Courts Begin to Narrow the Scope of the EEOC's Most Recent Background Check Guidance
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On October 7, 2013, the United States Court of Appeals for the Sixth Circuit upheld the imposition of fees and costs against the Equal Employment Opportunity Commission (“EEOC”) in EEOC v. Peoplemark, Inc., Case No. 11-2582, for knowingly pursuing a meritless claim in which the agency alleged that Peoplemark’s criminal background check policy had a disparate impact on minority job applicants.  The EEOC recently has moved aggressively to enforce its April 2012 guidance regarding the use of criminal background checks in hiring.  That guidance appears to suggest that any criminal background check policy may be vulnerable to an EEOC enforcement action under a disparate impact theory—regardless of its terms and the manner in which it is implemented—solely on the basis of national data that show disproportionate rates of incarceration for African-Americans and Hispanics.  However, the Peoplemark decision, of which the EEOC presently seeks en banc review, also heralds an emerging pattern of judicial skepticism towards the agency’s enforcement tactics and its efforts to pursue disparate impact claims premised solely on national statistical evidence that is unrelated to any specific employer practice.

The new guidance appears to newly suggest that an employer may only survive a discrimination claim if it can show that it conducted an individualized assessment of each applicant after a targeted criminal history screen, which allows an applicant to explain the circumstances surrounding the criminal conduct that led to his exclusion.  The EEOC insisted that an individualized assessment is not mandatory in a letter to six state Attorneys General who objected to the stringent new requirements.  But the guidance itself clearly states that an individualized assessment or a formal validation study are the only two ways an employer can be absolutely certain its background check policies do not run afoul of Title VII. 

However, the EEOC’s recent actions make it unclear whether even an individualized assessment will save an employer from enforcement where the agency believes it can show disparate impact by statistical evidence alone.  In Peoplemark, the EEOC initially alleged that the company had a blanket policy of denying employment to individuals with felony convictions, resulting in a clear disparate impact on African-Americans.  However, after discovery revealed that no such policy existed and the company in fact utilized individualized assessments, the EEOC nonetheless continued to pursue its claim and attempted to rely solely on statistical workforce data to show that the policy still had a disparate impact even though it comported with agency guidance.  The court rejected the agency’s attempt to recast its theory of the case and reaffirmed that disparate impact claims must be premised on an identifiable unlawful employer practice.  To have held otherwise would have set a precedent where potential employer liability turns solely on the quality of the EEOC’s statistical evidence on a topic that even the agency concedes is difficult to quantify. 

The Sixth Circuit’s approach is part of a broader trend of courts looking skeptically at the EEOC’s questionable litigation practices and ensuring that there is a sufficient evidentiary foundation to any disparate impact claim.  Peoplemark was handed down not long after District Judge Roger W. Titus rejected a similar case brought by the EEOC in the District of Maryland on the basis that the agency’s disparate impact claim was “a theory in search of facts to support it.”  In that case, EEOC v. Freeman, Inc., Judge Titus acknowledged that the EEOC’s emphasis on a higher incarceration rate for minorities “might cause one to fear that any use of criminal history information would be in violation of Title VII,” but held instead that that was “simply not the case” and that the “careful and appropriate use of criminal history information is an important, and in many cases essential, part of the employment process.”  Judge Titus went on to specifically reject the EEOC’s attempt to rely solely on statistical data to prove its case and require any disparate impact claim to be “carefully focused on a specific practice with an evidentiary foundation showing that it has a disparate impact because of a prohibited fact.”  Judge Titus also emphasized the need for judges to analyze any proffered statistical evidence to ensure that it is reliable and accurate.  Similarly, the Sixth Circuit will address the issue of the quality of the EEOC’s statistical evidence in EEOC v. Kaplan Higher Education Corp., Case No. 13-3408, another disparate impact case that was argued in early October.

As a result of the uncertainty surrounding the EEOC’s background check guidance, it is extremely difficult for an employer to assess potential Title VII risk.  Nonetheless, employers are encouraged to closely review their hiring policies and ensure that the consideration of criminal history is done in a careful and individualized way.


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