The EEOC exhibited the classic definition of stupidity (expecting the same  circumstances to yield a different result) in the case of EEOC v. Freeman (D. Md. Sept. 4, 2015). The Agency sued Freeman, a corporate events planning company, alleging that its background check policy had a disparate impact based upon race. A disparate impact claim does not require a showing of discriminatory intent, but generally must be supported by “[r]efined, statistical comparisons.” Even though this has been the law since 1989, the EEOC pursued the Freeman case with only generalized statistical data about the correlation between race and sex and negative criminal and credit histories. This was wholly inadequate, the Court explained, even if the data had been otherwise accurate. (It wasn’t, as we explained in a previous ELB). The Commission’s stupidity was pursuing the claim after the Court found the EEOC’s statistical expert’s work was “inexcusably slip-shot and wholly unreliable,” “mindboggling” and containing “unexplained discrepancies.”

Although, the Court recognized the validity of evaluating whether an employer’s background check policies had a discriminatory impact, it found the EEOC’s analysis and statistics so unsound that—after its 2013 decision to exclude the EEOC’s expert reports and rule in Freeman’s favor, and after the Fourth Circuit Court of Appeals upheld the decision earlier this year—it awarded $938,771.50 in attorneys’ fees to Freeman.

Four days after the beat down in Freeman, the EEOC covered its loss, obtained a $1.6 million settlement involving the required use of background checks by a contractor of BMW. EEOC v. BMW Manufacturing Co., LLC (D. S.C. Sept. 8, 2015). There were 56 known claimants in the case. BMW outsourced its logistics function and invited its employees to apply for employment with the logistics contractor, BMW-MC. BMW required the contractor to conduct criminal background checks of its applicants, including those who were transitioning from BMW, even if they had worked for BMW for years without incident. The EEOC alleged that the background check requirement had a discriminatory impact based upon race which could not be overcome by showing a business necessity. In addition to the financial outcome, BMW-MC agreed to establish a new background check policy, operate under a consent decree for three years and post a notice.

Criminal and credit background checks and current arrest records may be permitted when an employer is able to establish the business necessity for the information. The use of relatively recent, job-related conviction records are most likely to pass scrutiny. For example, an employer will likely pass this level  of  scrutiny if  all  applicants for  cash-handling  positions  arescreened for theft or dishonesty-related convictions in the past seven years and if the inquiry is somewhat individualized (for example, if the applicant is given an opportunity to provide positive evidence of reform). Learn more about the EEOC’s 2013 guidance on background checks—and medical inquiries—here.