charges are dismissed. An arrest, however, may be a reason for an employer to investigate whether the conduct underlying the arrest justifies an adverse employment action. The investigation should focus on whether the underlying conduct is related to the job the applicant/employee is seeking and if there is a business necessity to exclude the employee based on the underlying conduct. The arrest alone is not job related and consistent with a business necessity.

Conviction Records
According to the EEOC, convictions will usually serve as sufficient evidence that the person engaged in criminal conduct. The EEOC recommends that employers not ask about convictions on job applications and that, if and when they 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.

To establish a particular policy of excluding applicants/employees with criminal records is job related and consistent with a business necessity, the EEOC recommends using the Green factors:

• The nature and gravity of the offense or conduct;
• The time that has passed since the offense, conduct and/or completion of the sentence; and
• The nature of the job held or sought. The nature and gravity of the offense or conduct is the first step in determining whether a specific crime may be relevant to concerns about risks in a particular position.

The nature of the offense or conduct may be by looking at the harm caused by the crime or the elements of the crime. Employers will also need to consider whether the crime was a felony or misdemeanor. When considering the time that has passed since the offense, employers will need to tailor the exclusion based on particular facts and circumstances of each case. Employers also need to look at the nature of the job’s duties, identify the job’s essential functions, the circumstances under which the job is performed, and the environment in which the job’s duties are performed. Linking the criminal conduct to the essential functions of the position in question may assist an employer in demonstrating that its policy or practice is job related and consistent with business necessity.

In addition, in certain workplace situations, federal or state law may require or permit employers to inquire into prospective employees’ criminal conviction records. For example, certain regulations require applicants for positions involving child care to supply prospective employers with information regarding convictions for sex crimes. Other examples pertain to employees who work for financial institutions, who carry weapons, who have access to drugs and other medications, who have access to patients, who have access to medical records, or who may seek entrance to private residences. Thus, depending on the hiring situation, certain employers will be given greater latitude in performing criminal background checks.

Ban-the-Box Laws
Ban-the-Box laws are state and local laws which limit private employers’ use of criminal background inquiries on the application. Basically, they ban the use of the question of whether someone has a criminal conviction on the application. Most of these laws require an employer wait until at least the interview stage to make the inquiry. A few of the states and government entities that have enacted these laws include:

• Minnesota
• Colorado
• New Mexico
• California
• Maryland
• Rhode Island
• Massachusetts
• Hawaii
• Illinois
• Connecticut
• Newark, NJ
• Buffalo, NY
• Philadelphia, PA
• Seattle, WA

Recent Cases Involving Criminal Background Checks
EEOC v. Pepsi
In January, 2012, Pepsi-Cola agreed to pay $3.13 million to settle an EEOC complaint it unlawfully discriminated against more than 300 Blacks when the Company applied a criminal background check policy. Under the Pepsi policy, job applicants who had been arrested pending prosecution were not hired.

EEOC v. Peoplemark, Inc.
In October, 2013, the U.S. Court of Appeals for the Sixth Circuit affirmed the award of $751,942 in fees and costs to Peoplemark. The EEOC had sued Peoplemark claiming their criminal background policy caused a disparate impact on minorities. During the EEOC investigation, the Company’s Vice-President and Associate General Counsel told the investigator the Company had a policy of rejecting applicants with a felony. This was not true. The Company did not have this policy. However, even after the EEOC discovered the

Company did not have the policy, they continued the lawsuit under a slightly different theory – that the Company considered felony convictions. The EEOC tried to get new experts, but it was too late. The Company was awarded summary judgment and the EEOC voluntarily withdrew the case. The Company moved for attorney fees as the prevailing party and was awarded $751,942. The Sixth Circuit affirmed because the EEOC did not prove its case based on the complaint and never moved to amend the complaint.

EEOC v. Freeman
The EEOC filed this case in Maryland in October, 2009. Freeman is a nationwide convention, exhibition and corporate events marketing company. The EEOC alleged Freeman’s use of criminal and credit background checks discriminated against Black, Hispanic and male job applicants, even though Freeman’s policy had limitations. It limited criminal background checks to convictions within the past seven years and outstanding warrants. It limited its credit checks for only credit-sensitive positions.

On August 9, 2013, the court dismissed the case because the EEOC’s expert witness report was unreliable and could not demonstrate Freeman’s policies have a disparate impact on Blacks or men. Additionally, the EEOC had failed to specify which Freeman policy or practice caused the alleged disparate impact. The court did not decide whether the company’s use of the checks was job-related and consistent with a business necessity.

The EEOC filed this case in South Carolina on June 11, 2013. The EEOC alleges BMW’s use of criminal background checks were not job related and consistent with a business necessity. The employees making the claims were actually employees of UTi Integrated Logistics, Inc, which provides warehouse and distribution services to BMW. BMW has a policy prohibiting employees of subcontractors who have certain criminal convictions access to their property. It does not matter the age of the conviction. UTi’s screening policy was more lenient – it only considered convictions within the prior seven years. In 2008, BMW contracted with a different company to provide the warehouse and distribution services. BMW directed the new contractor to use BMW’s criminal background check policy. This change resulted in some of the UTi employees who had been working at the BMW facility for years without incident to lose their jobs. The number of Black employees who lost their job was disproportionately high – according to the EEOC. This case has not been resolved at the time of this publication.

EEOC v. Dollar General
The EEOC filed this case in Illinois on June 11, 2013 – the same day it filed the BMW case. The EEOC alleges Dollar General discriminatorily failed to hire two Black applicants at two different stores based on its criminal background check policy. The first applicant was given an offer of employment conditional on a background check. The applicant disclosed she had a six-year old conviction for possession of drugs. However, Dollar General’s criteria limited criminal convictions to no less than 10 years.

The applicant was not hired. The EEOC is focusing on the fact that this applicant had worked in a similar retail company without incident. The second applicant was allowed to start work while her background check was being processed. She had not disclosed a criminal conviction in the application process. However, a criminal felony conviction showed up in the background check. The applicant told the manager it was a mistake and she had not been convicted of a felony. The company fired the applicant without resolving if the felony actually belonged to the employee. This case has not been resolved at the time of this publication.

Waldon v. Cincinnati Public Schools
This case was filed in the Southern District of Ohio against the Cincinnati Public Schools by former employees who were discharged in accordance with Ohio state law because they had felony convictions on their record.

The State of Ohio passed a law which required criminal background checks of current school employees – regardless of their duties at the school and regardless of how old a felony. Cincinnati Public Schools conducted the background checks and fired ten current employees based on their criminal backgrounds. Nine of the terminated employees were Black. Two terminated employees sued, claiming the policy created a disparate treatment against Blacks. The employees pointed out their felonies were old, they did not work directly with children and they had been working at the school for a long time without incident.

The school moved to dismiss the case because it was simply following state law. On April 24, 2013, the court refused to dismiss the case. In the court’s opinion, it cited the EEOC’s guidance on using arrest and conviction records. It held that the Plaintiffs’ Complaint raised plausible allegations of disparate impact discrimination which could be a violation of Title VII.

Using Credit Reports as Hiring Criteria
Questions relating to an applicant's credit must be supported by a clear showing that the inquiry is job-related and justified by a business necessity. Rejecting applicants on the basis of a poor credit rating may have a disproportionate impact on minorities or females. In 2010, the EEOC held public meetings to explore the use of credit histories as employee selection criteria. The position held by the EEOC is that the practice can have a disparate impact on women, Blacks and Latinos and credit histories are not predictive of job performance.

Many states have limited the use of credit information as hiring criteria. These states include: Washington, Oregon, Hawaii, Illinois, Connecticut, Maryland, California, Colorado, Nevada, and Vermont. Additionally, public employers may not refuse to hire someone because they have filed for bankruptcy.

Recent Case on Credit Checks
EEOC v. Kaplan Higher Learning Education
The EEOC filed this case in Ohio in December, 2010. The EEOC alleged Kaplan’s practice of using credit background checks adversely discriminated against Black applicants. In January, 2013, the court dismissed this case. The EEOC’s expert failed to show how the company’s policy had a significant adverse effect on minority candidates. This was in part because Kaplan did not collect or keep information on the race of applicants. The EEOC’s attempt to use photos from the DMV which it found by using the applicant’s names fell short. The DMV photos were not enough to establish race.

The Fair Credit Reporting Act
As of September 30, 1997, all employers who use credit reporting agencies to check credit and/or personal history of applicants and employees must conform to federal standards. The 1997 amendments to the FCRA are intended to ensure that (1) individuals are aware that consumer reports may be used for employment purposes and agree to such use, and (2) that individuals are notified promptly if information in a consumer report may be result in a negative employment decision.

In recent years, employers have increasingly used consumer reporting agencies to obtain consumer reports and investigative consumer reports on applicants and employees as one means to help make employment decisions including hiring, promotion, retention, and reassignment. Prior to 1997, employers requesting such reports were required to advise applicants and/or employees only when an investigative consumer report might be requested.

Thus, before 1997, an employer could run a check on an applicant’s or employee’s background, including credit history, criminal backgrounds, motor vehicle records, and other information included on resumes through a Credit Reporting Agency. This check could be done in most cases without the knowledge of the applicant or employee and the employer could act on the basis of the information obtained without informing anyone. In 1997, Congress amended the Fair Credit Reporting Act (“FCRA”) and significantly increased the legal obligations of employers who use consumer reports provided by a consumer reporting agency. The amendment reflected Congress’ concern that inaccurate or incomplete consumer reports could cause applicants to be denied jobs or cause employees to be denied promotions unjustly. The amendments have been designed to protect the privacy of consumer report information and to guarantee that the information supplied by consumer reporting agencies is as accurate as possible.

FCRA Changes
The type of investigation an employer is requesting from a Consumer Reporting Agency (“CRA”) determines which requirements they must follow. It is important to remember these requirements only apply if the employer is using a CRA to investigate its applicants. Other types of investigation by employers are not covered by the FCRA. A CRA, generally, is anyone who regularly engages in the practice of assembling or evaluating consumer credit information for third parties. Employers can obtain two kinds of reports from a CRA:

1) A Consumer Report - any written, oral, or other communication reporting on the applicant’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living, and

2) An Investigative Consumer Report - a more detailed report in which information regarding the applicant’s character, general reputation, personal characteristics, or mode of living is obtained by personal interviews by the CRA with neighbors, friends, or associates of the consumer.

The Consumer Report is the report that most people are familiar with while the Investigative Consumer Report delves into a person’s personal affairs and is usually performed by an investigative agency by the CRA. Investigations performed by the employer such as interviews of persons used as references by the employee are not considered as being performed by a CRA and, thus, are beyond the preview of the FCRA.

Requirements For a regular Consumer Report, there are three distinct periods that require affirmative action by the employer:

1) Before requesting the report, an employer must make a written disclosure to the applicant stating that they may obtain this report for employment purposes. The disclosure must be made in a document consisting solely of the disclosure. The applicant must then consent in writing to the employer wishing to obtain this report. The employer must certify to the CRA that both of these requirements have been met.
2) Before taking an adverse action [i.e., denial of job or termination] based on the information contained in the report, an employer must give the applicant a pre-adverse action disclosure which includes a copy of the applicant’s Consumer Report and a copy of “A Summary of Your Rights Under the Fair Credit Reporting Act” [provided by the CRA].

3) After taking an adverse action, an employer must then provide the applicant with an adverse action notice. This can be in writing, orally or electronically. The notice must include:

• the name, address, and phone number of the CRA that supplied the report;
• a statement that the CRA that supplied the report did not make the decision to take the adverse action and cannot give specific reasons for it; and
• a notice of the employee’s or applicant’s right to dispute the accuracy or completeness of any
information the agency furnished, and his or her right to an additional free consumer report from the agency upon request within 60 days.

Because an Investigative Consumer Report is considered particularly invasive of an employee’s or applicant’s privacy, an employer requesting an investigative consumer report, in addition to the requirements for a regular consumer report, also must notify the applicant or employee who is the subject of the investigative report of the request within three days of the employer requesting the report. The applicant or employee must also be advised of his or her right to obtain a complete and accurate disclosure of the nature and scope of the investigation the employer requested. If the applicant or employee makes a written request to the employer within a reasonable amount of time after he or she receives notice of the investigation, the employer must disclose in writing the nature and scope of the investigation requested not later than five days after the date on which the request for such disclosure was received from the applicant or employee or the date the report was first requested, whichever is later.

In an Opinion Letter of July 9, 1998, the Federal Trade Commission (“FTC”) issued guidance clarifying the distinction between a credit report and an investigative credit report. The key difference is the use of “interviews” to obtain background information on an employee or applicant. According to the FTC, the term “interview” does not include verifying factual information that a job applicant or employee has offered during the application process with the source of that information (i.e., verifying the date an applicant graduated from college from the college admissions office). However, if a CRA asks for any information that goes beyond the factual information contained in the application, the consumer report is considered an investigative consumer report.

Consequences for the Employer
Employers wishing to use CRAs to investigate applicants or employees must develop documents and procedures pursuant to the 1997 changes to the FCRA including:

1) Creating a separate notice and authorization document informing the applicant of the possibility of a credit check and obtaining written authorization from the applicant or employee to request one;

2) Developing procedures to provide applicants and/or employees who will be the subject of adverse action a copy of their Credit Report before any adverse action is taken against them; and
3) Developing procedures to inform applicants and employees of their statutory rights under the FCRA after an adverse action is taken against them.

In addition, if the employer is going to request an investigative credit report, the employer needs to include in the notice document that an investigative report may be obtained and the applicant’s or employee’s right to obtain additional information on the nature and scope of the investigation upon written request.

If the employer does not certify to the CRA that the notice and authorization requirements have been met and the additional requirements will be met, the CRA is not allowed to provide a Credit Report to the employer. If the employer certifies that it has and will meet the FCRA requirements and willfully fails to do so, the employer may be held liable for actual and punitive damages, plus attorney’s fees, by either the applicant or employee, or the CRA. If the employer only negligently fails to meet the requirements, it can still be liable for actual damages, plus attorney’s fees.

It should be emphasized that the FCRA requirements only apply to requests by employers for credit reports from CRAs. It does not apply to other types of investigations and background checks by employers. Thus, consent and waiver clauses in applications are not affected by the 1997 changes in the FCRA other than for a Credit Report by a CRA.

Using Unemployment Status as Hiring Criteria
Many companies think the best candidate for a position is one who is currently working for another company. It stands to reason that if a company is going to lay off workers during the downturn in the economy, it will lay off the poor performers – not their best employees. With that reasoning in mind, some companies are now considering unemployment status as hiring criteria. After all, unemployment status is not a protected class. However, the EEOC says “not so fast.”

In February, 2011, the EEOC held a public meeting on discrimination against the unemployed. The EEOC’s position is that a policy of refusing to hire an applicant based on a history of unemployment may have a disparate impact on women and some minorities. States and municipalities have begun passing laws to limit the use of unemployment history as a hiring criteria. Some limit the limitation being placed in an employment ad while others prohibit the practice outright. These states and municipalities include: New York; New Jersey; Madison, Wisconsin, Chicago, Illinois; and Oregon. No known cases have been filed with the EEOC alleging this cause of action.

Using High School Graduation as a Hiring Criteria
On November 17, 2011, the EEOC issued an informal decision letter on the topic of employers requiring applicants to have a high school diploma and how the ADA may be implicated. Specifically, if a student did not graduate high school because of a learning disability, employers will need to consider reasonable accommodations.

The first thing to consider is whether the high school diploma requirement is job related to the position in question and consistent with a business necessity. Does it accurately measure the ability to perform the job’s essential functions? Simply said, why is it necessary to perform the job? Can someone who does not have a high school diploma just as easily perform the job?

If a high school diploma is necessary, and the employer knows the individual does not have a diploma because of a disability, the employer needs to consider accommodations. The employer may also ask the applicant to demonstrate his/her ability to perform the essential functions of the job. The employer may also consider the applicant’s work history to determine if the applicant has been able to perform a similar job in the past without difficulty.

The dilemma here may be in how an employer knows the applicant has a learning disability. Employers are not allowed to ask an applicant if they are disabled. So, how they accommodate a disability they do not know about? The simple answer is “don’t ask” and only inquire about accommodations if the applicant tells the employer he/she is disabled. If you assume the applicant did not receive a diploma because of a disability, you may be accused of a “regarded as” ADA violation.

The bottom line is that if an employer is requiring all applicants to have a high school diploma, it is time to reevaluate the policy.

Using Social Media in the Hiring Process
Another question the EEOC may ask when investigating a hiring criteria complaint is whether or not the employer used social media in the vetting process. Employers know they cannot ask certain questions on an application or in the interview process. Things like, age, religion, race, etc. are all off limits to employers. Since they are not allowed to ask the questions, some employers have turned into detectives and have taken to the internet to find answers to the forbidden questions. Viewing someone on Facebook may tell you their age, religion, race and a host of other information – some useful and some not so useful. Employers can avoid the pitfalls of using social media by taking a few extra steps.

• Insulate the decision maker. Have someone else do the social media search instead of the person who is making the decision to hire the applicant.
• List the social media that will be viewed. To ensure consistency, only run searches on certain websites. You can make a list of the websites to be viewed.
• Limit searches to public information. Do not try to get information that is not public. Do not use others’ passwords or try to have someone “friend” the applicant so you can look at their page. Keep in mind; you may be violating state or federal law. Many states now have laws against requiring someone to give you their passwords. Additionally, the federal Stored Communications and Wire Tap Act prohibits you from accessing information you have no right to access.
• List the lawful information that the employer desires to learn from these sites. This is another way to insulate the decisionmaker. Have the person conducting the search only provide the decisionmaker with information they need to make the decision. The person conducting the search should not tell the decisionmaker things like: race, age, pregnancy status, religion, etc.
• Run consistent searches on all employees/candidates. If you are going to conduct these types of searches, make sure you do them on all candidates for the position and/or all candidates for all positions within the company.
• Consider advising the employee/candidate of any adverse results and giving them the opportunity to respond to or correct the information. Contrary to popular belief, all information found on the internet is not true. Consider giving the person an opportunity to explain the adverse information you found.
• Retain the search results. Document, Document, Document. Save the result of the search so you can support your decision later. Facebook information can be deleted. It may not be there if you go back and try to find it later.

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