Legal Update: Background Checks Revisted

Revisiting Background Checks (Again)

Background checks continue to be a source of litigation. In June 2013, we highlighted two lawsuits filed by the EEOC against Dollar General and BMW for allegedly violating Title VII by relying on background checks (EEOC v. BMW Manufacturing Co., Inc.; EEOC v. Dolgencorp LLC d/b/a Dollar General). In both, the EEOC asserted that each company discriminated against African American job applicants through the improper use of criminal background checks as an applicant screening tool which were not job-related and consistent with business necessity and resulted in disparate impact. Since then, there have been additional developments related to background investigations in employment contexts.

In the BMW case, the claimants were employees of a company that provided logistical services to BMW. That company conducted criminal background checks, but they were limited to convictions within the past seven years. The company ended its contract with BMW and the employees had to reapply for jobs at BMW and subsequently had to undergo another criminal background check. During that process, several employees were found to have criminal convictions and were told they were no longer eligible for employment. At issue appears to be the duration of time since the conviction. The EEOC stated “The policy is a blanket exclusion without any individualized assessment of the nature and gravity of the crimes, the ages of the convictions, or the nature of the claimants’ respective positions.” While the Fair Credit Reporting Act (FCRA) allows for the use of criminal record checks in screening regardless of the time frame, the EEOC has considered limiting this to seven years. The EEOC alleges that BMW’s criminal conviction background check policy disparately impacts African American employees and applicants because BMW does not conduct an individual assessment of the nature or seriousness of the offense, how old the conviction is, or the nature of the claimant’s respective positions. Moreover, EEOC claims the policy is not job-related and consistent with business necessity.

In the latest action in the case (October 2014), the Federal judge in the U.S. District Court in South Carolina denied BMW’s motion to acquire documents from the EEOC related to the EEOC’s own policies and practices on background screening for its own employees. The judge ruled that the EEOC’s practices were not relevant to BMW’s defense.

In October, Dollar General agreed to settle a Fair Credit Reporting Act (FRCA) class action lawsuit for $4 million dollars (Marcum v. Dolgencorp). The suit was initially filed in 2012 by lead plaintiff Jonathan Marcum who alleged that the discount retailer solicited a background report on him without proper notification and that he didn’t get the job as a result of the report. The $4 million dollar settlement fund will be used to satisfy claims by approximately 112,000 class members who allegedly did not receive proper FRCA employee screening disclosures.

Amid all the litigation, in March the EEOC and the Federal Trade Commission (FTC) co-published new guidance that consolidated the two agencies’ rules on background checks. The two technical guidance reports, Background Checks: What Employers Need to Know and Background Checks: What Job Applicants and Employees Should Know are available on EEOC’s website. The fact that EEOC and FTC have collaborated to issue a new set of guidelines suggests that both agencies consider this topic to be a priority and could potentially share information and leads when enforcing laws concerning the use of background checks. Employers are well advised to consider the risks that come with the use of background reports when making personnel decisions.

Co-Author: Brian O’Leary U.S. Government Retired, Independent Consultant

Reprinted with permission from the Personnel Testing Council of Metropolitan Washington

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