News & Updates

$3.1M Fine Against Employer Highlights Need for Caution in Using Criminal Background Checks January 23, 2012

It has never been easier for an employer to learn a great deal about a job applicant’s background. Nevertheless, utilizing the many available resources must be done with extreme caution — or employers may find themselves facing allegations of employment discrimination and paying an unexpected price for that information.  As a recent claim against one of the country’s most well-known employers demonstrates, reliance upon background checks may expose employers to liability depending on how they use that information to make hiring or firing decisions.

Pepsi Beverages Co. recently agreed to pay $3.1 million to resolve federal charges that it engaged in unlawful race discrimination by using criminal background checks to disqualify job applicants.  The U.S. Equal Employment Opportunity Commission (EEOC) contended that the company’s policy of refusing to hire applicants with arrest records disproportionately excluded more than 300 African American applicants.  Under the policy, applicants with arrest records were not considered for hire, even when they were not convicted of a crime.  The company also denied employment to those arrested or convicted of minor offenses.  The EEOC maintained that the use of arrest and conviction records to deny employment may be illegal if it is not relevant to the applicable job duties and has a disparate impact upon protected classes.  The company has since adopted a revised criminal background policy. 

In addition to the risk of a federal discrimination claim, employers utilizing criminal background checks must also be aware of state laws protecting the rights of employees and applicants who have been arrested or convicted of crimes.

The New York State Human Rights Law makes it unlawful for employers to:

  • deny employment based upon an individual’s record of arrests not then pending which do not result in a conviction or
  • make an inquiry regarding an applicant’s record of arrests not then pending which do not result in a conviction.

In New York, both Article 23-A of the Corrections Law and the Human Rights Law limit the ability of an employer to deny employment to an individual on the basis of his or her arrest or conviction record.  Here is a link to our  March 31, 2011 alert on the most recent New York Court of Appeals case on this subject: http://dld.bz/aHvQA.

The purpose of these New York statutes is to enhance employment opportunities and, under Article 23-A of the New York Correction Law as amended, employers are required  to engage in a multi-factor analysis before denying employment to an applicant or terminating an employee based solely on a prior criminal conviction.  There are two situations in which an employer may lawfully deny employment based upon a prior criminal conviction:

  • where there is a “direct relationship” between the prior criminal offense and the specific employment sought or
  • where employing the individual in question would create an “unreasonable risk” to persons or property.  The statute does not define the term “unreasonable risk”; however, courts have suggested the multiple factors used in determining a “direct relationship” (see discussion below) may be used to determine the existence of an “unreasonable risk.”

A “direct relationship” is specifically defined as one in which the nature of the criminal conduct for which the person was convicted has a direct bearing on his or her fitness or ability to perform one or more of the duties or responsibilities necessarily related to the license or employment sought.  For example, an employer need not hire an individual to serve in a position with responsibility over financial matters if that individual was previously convicted of embezzlement.

The statute provides several factors that employers must consider in determining whether a “direct relationship” exists between an individual’s prior criminal record and the position sought or held:

a.       the specific duties of the job;
b.       the bearing, if any, the criminal offense or offenses will have on the applicant’s or employee’s fitness to perform such duties;
c.       the time elapsed since the conviction; 
d.       the age of the job applicant or employee at the time of the offense; 
e.       the seriousness of the offense or offenses; 
f.        the public policy of New York to encourage the employment of persons previously convicted of one or more criminal offenses; and
g.       any information in regard to the applicant’s or employee’s rehabilitation and good conduct; and the safety and welfare of specific individuals or the general public.

Under the statute, New York employers must provide a copy of Article 23-A to individuals subject to background checks.  In addition, employers must post a copy of Article 23-A of the Correction Law in a visually conspicuous manner in an accessible location in the workplace.

Finally, the New York Human Rights Law was amended in 2008 to help protect New York employers from negligence claims alleging that an employee with a criminal conviction caused harm in the workplace.  Under that amendment, if an employer evaluates an applicant’s or employee’s criminal history in accordance with Article 23-A of the Correction Law, and decides in good faith to hire or retain the individual, then the employer is afforded a rebuttable presumption that information regarding the individual’s criminal background should be excluded from evidence in any subsequent negligent hiring lawsuit.

In light of this statutory scheme, New York employers must review and revise their policies and practices to ensure compliance with Article 23-A of the Correction Law.  For example, employers should provide their employees and job applicants with a copy of Article 23-A whenever they seek consent and disclosure forms authorizing a consumer report and should arrange for the proper postings.  New York employers should also confer with counsel whenever they are considering refusal to hire or termination based on a prior criminal conviction or an arrest record. 

For more information on these recent statutory amendments or if you have questions about other aspects of state or federal employment law, please contact Richard A. Braden at rbraden@goldbergsegalla.com or 716.566.5436.