It has been rightly said that preparation is half the battle, and this has once again been proved when the Fourth Circuit court ruled against the Equal Employment Opportunity Commission (EEOC) in a summary judgment in the EEOC vs. Freeman case. The EEOC lost its case against an employer’s use of background checks to create a disparate impact, because the evidence submitted failed to support it.
The case examined the defendant’s use of criminal background and credit checks to hire applicants to positions which involve the handling of money as well as sensitive financial information. When individuals filed complaints with the EEOC, indicating that the background and credit checks have an adverse impact on Hispanic and black candidates, the EEOC commissioned an analyst to investigate Freeman’s background checking practice. The EEOC then filed a case against Freeman alleging disparate impact, based on the report of the analyst. Unfortunately, the report was found to be rife with coding errors, inconsistent in the time periods covered by the data, and selective in the data to be analyzed. The court ruled that the data was unreliable.
The practice of conducting background checks cannot be called into question when employed in a rational way to legitimately ensure a reasonable hiring process that protects the business interests of the company without excluding protected groups of candidates. In pursuing claims of disparate impact, the EEOC must demonstrate that hiring patterns exist that are indicative of violations of the Title VII rights of all workers. The defendant must then prove that the hiring practices are tied to sound business goals, and are applied consistently to all candidates. The outcome of the Freeman case hinged on the failed analytical approach of the statistician. It does not mean that employers can afford to become complacent about the litigating powers of the EEOC.
Some Insights for Employers:
Employers may stay clear of the EEOC’s punitive action and expensive litigation, if they keep its guidelines in mind.
Take all locations of the company into consideration and ensure that the microcosm of your workplace represents the diversity of the macrocosm around you.
When onboarding permanent employees and temporary workers, background checks can be an effective means of protecting a company, its workers, clients and community. They are an essential step in ensuring workplace safety. However, when improperly conducted they can unfairly discriminate. Penalties for errors in either direction can be costly both financially and to a company’s reputation. This ruling underscores the importance of being able to back up every business practice with detailed, auditable data. For those who enact sound practices and maintain detailed records, this ruling increases confidence in their ability to take steps that are in the best interests of their business.
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