Laws Governing Employment Background Checks

Ben Bennington - DRI Enterprises, Ltd.

Employers’ use of background investigations, particularly criminal record information, is under scrutiny and, in some cases, restriction from all levels of government. This recent attention is driven by four main concerns:

  • Continued high rates of unemployment among previous criminal offenders, which many believe increases former offenders’ likelihood of committing new offenses.
  • The perception that some employers’ consideration of criminal and credit information is overly broad.
  • Employer’s’ failure to comply with existing consumer protection laws.
  • Poor consumer-protection practices by some employment background screening providers.

The legislative, regulatory, and judicial responses to these concerns have been varied.


Title VII of the Civil Rights Act of 1964

The Equal Employment Opportunity Commission, the agency charged with enforcing Title VII, has been at the forefront of those questioning employers’ use of both criminal and credit history. The Commission’s belief that overly-broad use of criminal and credit history results in discrimination against individuals in protected classes has been apparent in both their investigation and prosecution strategy over the last several years.

Title VII hasn’t changed since 1991 and according to a Seton Law School Law Review article critical of the EEOC’s guidance and litigation in this area, no plaintiff has won a disparate impact case related to an employer’s’ use of criminal records since the 1975 Eighth Circuit Court of Appeals federal case Green v. Missouri Pacific Railroad.

In Green, MoPac followed “an absolute policy of refusing consideration for employment to any person convicted of a crime other than a minor traffic offense.

The court found that this very broad exclusion had a disparate impact on black applicants:

We cannot conceive of any business necessity that would automatically place every individual convicted of any offense, except a minor traffic offense, in the permanent ranks of the unemployed. This is particularly true for blacks who have suffered and still suffer from the burdens of discrimination in our society. To deny job opportunities to these individuals because of some conduct which may be remote in time or does not significantly bear upon the particular job requirements is an unnecessarily harsh and unjust burden.

Remember: The employer had an absolute bar to employment of former offenders, not a nuanced approach to reviewing applicants’ criminal histories. Most employers are more nuanced in their use of criminal records than they were 40 years ago.

The Commission has had poor results in their legal efforts, losing a major disparate impact cases against Kaplan Higher Education in January 2013 and Peoplemark in 2011. BMW, however, settled a class-action lawsuit brought by the EEOC in 2015.

In any case, even if the EEOC is ultimately unsuccessful in a legal effort, the cost to employers in time, fees, and reputation should not be underestimated.

In April 2012, the EEOC issued updated guidance on employers’ use of criminal history records. The Guidance reviewed the three factors that employers should consider when reviewing criminal records, which were mentioned in the Green decision:

  • The nature and gravity of the offense or conduct;
  • The time that has passed since the offense or conduct and/or completion of the sentence; and
  • The nature of the job held or sought.

The Commission also said that in cases that did not end in a conviction, that employers should consider additional information to determine if it is reasonable to believe that the person engaged in the conduct alleged.

Many employers have thoughtfully been using the “Green factors” successfully for almost 40 years.

However, in their 2012 guidance, the EEOC suggested an additional formal process called “individualized assessment” whereby the job applicant has an opportunity to explain why the employer’s criminal history policy should not apply to the applicant.

The guidance lists specific pieces of information that an applicant might provide and that an employer might consider in evaluating whether to make an exception to their policy. These include “the facts or circumstances surrounding the offense or conduct” (the applicant’s side of the story), the former offender’s rehabilitation efforts, and character references. They also include more objective factors such as the number of convictions and the applicant’s employment history.


Ban the Box

The EEOC’s guidance also suggests that employers should consider removing the criminal history inquiry from the employment application or restrict the inquiry to offenses directly relevant to the position for which the individual is applying, an obviously unworkable alternative. This is part of a national trend referred to as “ban the box.”

The “box” refers to the criminal history inquiry on the application, which is sometimes accompanied by a check box for the applicant to mark indicating whether he has a criminal history. The perception driving “ban the box” is that many employers, without considering the Green factors, automatically disregard any applicant who affirmatively responds to the criminal history question.

Some states and municipalities are also placing additional restrictions on employers within their jurisdiction. Some are “banning the box” for public and/or private employers while others are prohibiting employers from considering certain offenses when making a hiring decision.


Fair Credit Reporting Act

Most employers are aware of their responsibilities under the Fair Credit Reporting Act. However, recent litigation suggests that at least some employers have unknowingly been violating the FCRA’s requirements.

Including the FCRA-required background check disclosure language as part of the “small print” at the end of the employment application or including releases of liability in the disclosure document are common compliance mistakes made by employers that have led to class action FCRA lawsuits.

Failure to comply with the finer details of the FCRA’s pre-adverse and post-adverse action notification requirements has also led to class action lawsuits against employers.

Poor consumer protection practices by some background screening companies have created litigation problems for employers. Some employment background screening companies sell instant “national criminal records databases” to employers without appropriate safeguards to ensure that the information they are delivering is accurate and up to date.

When employers make hiring decisions based on this incorrect or incomplete information, the injured applicant often sues both the employer and the background screening company. In many cases, the employer’s liability is mitigated if they have strictly followed the requirements of the Fair Credit Reporting Act.

The best practice, however, is to avoid these claims altogether by requiring that the background screening firm verify all records with the original jurisdiction before reporting them to the employer.

Some states and even cities have their own restrictions as to what can be included in an employment background check, as well as limitations on what information employers can consider.

Some states’ limitations, like Texas’ seven-year criminal history limit, have been preempted by the FCRA.

Is it Worth the Hassle?

Given all of these potential pitfalls, one might ask why employers even bother conducting background checks.

Employers have a need to provide a safe and productive workplace, ensure that public safety is not threatened by putting the wrong person in the wrong position, and protect the company’s assets and reputation. These imperatives outweigh the risk of litigation, particularly where the employer has worked with their legal counsel and background screening partner to ensure compliance in their use of background checks.

The foregoing is a high-level overview of the legislative, regulatory, and litigation issues currently surrounding employers’ use of background check information. Each is discussed more in-depth in our ongoing series of free webinars approved for HRCI general recertification credit. The current schedule is always available on our Human Resources webinars page. These presentations can also be made to your SHRM chapter or other business group by Imperative’s president, Mike Coffey, SPHR.

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