Implications of the Recent Verdict against the EEOC | DCR Workforce Blog

Implications of the Recent Verdict against the EEOC

background checksIt 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.

  • Screening policies and procedures should be clearly established and documented, then consistently applied. Avoid blanket disqualification criteria, as they will definitely be questioned by the EEOC.
  • Prepare to prove that the specified background check is directly related to the requirements of the job.
  • Make sure that the applicants know the complete details of the background checks you propose to conduct and obtain their permission in advance.
  • In the case of adverse results, give the candidate an opportunity to explain or to rectify the situation, if possible. The nature and gravity of the offence, time since the conviction and relevance to the job must be factored into the decision to not employ or promote an individual.
  • Maintain all hiring records so that a complete analysis can be conducted if confronted with an EEOC audit or action. If you happen to have made any policy changes, do make sure that the data is sorted into separate silos, so as to present an accurate picture of affairs.

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.

The content on this blog is for informational purposes only and cannot be construed as specific legal advice or as a substitute for competent legal advice. They reflect the opinions of DCR Workforce and may not reflect the opinions of any individual attorney. Do contact an attorney for advice specific to your issue or problem.
Lalita is a people/project manager with extensive experience in operations, HCM and training and development across industries like banking, education, business consulting, BPO and information technology. She believes in a dynamic approach to life and learning as change is the only constant.