The Equal Employment Opportunity Commission (EEOC) has stated that credit checks by employers can be potentially dangerous ground. The agency has also recently issued guidance which states that an employer’s use of an individual’s criminal history in making employment decisions may, in some instances, violate the prohibition against employment discrimination under Title VII of the Civil Rights Act of 1964, as amended. Here we take a closer look at EEOC’s stance on credit checks and arrest records.

EEOC position on credit checks

The EEOC has stated that credit checks by employers can be potentially dangerous ground. They warn that Title VII prohibits any employment practice that disproportionately screens out racial minorities, women, or another protected group, unless the practice is job related and consistent with business necessity. Thus, if an employer’s use of credit information disproportionately excludes minority candidates, the practice would be unlawful unless the employer could establish that the practice is needed for it to operate safely or efficiently.

At an EEOC meeting on employment testing and screening, an attorney testified that credit checks have not been shown to be a valid measure of job performance. Some courts, however, have determined that credit checks are appropriate for certain positions, such as where an employee handles large amounts of cash.

According to the EEOC, an employer’s use of an individual’s criminal history in making employment decisions may, in some instances, violate the prohibition against employment discrimination under Title VII of the Civil Rights Act of 1964, as amended.

The Guidance discusses the differences between arrest and conviction records. The fact of an arrest does not establish that criminal conduct has occurred, and an exclusion based on an arrest, in itself, is not job related and consistent with business necessity. However, an employer may make an employment decision based on the conduct underlying an arrest if the conduct makes the individual unfit for the position in question. In contrast, a conviction record will usually serve as sufficient evidence that a person engaged in particular conduct. In certain circumstances, however, there may be reasons for an employer not to rely on the conviction record alone when making an employment decision.

The Guidance also discusses disparate treatment and disparate impact analysis under Title VII. A violation may occur when an employer treats criminal history information differently for different applicants or employees, based on their race or national origin (disparate treatment liability). An employer’s neutral policy (e.g., excluding applicants from employment based on certain criminal conduct) may disproportionately impact some individuals protected under Title VII and may violate the law if not job related and consistent with business necessity (disparate impact liability).

Two circumstances in which the Commission believes employers will consistently meet the “job related and consistent with business necessity” defense are as follows:

• The employer validates the criminal conduct exclusion for the position in question in light of the Uniform Guidelines on Employee Selection Procedures (if there is data or analysis about criminal conduct as related to subsequent work performance or behaviors); or
• The employer develops a targeted screen considering at least the nature of the crime, the time elapsed, and the nature of the job. The employer’s policy then provides an opportunity for an individualized assessment for those people identified by the screen, to determine if the policy as applied is job related and consistent with business necessity. (Although Title VII does not require individualized assessment in all circumstances, the use of a screen that does not include individualized assessment is more likely to violate Title VII.).

State law. State laws may be even more restrictive than Title VII or FCRA when asking about criminal history and with respect to the use of criminal records when making hiring decisions (e.g., Arizona, California, Hawaii, and Massachusetts). Please refer to BLR’s 50 Employment Laws in 50 States for more information.

• Duty to inquire. State laws may create a duty for an employer to ask about criminal records. (e.g., Florida requires employers to check criminal records of employees who come into contact with minors).
• Licensing. In addition to legal obligations to obtain a criminal history record check for certain positions, you may also be required by business licensing procedures to check criminal records. For example, in some states, convicted felons may not be able to sell guns or alcohol. Thus, arms dealer or liquor licenses may not permit you to hire such individuals or may restrict the positions for which they can be hired.
• Consent. State law may require the written consent of the applicant to obtain criminal records.
• Privacy. Obtaining an arrest record without a right or need to know may violate state law. (e.g., Alabama).
• Sealed records. Employers may not be able to ask about sealed records. (e.g., California). Applicants with sealed records may be able to state no such action has occurred. (e.g., Texas).
• Expunged records. Applicants with expunged criminal records may be able to state no such record exists. (e.g., Utah).

Negligence. If you are not required by statute or court decision to inquire about criminal histories but do so anyway, then you may be liable for negligence in hiring if you do not check the accuracy of the information. In other words, you may not have any obligation to ask about criminal histories. However, once you do, you have to exercise care, such as confirming the accuracy of the information provided.

Susan E. Prince, J.D., is a Legal Editor for BLR’s human resources and employment law publications. Ms. Prince has over 10 years of experience as an attorney and writer in the field of human resources and has published numerous articles on a variety of human resources and employment topics, including compensation, benefits, workers’ compensation, discrimination, work/life issues, termination, and military leave. Ms. Prince also served as an expert on several audio conferences discussing the 2004 changes to the federal regulations under the Fair Labor Standards Act. Before starting her career in publishing, Ms. Prince practiced law for several years in the insurance industry and served as president of a retail sales business. Ms. Prince received her law degree from Vermont Law School.

Follow Susan Prince on Google+