There have been several recent developments that make this an opportune time for employers to re-evaluate their background check practices. First, the EEOC has issued updated guidance on employer use of criminal history information in background checks of job applicants. Second, two recent Fair Credit Reporting Act (“FCRA”) class action cases highlight the need for close attention to the manner in which employers obtain consent from employees prior to initiating a background check.

EEOC Issues Revised Criminal Background Check Guidelines for Employers

On April 25, 2012, the EEOC issued an updated Enforcement Guidance to employers on how to properly consider job applicants’ criminal histories under Title VII of the Civil Rights Act of 1964 (“Title VII”). The revamped guidelines reinforce the EEOC’s long-held position that employers’ reliance on applicants’ criminal background information may have a disparate impact on individuals because of their race or national origin, thereby violating Title VII. Under the disparate impact theory of liability, whenever an employment practice has a disproportionate effect on a particular protected class, the employer must show that the practice is “job-related and consistent with business necessity.” In the new guidelines, the EEOC discusses in detail the steps employers need to take if they hope to establish that a decision to reject certain applicants because of criminal history is truly a business necessity.

The guidelines distinguish between arrests and convictions. With respect to arrests, the guidelines make clear that the mere “fact of an arrest” is not a sufficient reason to reject an applicant. However, the EEOC notes that if the employer conducts an inquiry into the underlying circumstances of the arrest, it may be able to rely on those underlying circumstances to establish the business necessity of excluding an applicant from a job. (Note that some states may have other restrictions regarding arrest-related inquiries. For example, Illinois, California and New York generally prohibit employers from inquiring into arrests that did not result in convictions as part of the hiring process or using the fact of such arrests for employment purposes).

With respect to convictions, the guidelines state that while the fact of the conviction can be used as evidence that the applicant has engaged in wrongdoing, employers cannot apply blanket rules excluding all applicants who have certain types of criminal convictions. Instead, employers should only use convictions to exclude applicants from positions if they can establish that such an exclusion is job-related and consistent with business necessity. The EEOC specifically notes two circumstances in which employers will consistently meet the business necessity defense: 1) the employer validates the criminal conduct screen for the position using the Uniform Guidelines on Employee Selection Procedures; or 2) the employer conducts a “targeted screen” with an “individualized assessment” of the applicant’s situation prior to rejecting an applicant because of a particular conviction. Employers should consider at least three factors as part of the targeted screen: 1) the nature of the crime; 2) the time elapsed; and 3) the nature of the job. Other factors for consideration as part of the individualized assessment include but are not limited to: any additional information the employer gathers from the applicant about the conviction after informing the applicant that he or she may be excluded because of the conviction; the facts and circumstances surrounding the offense; the number of offenses committed; the individual’s post-conviction employment history; rehabilitation efforts; and other evidence of the individual’s character.

The EEOC’s Enforcement Guidance contains some best practice recommendations for employers, including:

  • Eliminating blanket policies or practices that automatically exclude individuals from employment based on any criminal record;
  • Limiting inquiries into criminal convictions to those types of convictions that are potentially job-related for the position in question and consistent with business necessity;
  • Developing a narrowly-tailored written policy and procedure for screening applicants and employees that provides for individualized consideration of criminal history; and
  • Training managers, hiring officials, and decision makers on how to implement the policy and procedures consistent with Title VII.

The EEOC has stepped up enforcement actions regarding criminal background check practices in recent years. Employers who consider criminal history in employment decisions must be ready to show that their policy is narrowly tailored to identify specific criminal conduct with a demonstrably tight nexus to the position in question. The Enforcement Guidance, along with EEOC-provided Questions and Answers, can be accessed here.

Two Recent Fair Credit Reporting Act Cases Emphasize the Need for Care in Obtaining Consent for Background Checks

Along with ensuring that background screening processes are compliant with Title VII, now is also a good time for employers to review Fair Credit Reporting Act (“FCRA”) compliance. The FCRA requires that employers obtain “written” consent from applicants before conducting background checks using a third party reporting agency (i.e., a “consumer reporting agency”). Plaintiffs’ attorneys are becoming increasingly aggressive in challenging small details in the manner in which employers go about obtaining this consent. Two recent cases are particularly noteworthy.

First, in Singleton v. Domino’s Pizza, LLC, the plaintiffs brought a class action in the federal district court in Maryland challenging the content of a FCRA notice and consent form used by Domino’s. The FCRA requires that employers notify individuals of their intent to obtain a background report on a form that consists “solely” of that notice. Although the notice of intent to obtain the report can be combined with the form by which the individual actually provides written consent, the notice cannot be included as part of other documents. It has always been clear that the FCRA notice cannot be included as part of boilerplate language at the end of a job application—it must be on a separate document apart from the application itself. Although Domino’s had a FCRA notice/consent form that was separate from its employment application, the plaintiffs in Singleton took issue with the fact that the form contained a release of liability. Although such releases are commonplace, the Singleton plaintiffs argued that the extra release language violated the FCRA because Domino’s notice/consent form went beyond what was required by the FCRA and thus no longer consisted “solely” of the notice and consent.

The FCRA requires that employers notify individuals of their intent to obtain a background report on a form that consists “solely” of that notice.

In January of this year, the court issued a ruling agreeing with the Singleton plaintiffs—taking a very narrow view of what can be included on a FCRA notice and consent form. The court found that because the FCRA uses the word “solely” when speaking of the required notice, anything extraneous in the notice has the potential to invalidate the effectiveness of the notice under the law. In light of how the Singleton court interpreted the FCRA, employers would be wise to re-evaluate the content of their FCRA notices and consider removing from such notices anything that is unrelated to what is specifically required by the FCRA itself. Other information, such as releases of liability, can be provided on separate documents apart from the FCRA notice.

A second noteworthy case is Pitt v. Kmart Corporation, which is an ongoing class action case in the federal district court in Richmond, Virginia. In Pitt, the plaintiffs are challenging a number of aspects of Kmart’s FCRA practices. Most significant, however, is the fact that the plaintiffs are challenging Kmart’s use of an electronic signature to constitute the “written” consent required by the FCRA. Although the prevailing view is that the federal E-SIGN Act allows electronic signatures to substitute for hard-copy signatures in a wide variety of circumstances, including where statutes like the FCRA require “written” consent, the plaintiffs contend that the E-SIGN Act applies only in the commercial context and is not applicable to the employment arena. The plaintiffs in Pitt are likely to fail in their argument, as the Federal Trade Commission (the agency responsible for administering the FCRA) has indicated in an opinion letter that the E-SIGN Act allows electronic signatures for FCRA purposes and, moreover, the weight of the authority interpreting the E-SIGN Act makes clear that its reach is not limited to commercial contexts. Nevertheless, the case shows the creativity of plaintiffs’ attorneys in challenging FCRA-related matters. If your company is using or is planning to use an electronic signature to obtain consent from applicants for background checks, it is important that you ensure that your program meets the requirements of both the E-SIGN Act and the FCRA.