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Despite Recent EEOC Loss, Employers Must Be Cautious With Criminal Background and Credit Screenings


Despite Recent EEOC Loss, Employers Must Be Cautious With Criminal Background and Credit Screenings

March 3, 2015

The U.S. Court of Appeals for the Fourth Circuit recently upheld a district court’s grant of summary judgment dismissing a U.S. Equal Employment Opportunity Commission (EEOC) legal action contending that a company’s policy of using criminal background and credit history checks in its hiring process disproportionately excluded African American applicants.

Notably, the Fourth Circuit’s decision is harshly critical of the EEOC because the expert testimony relied upon by the agency contained a “mind-boggling number of errors.” The decision further notes that the EEOC’s continued reliance on the expert testimony was “fatally flawed in multiple respects.”

While the grant of summary judgment against the EEOC represents a victory for employers, the decision does not address the merits of the EEOC’s position that criminal background and/or credit checks may disproportionately exclude individuals from employment based on a protected category. 

The EEOC has stated an intent to eliminate intentional and unintentional discrimination, as set forth in the agency’s December 2012 Strategic Enforcement Plan. The EEOC maintains 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. Employers should expect more legal action from the EEOC and should consider revising criminal or credit background check policies and practices.

Also, and as we have stated before, while employers risk federal discrimination claims by individuals or the EEOC, those utilizing criminal background and/or credit checks must also be aware of state laws protecting the rights of employees and/or applicants who have been arrested or convicted of crimes.

For example, 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.

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;

g.any information in regard to the applicant’s or employee’s rehabilitation and good conduct; and

  h. 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.

Employers should always confer with counsel whenever they are considering refusal to hire or termination based on a prior criminal conviction or an arrest record in order to ensure they are compliant with specific state laws.

For any questions on this ruling or how these laws may impact your business, please contact: