EEOC’s Policy On Employee Criminal Records Scrutinized

The Equal Employment Opportunity Commission (EEOC) announced last year a new enforcement guidance under Title VII of the Civil Rights Act of 1964 to employers regarding the use of arrest and convictionrecords in employment decisions. Though there is no federal law prohibiting an employer from asking about arrest and/or conviction records, this recent guidance informed employers that even a neutral and uniformly applied “policy (e.g., excluding applicants from employment based on certain criminal conduct) may disproportionately impact some minority groups protected under Title VII, and may violate the law if not job related and consistent with business necessity.” If a background check is in fact necessary, the EEOC recommended that the policy at least consider “the nature of the crime, the time elapsed, and the nature of the job, and then provide an opportunity for an individualized assessment for people excluded.”

This guidance left employers in quite a dilemma, as on one hand if employers continued to uniformly use neutral background checks on all employees, they may run the risk of being subject to a disparate impact lawsuit. On the other hand, refusing to conduct background checks may be problematic as they have played a vital role in enabling employers to comprehend employees’ criminal history in an effort to avoid liability for criminal or fraudulent acts committed by employees and/or avoiding claims of negligent retention.

Faced with this predicament, a recent federal court in Baltimore cast serious doubt on the EEOC’s background check guidance. In the case, the EEOC filed a lawsuit against a corporate events provider that had a uniformly applied policy of running background checks on all prospective employees prior to commencing employment. The EEOC challenged this policy claiming that it had a disproportionate effect on minorities due to the higher statistical incarceration rates for minorities. The court dismissed the case on summary judgment in favor of the company due to the unreliability of the EEOC’s witnesses; however, the judge went out of his way to state his strong disdain for the EEOC’s guidance. Specifically, the judge noted that the EEOC’s guidance places employers in an unworkable position due to the inherent risks that can come from ignoring criminal history checks and employers should not have to second guess their decision to obtain fundamental information on their potential workers.

Although this opinion casts doubt on the EEOC’s enforcement of background checks, this opinion does not affect the guidance itself and best practices suggested by the EEOC. Unfortunately, there is no bright line rule governing background checks and companies should be sure to consult with an attorney before implementing a background check policy that could include criminal history or credit checks.

Nick Johnson is an associate attorney with Berenzweig Leonard, LLP, a DC regional business law firm. He can be reached at njohnson@BerenzweigLaw.com.

Is It Negligent for a Company to Hire Someone Who Turns Out to be a Thief?

An administrator for a Vienna law firm was accused of stealing over half a million dollars from a client.  The client had hired the law firm to pursue a specific type of immigration visa that entailed making a commercial investment of $500,000.  The employee directed the client to deposit this money in a bank account that he controlled, and the employee later absconded with the money instead of using it for the client’s visa process. The employee fled overseas and faces criminal prosecution.

The client sued the law firm over the stolen funds, alleging among other legal claims that the law firm was negligent in hiring the administrator in the first place.  The client claimed that if the law firm had done the appropriate background check on the employee prior to hiring him, it would have discovered that he and his family had several unsatisfied monetary judgments against them.  Therefore, the employee should not have been entrusted with a position that entailed handling large sums of client money and the law firm was negligent in bringing him on board.  The law firm countered that it had no reason to suspect that the employee would end up being a thief, and therefore, the firm was not negligent in hiring him.

A federal judge in Alexandria recently dismissed the client’s negligent hiring claim against the law firm.  The judge stated that, in Virginia, the test for negligent hiring is whether the employee has negligently placed an unfit person in an employment situation that could cause unreasonable risk of harm to others.  The judge concluded that even if the administrator had money troubles in his past, causing financial harm to others is not enough to raise a claim for negligent hiring.  There must be actual physical injuries inflicted by an employee before an employer can be held liable for negligent hiring.  It should be noted that the client made several other legal claims against the law firm related to the theft, and some of those claims are still pending.

Declan Leonard is managing partner of the Washington, DC regional business law firm Berenzweig Leonard, LLP. He can be reached at DLeonard@BerenzweigLaw.com.