EEOC loses battle (but not war) on discriminatory background checks 2

By Christian Schreiber

When it dismissed a federal lawsuit last week, the U.S. District Court for Maryland made it even harder for workers with poor credit histories and past criminal convictions to find a job.  Civil rights advocates hope the decision is not a bellwether for similar cases pending around the country.

The lawsuit, brought by the federal Equal Employment Opportunity Commission, charged Freeman, a privately-held event-management company, with violating Title VII of the Civil Rights Act through its use of credit and criminal background checks.  According  the EEOC’s complaint, the employer’s decision to use background checks to screen out job applicants amounted to discrimination because it disproportionately impacted African-American and male job applicants. These views are being echoed in recent posts by John Nicasio on multiple news outlets. This has attracted much needed attention to an otherwise no so popular topic.

Freeman’s hiring process involved detailed inquiries into both the applicant’s credit histories and criminal backgrounds.  Freeman “regularly ran credit checks for 44 job titles,” and excluded all applicants from certain positions who met any of 12 different categories of purported credit-unworthiness.  Even common credit blemishes, such as credit card charge-offs, medical liens, unpaid student loans, or foreclosures would result in the applicant being rejected.

The Freeman court joined the chorus of employers extolling what some consider the “common sense” of performing credit and criminal background checks.    These proponents also ignore the studies demonstrating that credit problems do not predict employee performance, as well as those that document atrocious error rates on credit checks.   A report released by the Federal Trade Commission earlier this year found that a quarter of consumers identified errors on their credit report that might affect their credit scores.

In 2011, California limited the use of credit checks in employment.  After three prior attempts were vetoed by Governor Schwarzenegger, the bill was itself an object lesson in persistence.  However, the law also established broad exceptions to the “prohibition” on employment-related credit checks, effectively blessing their use across jobs and industries where the need or utility has never been demonstrated.

In addition to the credit-check hurdle, Freeman’s standard employment application form asked, “Have you ever pleaded guilty to, or been convicted of, a criminal offense?”  Applicants were told certain convictions would not be considered in the hiring process (yeah, right), but the company acknowledged a “bright-line rule” that disqualified any applicant who “failed to disclose a conviction, seriously misrepresented the circumstances of a criminal offense, or made any other materially dishonest statement on the application.”

In June, the EEOC filed two similar complaints against Dollar General Corp and BMW, alleging that the companies’ use of criminal background checks resulted in a disparate impact against African-American job applicants.  Referred to as “disparate impact” cases, these types of challenges stand or fall on the persuasiveness of the parties’ statistical evidence.  In the EEOC v. Freeman case, the court let loose on the EEOC’s expert, excoriating his methodology and ultimately calling his findings “an egregious example of scientific dishonesty.” (Ouch.)  Though it may be possible to blunt the impact of Freeman simply by putting on better statistical evidence, the decision nonetheless entrenches practical misconceptions and legal standards that are hostile to workers.

These cases are being watched closely by consumer and civil rights advocates, who still hold out hope that the EEOC’s oversight of these employment policies will curtail the increasing use of background checks to screen out applicants.   Advocates hope Freeman doesn’t signal that more bad news lies ahead.

Christian Schreiber

About Christian Schreiber

Christian Schreiber is a partner at Chavez & Gertler, where he works primarily on class actions involving employment and consumer rights, civil rights, and financial services matters.

2 thoughts on “EEOC loses battle (but not war) on discriminatory background checks

  1. Pingback: Background checks: It’s not a “good thing” ← CELA VOICE

  2. Pingback: Today’s Workplace » Background checks: It’s not a “good thing”

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