Overview
Employers widely utilize background checks to screen applicants with the goal of making more informed hiring decisions, protecting employees, customers and company assets, and both reducing the risk of and providing defenses to negligent hiring claims. Recent legal developments have resulted in increased scrutiny of employers' criminal background check policies. This QuickCounsel summarizes federal legal obligations and constraints on the use of background checks in the employment context.
Equal Employment Opportunity Commission and Criminal Background Checks
The EEOC Disapproves of Across-the-Board Exclusions
The EEOC recognizes that employers have legitimate reasons to conduct criminal background checks and that Title VII of the Civil Rights Act of 1964 (Title VII) does not specifically prohibit or give instructions on how an employer can utilize criminal background records. However, the EEOC has concluded that racial minorities are disproportionately convicted of crimes compared to non-minorities. Accordingly, after more than 20 years of limited activity in scrutinizing an employers' use of criminal backgrounds, the EEOC in 2012 released extensive updated Guidance on how employers are to use criminal conviction and arrest records in order to comply with Title VII. The EEOC's Guidance makes clear that the EEOC will not look favorably on across-the-board criminal background exclusions.
Demonstrating Compliance to the EEOC
While the EEOC takes the view that criminal background checks will almost always have a disparate impact against African-Americans or Hispanics, the Commission provides two avenues for employers to defend such usage.
Formal Validation
The first route is for an employer to formally validate the job-related business justifications for using such a practice. Because such formal validation studies require the use of industrial and organizational psychologists and are generally costly, and because of lack of precedent in validating the use of criminal background information, formal validation is not currently viewed as a viable option for employers.
Targeted Screen
The EEOC's alternative route to justify the use of criminal background information requires an employer to conduct a targeted criminal background screen and engage in an individualized assessment of persons with criminal background records. The targeted screen of individuals with criminal records involves looking at three factors, referred to as the Green factors: 1) the nature and gravity of the offense or conduct; 2) the time that has passed since the offense or conduct or completion of a criminal sentence; and 3) the nature of the job currently held or sought. Green v. Missouri Pac. Railroad, 523 F.2d 1290 (8th Cir. 1975).
Individualized Assessment
The EEOC's Guidance strongly recommends that employers conduct an individualized assessment following the targeted screen with the goal of providing a person with a criminal record the opportunity to demonstrate that the employer's targeted screen (i.e., exclusion) should not apply to him. The Guidance lists eight possible topics of consideration as part of an individualized assessment, including these three:
- The facts and circumstances surrounding the offense or conduct; Evidence that the individual performed the same type of work, post-conviction, with the same or a different employer, with no known incidents of criminal conduct; and Employment or character references and other information regarding the individual's fitness for the particular position.
Persons Subject to Federal Prohibitions or Restrictions
The EEOC's Guidance notes federal laws and regulations prohibit the employment of persons with records of certain crimes in particular positions, e.g., child care workers in federal agencies, bank employees and port workers. Compliance with such federal laws is a defense to a charge of discrimination as the EEOC recognizes an employer's obligation to comply with such obligations.
State and Local Restrictions
According to the Guidance, an employer who takes adverse action required by state law or local regulations nonetheless must demonstrate that its policy is job-related and consistent with business necessity based on the Green factors. This of course raises a Hobson's choice for many employers.
Other Important Components of EEOC Guidance
As a "best practice," the Guidance encourages employers not to ask applicants about their criminal records early in the application process. The EEOC also takes the position that an "arrest record standing alone may not be used to deny an employment opportunity." However, the Guidance allows an employer to make an employment decision based on the conduct underlying the arrest if the individual would be unfit for the position because of the conduct. Therefore, if an applicant's or employee's criminal conduct is limited to an arrest record or a pending prosecution, the employer should discuss with law enforcement officials and/or the applicant/employee the circumstances underlying the alleged offense to determine whether the individual actually engaged in the conduct alleged, subject to state law.
Fair Credit Reporting Act Summary of Obligations
The Fair Credit Reporting Act (FCRA), now chiefly enforced by the Consumer Financial Protection Bureau (CFPB), requires employers to take a distinct series of administrative steps when procuring a criminal background check, as well as other background checks not covered by this QuickCounsel, from virtually any non-governmental outside vendor or organization. Such outside vendors are referred to as a consumer reporting agency (CRA). The FCRA also requires that certain administrative steps be taken when contemplating and taking an adverse action based on a criminal background check.
Steps Required Prior to Report Procurement
Employers who utilize a CRA to procure a criminal background report must take certain "pre-procurement" steps:
- Make certain certifications regarding the permissible purposes of the background check to the CRA. The CRA typically requires these certifications from the employer/user prior to performing any background checks. Provide notice to the subject that a criminal background check may be obtained for employment purposes and make this a stand-alone document which may include the authorization referenced in item 3 below. Obtain authorization from the subject of the criminal background report.
While compliance with all provisions of the FCRA is important, failure to comply with pre-procurement steps is potentially most problematic because these provisions implicate the entire universe of persons for whom an employer uses a CRA to obtain a background check. The obligations below relate to applicants/employees whose background check contains information that might adversely impact employment, typically a fraction of those persons on whom an employer obtains a background check.
Pre-Adverse Action Notice and Waiting Period
If a criminal background report contains negative information which "in whole or in part" may cause the employer to take any adverse action, including rejecting that candidate for employment/denying a promotion/terminating a current employee, the employer is required to follow the FCRA's pre-adverse action requirements by providing a copy of the report to the applicant and the CFPB's summary of rights and waiting before making a final decision. See 15 U.S.C. 1681b(b)(3)(A). This waiting period allows the subject of the background check to bring to the employer's attention any errors in the criminal background check report. The text of the FCRA provides no minimum amount of time for this waiting period, but prudent employers generally provide a waiting period of five or more business days to see if the subject indicates he/she is challenging accuracy and if so a further period of time for the subject to work with the CRA to obtain a revised report.
Adverse Action Notice
After the appropriate waiting period has passed, the employer may decide to take adverse action—e.g., not hire, not promote, terminate— on the applicant or employee who was the subject of the background check. The FCRA requires that the employer provide notice of such adverse action, sometimes called an "adverse action notice," to the subject of the background check. Although notice may be provided orally, the more prudent route is to use written or electronic notification, which should include: (1) the fact that adverse action has been taken; (2) contact information of the CRA providing the information to the employer; (3) a statement that the CRA did not make the adverse action decision and cannot explain the decision; (4) the right of the subject of the report to obtain a free copy of the report from the CRA within 60 days; (5) the right of the subject of the report to dispute with the CRA the accuracy and/or completeness of the report. See 15 U.S.C. §1681m.
Additional FCRA Related Considerations
The above sets forth some of the basic obligations an employer faces when utilizing a CRA to conduct criminal background investigations. Employers have further obligations under federal and/or state law for certain specific types of background checks, e.g., the use of credit scores and investigative consumer reports (investigative consumer reports are generally reports generated by the CRA's interviews with individuals). While this QuickCounsel is focused on federal law, numerous states maintain mini-FCRA statutes creating additional administrative obligations on employers, and many states restrict what criminal background and credit information employers may obtain and/or use in making employment decisions as well.
FCRA - Potential for Exposure
Formerly the FTC, and now the CFPB, had the ability to bring civil actions against an employer for violations of the FCRA. The CFPB may seek civil penalties of up to $3,500 per violation. Although over 80 governmental enforcement actions have been brought to enforce the FCRA primarily against CRAs, there is a growing trend by the private plaintiffs' bar to bring Rule 23 class actions lawsuits against employers for violations of the FCRA. Under the FCRA, applicants or employees may obtain actual damages and attorneys' fees for certain negligent violations of the FCRA. In general, however, for willful violations, applicants/employees are entitled to actual damages or statutory damages of not less than $100 and not more than $1,000, punitive damages and attorneys' fees. To prove willfulness, a plaintiff is not required to prove that an employer knowingly violated the FCRA, but only that the violation was reckless. Under the FCRA, there is a two years statute of limitations from the date of discovery by the plaintiff of the violation.
Conclusion
Employers should move away from broad across-the-board criminal background exclusions, refine general exclusion standards to apply to the position sought and utilize individualized assessments when considering applicants with criminal records. Employers must also ensure they have complied with all requirements under the Fair Credit Reporting Act. Although not within the scope of this QuickCounsel, employers should also consider state law restrictions on obtaining and using criminal background information.
Additional Resources
- Top Ten State Background Check Issues, Association of Corporate Counsel (2011) New EEOC Guidance On The Use of Arrest and Conviction Records in Making Employment Decisions, Jackson Lewis (2012) EEOC Issues New Enforcement Guidance on Use of Arrest and Conviction Records in Employment, Jackson Lewis (2012) Federal Trade Commission FCRA Opinion Letters, Federal Trade Commission 40 Years of Experience with the FCRA, Federal Trade Commission (2011) Questions and Answers About the EEOC's Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII, EEOC
Published on March 15, 2013
