In its war on background checks, the EEOC loses a major early battle

Late last year, in this post, I highlighted the six issues that the United States Equal Employment Commission prioritized in its Strategic Enforcement Plan.  Numero uno is eliminating barriers in recruitment and hiring.

Even before it released its Strategic Enforcement Plan, earlier in 2012, the EEOC telegraphed that it would closely scrutinize criminal background checks employers run on job applicants to determine whether they may disparately impact minorities.

 

But even before that, in 2009, the EEOC came out guns blazing, when it announced a lawsuit against Freeman (also known as the Freeman Companies), a nationwide convention, exhibition and corporate events marketing company. In it’s lawsuit, the EEOC alleged that Freeman unlawfully “rejected job applicants based on their credit history and if they have had one or more of various types of criminal charges or convictions.”

Well, on Friday, in this opinion, a Maryland federal court dismissed the EEOC’s action against Freeman. While the court conceded that “some specific uses of criminal and credit background checks may be discriminatory and violate the provision of Title VII,” the EEOC could not meet its burden of “supplying reliable expert testimony and statistical analysis that demonstrates disparate impact stemming from a specific employment practice.”

And what, you may ask, did the court find so unreliable about the EEOC’s expert analysis in this case? Here are a few choice selections from the Court’s opinion:

 

• • The judge noted what “appear to be such a plethora of errors and analytical fallacies” in an EEOC expert’s conclusions to render them “completely unreliable, and insufficient to support a finding of disparate impact.”

 

• • He then underscored that the “mind-boggling number of errors” contained in the EEOC expert’s database “could alone render his disparate impact conclusions worthless.”

 

• • To add insult to injury, the judge piled on the EEOC expert by noting that he further “managed to introduce fresh errors into his new analysis, including many additional duplicates, material coding errors, and more double-counting.”

 

• • And when the EEOC tried to introduce another report from a second corroborating expert, the judge shot that report down as “likewise unreliable and inadmissible.”

 

• Finally, the judge turned his attention away from the EEOC’s experts, and blasted the EEOC itself for trying to “make a mockery of procedural standards.”

 

But where the EEOC really fell down here was with its failure to isolate a specific employment practice that allegedly caused a disparate impact. That is, Freeman had a variety of background screens in effect. Instead of tackling them individually, the EEOC lumped them all together and claimed that, collectively, they had a disparate impact on minorities. According to the court, what the EEOC should have done is “demonstrate that each particular challenged employment practice causes a disparate impact,” unless doing so proves unfeasible, which was not the case here.

The court concluded its opinion by offering a stern warning to the EEOC, which could carry over to other similar actions now pending against other employers:

By bringing actions of this nature, the EEOC has placed many employers in the “Hobson’s choice” of ignoring criminal history and credit background, 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. Something more, far more, than what is relied upon by the EEOC in this case must be utilized to justify a disparate impact claim based upon criminal history and credit checks. To require less, would be to condemn the use of common sense, and this is simply not what the discrimination laws of this country require.

Let’s call a spade a spade: this is a major setback for the EEOC. However, employers must recognize that facially neutral background checks may have a disparate impact on certain protected classes. While the EEOC’s “individualized assessment” strikes me as impracticable, I do agree with the EEOC that employers are well served to consider the nature of the position to be filled, as well as whether a background check exclusion is actually job-related and consistent with the needs of the business. Doing so, helps strike a reasonable balance to protect the business, while not excluding viable candidates.

Disclaimer: I am a pro bono mediator for the EEOC.