In 2012, the EEOC issued new guidance on the use of criminal background checks when hiring employees. This guidance highlighted the EEOC’s focus on the use of both criminal background checks and credit checks in the hiring process.

The EEOC believes background checks should only be used in situations where background checks are job related and consistent with business necessity. The EEOC, however, has suffered losses in two recent cases because courts have ruled that the evidence presented by the Agency was not sufficient to prove the use of background checks had a racially disparate impact.

The EEOC challenged Kaplan Higher Education Corp’s use of credit histories in hiring and has also challenged the use of criminal background checks by Freeman, a nationwide convention and exhibition marketing company. In each case, the EEOC attempted to prove disparate impact by utilizing an expert who used a race rating system to identify a cross section of job applicants from state driver’s license photographs.  The process involved five (5) “race raters” looking at the photos and identifying the individual applicant’s race.

An individual was only included in the sample if four of the five raters agreed on the individual’s race.

In the Kaplan case, the Sixth Circuit Court of Appeals refused to consider the “experts” use of visual identification of race because it was unreliable and because the sample used was not representative of Kaplan’s applicant pool. Further, the race raters were supplied with the names of the individuals whose photos were reviewed thereby potentially tainting the visual inspection. A U. S. District court in Maryland reached the same result in the Freeman case.

Interestingly, the Sixth Circuit observed that the EEOC runs credit checks for many of its positions.

The EEOC’s reactions to the recent decisions give no indication that the EEOC will back off its position on use of criminal and credit background checks.

Background checks can be a very useful tool in the hiring process but must be used carefully. When using criminal background checks, the EEOC requires that you consider 1) the nature and gravity of the offense, 2) the time that has passed since the offense, and 3) the nature of the job. It is also important to remember that only convictions should be considered, not arrests.

Additionally, in most circumstances, you must comply with the Fair Credit Reporting Act when seeking credit or criminal background checks.

Credit checks and criminal background checks are very useful tools, but you must take care in using them properly to avoid potential claims.