The Equal Employment Opportunity Commission ("EEOC") last week suffered a major defeat in its aggressive litigation offensive against employers using criminal and credit background checks. In an excoriating opinion affirming a lower court decision inEEOC v. Freeman, the United States Court of Appeals for the Fourth Circuit held that the expert witness on which the EEOC entirely bases its theory of liability conducted "slipshod work" and is "utterly unreliable".

The EEOC takes the position that utilizing such background checks in making employment decisions violates Title VII under a "disparate impact" theory of liability, because it disproportionately affects African-Americans and Hispanics, who statistically have higher rates of arrest and criminal conviction or bad credit.

In Freeman, a United States District Court in Maryland granted summary judgment in favor of the employer, dismissing the EEOC’s claim that the company’s background check policies violated Title VII. In so doing, the District Judge in the case recognized Freeman’s policy of conducting criminal history or credit record background checks on potential employees as "a rational and legitimate component of a reasonable hiring process." The District Court chastised the EEOC for pursuing a disparate impact discrimination claim based on "a theory in search of facts to support it," disregarding the EEOC’s expert’s report as "laughable" and "an egregious example of scientific dishonesty." The EEOC subsequently appealed the District Court’s decision to the Fourth Circuit.

The Fourth Circuit panel agreed with the lower court as to the seriously flawed statistical data and conclusions submitted by industrial and organizational psychologist Kevin R. Murphy on behalf of the EEOC. What makes the EEOC’s reliance on this expert witness even more puzzling is that the EEOC has repeatedly used Murphy in similar lawsuits, and other federal courts have likewise ruled against the EEOC and excoriated the sloppy and error ridden expert reports.

One of the Circuit Judges on the Freeman panel expressed serious concern over the EEOC’s litigation tactics because "[d]espite Murphy’s record of slipshod work, faulty analysis, and statistical sleight of hand, the EEOC continues on appeal to defend his testimony...It would serve the agency well in the future to reconsider how it might better discharge the responsibilities delegated to it or face the consequences for failing to do so."

Under the EEOC’s current guidelines, for an employer to avoid Title VII disparate impact liability for excluding an individual with a criminal record, the employers must show that any reliance on a criminal history is job related and consistent with business necessity. In doing so, an employer must show that it considered three factors: (1) the nature and gravity of the offense, (2) the amount of time since the conviction, and (3) the relevance of the offense to the type of job being sought. The EEOC’s guidelines place the burden on employers to develop screening guidelines to individually assess each applicant/employee to determine whether a criminal history may be used as a factor in any employment decision.

It’s important to note that currently, no federal law prohibits the consideration of criminal convictions in making employment decisions, and the EEOC’s position is simply an aggressive outgrowth of the agency’s current strategic enforcement plan.

While the Fourth Circuit’s ruling is very good news, the case is still troubling from a business perspective. The EEOC continues to force employers to engage in expensive litigation to defend themselves against a theory of liability based on what amounts to fabricated evidence.