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Criminal and Credit Background Checks Must Be Carefully Utilized By Employers  

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Reminger Co., LPA Spring 2015 Employment Practices Newsletter
June 1, 2015

Most experts anticipate an increase in employer hiring rates in 2015, which makes now a good time for companies to evaluate their hiring practices. Companies are increasingly required to work through federal and state rules that limit what information can be considered in the hiring process. Since issuing revised guidance on the issue in 2012, the Equal Employment Opportunity Commission (EEOC) has devoted more attention to the issue of employer requests for criminal records, financial history, and protected information on initial job application forms.

Running Criminal Background Checks on Applicants

92% of employers conduct criminal background checks on some segment of job applicants.1 Criminal background checks seem reasonable and, if uniformly applied to all applicants, clearly seem legal.

The EEOC’s position is less clear. The EEOC issued Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII 2  on April 25, 2012, which prohibited employers from baldly implementing these neutrally applied criminal record exclusions for convicted felons. In June 2013, the EEOC entered into a five-year conciliation agreement, including a monetary settlement and an ongoing monitoring, with JB Hunt after finding that it failed to comply with the EEOC’s April 2012 guidance.3  There is no doubt this issue is on the EEOC’s radar.

The EEOC’s position has left employers in a dilemma – run a criminal background check and risk an expensive lawsuit with the EEOC, or ignore criminal history and risk an expensive lawsuit due to potential liability for criminal acts committed by employees? How can employers best protect themselves from the EEOC, and still utilize criminal background checks? 

First, apply the same standards to applicants, regardless of race, gender, national origin, color, religion, disability, age, etc. If you check the background of one applicant, in a certain position, check the background of all applicants. Also, be consistent in your grounds for rejection. For example, if you do not reject applicants of one ethnicity with a specific criminal background, you must reject applicants of other ethnicities because they have similar criminal pasts.

Second, be cautious when basing employment decisions on background problems that may be more common amongst people of a certain national origin or race, age, gender, etc. Employers should eliminate per se exclusion policies and focus on narrowly-tailored policies for screening applicants. Employers should also familiarize themselves with the EEOC Guidelines, which require companies to conduct an Individualized Assessment of the applicant’s risks before excluding any applicant. 

Under this individualized assessment, employers should consider the nature of the job sought; the nature and gravity of the offense of which the applicant/employee was convicted; the time that has lapsed since the conviction (including employment history and evidence of rehabilitation); the facts and circumstances surrounding the offense; the number of prior convictions; and the age at time of conviction.

Employers should only consider convictions, not arrests and charges that did not result in a conviction. The EEOC has long held that an arrest, by itself, is never job-related and consistent with business necessity because it does not establish criminal conduct has occurred. Further, employers are reminded that they may have to make exceptions for problems revealed during a background check that were caused by a disability. 

Employers should only consider convictions that are relevant to the job itself. For example, a DUI may be relevant for a school bus driver position, but it is probably not relevant for a data entry position. An assault conviction may be more relevant when the job is performed in a customer’s private home than when an employee works from his or her own home, or who reports to work and is carefully supervised. A drug conviction may be more relevant for a job that involves access to prescription drugs than a job as a TV salesman. This consideration matters because the EEOC has determined that a criminal conviction should disqualify a job applicant only when there is a connection between the nature of the conviction and the nature of the job and that creates a greater risk. Thus, the employer should be able to demonstrate the connection between the nature of the crime and the applicant’s position before disqualifying an application.

Ultimately, if after conducting an individualized assessment, the employer decides to disqualify the applicant because of his or her criminal convictions, the employer must give the applicant notice that she has been screened out because of a criminal conviction, and give the applicant an opportunity to demonstrate the exclusion should not be applied due to a particular circumstance, and provide an explanation.

Running Credit Checks on Applicants

In addition to criminal background checks, 60% of employers conduct credit background checks on some segment of their applicants.4  While this practice can provide an employer with insightful information regarding potential employee’s personal responsibility and character, employers must be mindful of the Fair Credit Reporting Act’s (FCRA)5  requirements when doing so. The EEOC has recently begun monitoring how employers handle running credit checks on potential applicants, ensuring that they do so in an equal and nondiscriminatory manner. 

Again, employers must to apply the same standards to all applicants, regardless of race, national origin, color, sex, religion, disability, or age. Additionally, under the FCRA, employers must:

1.  Provide written notice to the applicant or employee stating that you might use credit information obtained for decisions regarding his or her employment. This must be a stand-alone document separate from the employment application.

2.  Get the employee or applicant’s written permission to perform the background check.

3.  Certify to the company from which you are obtaining the report that:

a. You notified the employee or applicant and received their permission to get the credit report;

b. You complied with all FCRA requirements;

c. You will not discriminate against the applicant or employee, or in any way misuse the information obtained in violation of federal or state equal opportunity laws or regulations.

If the employer decides to take adverse action based upon the information revealed before taking the adverse action, the FCRA requires the employer to provide the employee with: (1) notice that includes a copy of the consumer report relied upon; and (2) a copy of “A Summary of Your Rights Under the Fair Credit Reporting Act,” which should be received from the company that provided the report.

After taking the adverse employment action, the employer must tell the applicant or employee (either orally, in writing, or electronically): (1) That he or she was rejected because of information in the report; (2) the name, address, and phone number of the company that provided the report; (3) that the company providing the report did not make the adverse decision, and cannot provide specific reasons for it; and (4) that he or she has a right to dispute the accuracy of the report, and to get an additional free report from the company within sixty (60) days. 6 

Employers should also be aware that some creative employees have argued that employers consulting LinkedIn Reference Searches constitutes a background check under the FCRA.7 Only one court – a federal court in California – has ruled on this issue and has found that LinkedIn was not a background check under the FCRA.  Nonetheless, due to the potential liability, employers should be cautious if denying employment based on LinkedIn Reference Searches until this area of law is better fleshed out.

Finally, employers are reminded that each state can have its own background check laws. When hiring an out-of-state candidate, employers are bound by its own state (i.e., the state where the applicant is applying) and the state where the applicant is a resident.

Ultimately, employers are cautioned when conducting background checks – whether criminal or credit – to follow this ever-changing law. If you decide to do a background check, be sure to get the appropriate consent, in writing, and stick to the information that is relevant to the specific position for which the applicant applied. 

1Society of Human Resources Management (SHRM), Background Checking: conducting criminal background checks (Jan. 22, 2010).

2http://www.eeoc.gov/laws/guidance/arrest_conviction.cfm 

3http://www.eeoc.gov/eeoc/newsroom/release/6-28-13c.cfm 

4SHRM, Background Checking: conducting credit background checks (Jan. 22, 2010).

515 USC § 1681 et seq.

6http://www.eeoc.gove/eeoc/publications/background_checks_employers.cfm 

7Sweet et al. v. LinkedIn Corporation, 2015 WL 1744254 (N.D. Cal. April 14, 2015).

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