New EEOC Lawsuit for Discrimination Based on Credit Report and Criminal Records

Provided by ESR Newsletter and Legal Update

The Equal Employment Opportunity Commission (EEOC) announced  on October 1, 2009 that they have filed a lawsuit against Freeman, a firm that offers nationwide convention services, on the basis that it used credit reports and criminal records to unfairly discriminate against black, Hispanic and male job applicants. This case has the potential to have a profound impact on the way employers hire in the U.S.
 
According to the EEOC press release, the lawsuit charged that, "This practice has an unlawful discriminatory impact because of race, national origin and sex, and is neither job-related nor justified by business necessity."
 
Even though the use of criminal records and credit history does not directly target people protected by civil rights laws, the argument is that when those criteria were applied to Freeman applicants, the end result was that greater numbers of blacks, Hispanics and males were affected.  This is referred to as a "disparate impact." In other words, by using this information to make hiring decisions, the practical impact was that members of protected groups were unfairly treated and rejected in higher numbers.   
 
The EEOC has been active in identifying barriers that contribute to discrimination. In 2007, the EEOC launched the "E-RACE" (Eradicating Racism and Colorism from Employment) Initiative. The purpose was to "improve EEOC's efforts to ensure workplaces are free of race and color discrimination.  See www.eeoc.gov/eeoc/initiatives/e-race

The use of credit reports and criminal records being used to deny employment has been a hot-button issue for the EEOC.  The last significant case was El v. Septa, 479 F.3D 232 (3d. Cir. 2007), where a 40 year-old second degree murder conviction was allowed to be used to deny employment.  However, part of the decision was based upon the fact that the applicant that was suing for discrimination did not present any statistical evidence to rebut expert testimony by the employer that even a 40-year-old crime can be relevant. 
 
Since then, a study was conducted by Professor Alfred Blumstein at Carnegie Mellon University that suggested that after a period of as little as five years for some crimes, a person with a criminal record was no more likely to re-offend than a person with no criminal record. Ironically, the same professor was the expert in the El v. Septa matter where a 40-year-old murder was sufficient to deny employment.
 
ESR has written an in-depth analysis of the Blumstein study at:  http://www.esrcheck.com/Blumstein-and-Nakamura-study-on-redemption-in-Criminology.php

 

This case will not likely be finalized anytime soon and could well need to go to higher courts for a final resolution.  However, the case is a stark reminder that employers need to review their hiring practices, to ensure that any pre-employment assessment tool is both a valid predictor of job performance and not discriminatory.
 
In the case of criminal records, Employment Screening Resources (ESR) has long advised employers that they should NOT automatically reject an applicant with a criminal record, but should instead determine if there is a business necessity that precludes hiring.  The EEOC has suggested that employers take into account the nature and gravity of the crime, the nature of the job, and the age of the offense.  Similarly, ESR has also long advised employers that credit reports should be approached with caution, and only used where relevant to the job, such as positions involving access to cash, assets or fiduciary duties. In this case, it would appear that the credit reports were used on a workforce involving laborers and not higher managerial or accounting positions with access to assets or fiduciary obligations.  However, the case still points out the dangers of the use of credit reports.

Comments

[interview coaching]

Discrimination upon hiring is the biggest threat an applicant would have. It is right to have a law that contemplates this kind of act.

[plumbing]

I agree! What has been the defect of every industry is that discrimination can't be tolerated.

[Pre-Employment Screening]

"...A study was conducted by Professor Alfred Blumstein at Carnegie Mellon University that suggested that after a period of as little as five years for some crimes, a person with a criminal record was no more likely to re-offend than a person with no criminal record. Ironically, the same professor was the expert in the El v. Septa matter where a 40-year-old murder was sufficient to deny employment."

I feel that it should be a case-by-case basis for accepting or denying employment based on criminal charges. While it seems wrong to deny a position for retail based on a background of stealing and theft, it can seem reasonable for an employer to be hesitant to hire someone with a reoccurring criminal record of theft. However, if the person has had a significant life change, then it could be understandable to overlook the record. Not all pre-employment screenings are 100% accurate for items such as a life change.