New EEOC lawsuit for discrimination based on credit report and criminal records

The Equal Employment Opportunity Commission (EEOC) announced  on October 1, 2009 that they have filed a lawsuit against Freeman, a firm that offers nationwide convention services, on the basis that it used credit reports and criminal records to unfairly discriminate against black, Hispanic and male  job applicants.    This case has the potential to have a profound impact on the way employers hire in the U.S.

According to the EEOC press release the lawsuit charged that, “This practice has an unlawful discriminatory impact because of race, national origin and sex, and is neither job-related nor justified by business necessity.”

Even though the use of criminal records and credit history does not directly target people   protected by civil rights laws, the argument is that when those criteria were applied to Freeman applicants, the end result was that greater numbers of blacks, Hispanics and males were affected.  This is referred to as a “disparate impact.”  In other words, by using this information to make hiring decisions, the practical impact was that members of protected groups were unfairly treated and rejected in higher numbers.   

The EEOC has been active in identifying barriers that contribute to discrimination     In 2007, the EEOC launched the “E-RACE” (Eradicating Racism and Colorism from Employment) Initiative. The purpose was to “improve EEOC’s efforts to ensure workplaces are free of race and color discrimination.” http://www.eeoc.gov/eeoc/initiatives/e-race/index.cfm

The use of credit reports and criminal records being used to deny employment has been hot-button issues for the EEOC.  The last significant case was El. v. Septa, 479 F.3D 232 (3d. Cir. 2007), where a 40 year-old second degree murder conviction was allowed to be used to deny employment.  However, part of the decision was based upon the fact that the applicant that was suing for discrimination did not present any statistical evidence to rebut expert testimony by the employer that even a 40 year old crime can be relevant.  The company had a “bright-line” policy of rejecting applicants with convictions for violence. 

Since then, a study was conducted by Professor Alfred Blumstein at Carnegie Mellon University that suggested that after a period of as little as five years for some crimes, a person with a criminal record was no more likely to re-offend then a person with no criminal record.   Ironically, the same professor was the expert in the El v. Septa  matter where a 40 year old murder was sufficient to deny employment .

ESR has written an in-depth analysis of the Blumstein study at:   http://www.esrcheck.com/Blumstein-and-Nakamura-study-on-redemption-in-Criminology.php”>http://www.esrcheck.com/Blumstein-and-Nakamura-study-on-redemption-in-Criminology.php

This case will not likely be finalized anytime soon and could well need to go to higher courts for a final resolution.  However, the case is a stark reminder that employers need to review their hiring practices, to ensure that any pre-employment assessment tool is both a valid predictor and job performance and not discriminatory. 

In the case of criminal records, Employment Screening Resources (ESR) has long advised employers that they should NOT automatically reject an applicant with a criminal record, but should instead determine if there is a business necessity that precludes hiring.  The EEOC has suggested that employers take into account the nature and gravity of the crime, the nature of the job, and the age of the offense.  Similarly, ESR has also long advised employers that credit reports should be approached with caution, and only used where relevant to the job, such as positions involving access to cash, assets or fiduciary duties.