• EEOC Strikes Out In Criminal Background and Credit Check Litigation
  • November 19, 2013 | Author: Timothy A. Carney
  • Law Firm: GableGotwals - Tulsa Office
  • The EEOC has been aggressively pursuing litigation against private businesses for alleged violations of Title VII based upon the use of criminal background and credit checks in the hiring process. The theory pursued by the EEOC is that an employer’s use of these pre-hiring screening devices to exclude applicants has an unlawful disparate impact on minorities.

    This aggressive push comes on the heels of enforcement guidance issued by the EEOC last year relating to the use of arrest and conviction records by employers in making employment decisions. The link to this guidance is at:


    Thus far, however, the EEOC has met with relatively little success in pursuing its aggressive agenda. Recently, it was even required to pay attorney’s fees and costs to a business it sued for discrimination based upon criminal background checks. In EEOC v. Peoplemark, Inc., No. 11-2582 (Oct. 7, 2013), the Sixth Circuit, in a 2-1 decision, affirmed a district court’s award of over $750,000 in attorney’s fees, expert witness fees and other litigation costs to the employer, where the EEOC failed to present any evidence to support its claim that the employer had a “blanket policy” of denying jobs to African American applicants with felony records.

    The Court found that the EEOC’s claim “was not groundless when filed,” because it sued on the basis of statements made by the employer’s associate general counsel claiming the employer had a blanket policy of not extending employment opportunities to persons with felony convictions. However, it had an obligation to dismiss the case once the employer produced over 175,000 pages of documents demonstrating that no such blanket policy existed. The Court found that once the EEOC knew or should have known that no such policy existed, it was “unreasonable to continue to litigate the ¿ claim¿”

    In another recent case, EEOC v. Freeman, No. 09-CV-2573 (D. Md. Aug. 9, 2013), the EEOC sued an employer alleging that its use of criminal background and credit checks for employment screening resulted in a disparate impact against minorities in violation of Title VII. The federal district court dismissed the case after discovery in a scathing rebuke of the EEOC’s evidence and its expert analysis. The Freeman Court called the EEOC’s claim a “theory in search of facts to support it,” and stated that “[s]omething 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.” Addressing the EEOC’s expert, the Court found his opinions to be completely unreliable based upon “a plethora of errors and analytical fallacies underlying” his conclusions. Among other things, the Court found, the expert “cherry-pick[ed] data,” and even manipulated data to change the very character of the information provided by the employer, which the Court found to be “an egregious example of scientific dishonesty.”

    The Freeman Court acknowledged that employers have legitimate reasons for conducting criminal background and credit checks, finding that “[e]mployers have a clear incentive to avoid hiring employees who have a proven tendency to defraud or steal from their employers, engage in workplace violence, or who otherwise appear to be untrustworthy and unreliable.” The Court noted that the employer’s policy was narrowly tailored, as credit background checks were applied only to applicants for particular “credit-sensitive” positions, and criminal history checks were limited to convictions in the prior seven years and any outstanding warrants.

    The Court stated that “[c]areful and appropriate use of criminal history information is an important, and in many cases essential part of the employment process of employers throughout the United States.” The Court also found that on its face, the policy “appears reasonable and suitably tailored to its purpose of ensuring an honest work force.”

    Finally, the Court found, even if it were to assume the validity of the EEOC’s expert report, the EEOC’s claim failed because it had failed to identify specifically how any part of the employer’s policy resulted in a disparate impact on minorities.

    Another court earlier this year dismissed the EEOC’s claims in a suit that alleged that an employer’s use of credit checks in the hiring process had a disparate impact on black applicants, EEOC v. Kaplan Higher Education Learning Corp., No. 10-CV-2882 (N.D. Ohio Jan. 28, 2013). In Kaplan, the EEOC sued a group of institutes of higher learning that conducted credit checks on applicants for positions that worked with students receiving financial aid. These employers had instituted these pre-hire checks after finding that certain employees had misappropriated student financial aid payments.

    The EEOC claimed the employers’ use of credit checks disproportionately excluded black applicants. However, because the employers did not keep records showing the race of any applicants, the EEOC was required to attempt to prove their races through other means, using department of motor vehicle photos of applicants subpoenaed from a number of states. The EEOC used “race raters” to review the photos and assign a race to the individuals.

    The Court rejected the EEOC’s proffered use of these “race raters” to determine the race of the applicants, and found that there was no admissible evidence to show the employers’ use of credit checks had a disparate impact on black applicants.

    These cases demonstrate that the EEOC is intent on aggressively pursuing disparate impact claims involving criminal background and credit checks. They should serve as a call to employers who utilize these types of screening devices to undertake a careful review of their policies to ensure that they are narrowly tailored and that they seek only information that is job-related. In addition, as the cases demonstrate, it is unwise for employers to have a blank policy of exclusion from employment based upon the results of such screenings.

    The New Jersey Democratic controlled legislature voted earlier this year to increase the minimum wage to $8.50 an hour with automatic increases tied to inflation. Governor Chris Christie vetoed this bill, indicating that it would be detrimental to the economy, and instead proposed raising the minimum wage to $8.25 over a three-year period and increasing the earned income credit. The state Legislature was not willing to compromise, and instead placed the measure on the ballot for the New Jersey voters to decide.

    Similarly, President Barack Obama has been pushing for a $9 per hour federal minimum wage for quite some time and it is anticipated that Democratic lawmakers will renew pressure to get such a bill passed. However, with the Affordable Care Act and its burdensome requirements on businesses, it may be difficult to obtain bipartisan support for a marked increase in the federal minimum wage, which is currently $7.25 per hour.

    Only time will tell what impact, if any, an increase in the minimum wage will have on New Jersey businesses’ hiring practices and whether this will result in diminished opportunities and hours for employees working minimum wage jobs. Businesses in New Jersey need to make certain that starting in January they are compliant with the new minimum wage. The end of the year is also a good time to conduct wage hour audits to ensure compliance with the myriad of wage hour payment and collection laws.