EEOC’s Lawsuit Dismissed against Alleged Discriminatory Background Check Practices

EEOC’s Lawsuit Dismissed against Alleged Discriminatory Background Check PracticesOn August 9, 2013, The United States District Court for the District of Maryland dismissed the EEOC’s Title VII lawsuit, without a trial, against a national conference and exhibit services company. The EEOC alleged that the Company implemented a hiring policy that, though facially neutral, had a discriminatory effect on African-American and male applicants.

The following is a summary of this case and key points considered by the Maryland District Court to issue its summary judgment in favor of the Defendant.  Although the EEOC failed to make its case due to flawed statistical data, the Court was very clear in its position that national statistics could not be used to support a disparate impact claim for a specific hiring practice.  The case shows that the EEOC must isolate and identify the step or steps in the hiring process that is the alleged cause of the disparate impact claims.  This case will most likely go through the appeals process; however, the outcome for employers that use employment background checks is a positive one.  Court’s position is that the EEOC cannot rely on their “bright-line” approach at using national statistics alone to prove disparate impact with the use of criminal and credit background checks.    

An Employer’s Right to Conduct Background Checks

The right to conduct criminal history checks or even credit history checks among other employment background screening components is viewed as a legitimate practice by the Court.  Employers continue to have a clear incentive to avoid hiring employees with the proven tendency to steal, commit fraud, appear untrustworthy, unreliable, or even have the potential to engage in workplace violence.  Based on this common practice used by many employers across the United States, the EEOC continues to challenge these practices as a violation of Title VII of the Civil Rights Act of 1964.  According to the EEOC, such screening practices and hiring policies may constitute an unlawful employment hiring practice if a company’s policies have a disparate impact on the basis of race, religion, sex, or national origin.  Employers are constantly challenged to demonstrate that conducting criminal background checks and/or credit history checks is job-related and consistent with business necessity.

The Company’s Goals and Policies Regarding Background Checks

The Defendant is a national provider of services for expositions, conventions, corporate meetings, and events.  The Company employs over 28,000 part and full-time employees and had experienced continued problems with embezzlement, theft, drug use, and workplace violence by its staff.  Like most employers, the Company created a background screening program with goals in mind to combat these issues and to avoid exposure to negligent hiring/retention lawsuits; increase the security of the Defendant’s assets and employees; reduce liability from inconsistent hiring or screening practices; proactively reduce the risk of employee-related loss; and mitigate the likelihood of an adverse incident occurring on company property that could jeopardize customer or employee confidence.

The Company also took a very prudent approach by creating a background screening program specifically tailored by employee type while utilizing screening components that made sense based on business necessity.  General employees that did not have credit sensitive jobs received a social security number trace along with a criminal background check.  For credit sensitive positions that included duties such as handling money, credit card information, budgetary authority, or accounting functions a credit history check was conducted.  Company executives, managers, and department heads received an education verification as well.  All levels of employment background checks were conducted on a post-hire basis as the last step in the hiring process.

The Company outsourced their employment background screening services to a consumer reporting agency/background screening firm and followed necessary FCRA protocols such as proper authorization and consent and followed adverse action procedures to protect the rights of consumers.    

The Company also required applicants to disclose their criminal conviction history in detail; however, provided a disclaimer on the application that states specifically that applications would not automatically be precluded from employment consideration with prior criminal history.  Each criminal record disclosure was also assessed on an individual basis and against business necessity before a final decision was made.

The Background Check Evaluation Process

The Company also followed a multi-step evaluation process to assess the screening results. The evaluation was first performed by considering the truthfulness about criminal history disclosures along with serious misrepresentation on the application would not be considered for employment.  Consideration was also given for the type of criminal history discovered along with the evaluation of outstanding arrest warrants.  Each was assessed on an individual basis and crimes that would generally disqualify an applicant including those involving violence, destruction of private property, sexual misconduct, felony drug convictions, or job-related misdemeanors.   These are all rational considerations for a company within the convention and meeting services industry.   

A Discrimination Complaint was Filed

In January of 2008, an applicant filed a discrimination complaint with the EEOC, asserting that the company violated Title VII by rejecting her for employment based on information regarding her credit history.  The EEOC then filed a complaint alleging that the employer violated Title VII of the Civil Rights Act of 1964.  In its complaint, the EEOC alleged since February of 2001, “the Defendant engaged in a “pattern or practice” of discrimination against African-American job applicants by using poor credit history as a hiring criterion (the “credit class”), and against African-American, Hispanic, and male job applicants by using criminal history as a hiring criterion (the “criminal class”). The EEOC asserted that these hiring criteria have a significant disparate impact on the identified suspect classes and are not job-related or consistent with business necessity.”

The EEOC’s Burden of Proof

For the EEOC to prevail on a claim of disparate impact, they must show that a certain class of applicants is disproportionately and adversely impacted by a particular employment practice on the basis of their race, color, religion, sex or national origin as stated in Title VII.  The EEOC ultimately bears the burden of proving discriminatory impact by showing statistical disparities between the number of protected class members in the qualified applicant group and those in the relevant segment of the work-force.  If shown, the burden then shifts to the employer to prove that the allegedly discriminatory policies or practices are job-related for the position in question and consistent with business necessity.

The EEOC attempted to make a sufficient statistical demonstration of disparate impact through two expert witnesses and their statistical reports.  By federal rule, expert statistics are unreliable if they are based on “incomplete data sets and inadequate statistical techniques” as stated in case.  The statistical evidence provided by the EEOC’s experts included several flaws.  The reports did not include a random sample of accurate data from the relevant applicant pool and time period. Experts only utilized a fraction of the applicant information provided to them and even included duplicate information; included only a few individuals cherry-picked for inclusion from the discovery material; and did not include data from half of the company’s branch offices.  As stated in the summary of the case, “the used database is so full of material flaws that any evidence of disparate impact derived from an analysis of its contents must necessarily be disregarded.” The second expert witness’s report added nothing significant to the first and replicated the analysis and confirmed the conclusion regarding disparate impact claim.

The Court’s Reliance on National Statistics to Prove Disparate Impact

Both reports included national statistics related to disparate impact which the EEOC attempted to justify as sufficient evidence to support their case, as the data used from the applicant analysis report was considered worthless.  The Court was very clear on their view that this national statistical data was still not a representation of the specific applicant pool under question.  The summary of the Court’s decision was clear.   To use general population statistics to create an inference of disparate impact, the general populace must be representative of the relevant applicant pool. (the “proper comparison is between the racial composition of the at-issue jobs and the racial composition of the qualified . . . population in the relevant labor market.”). Here, there is no indication that such is the case. The general population pool “cannot be used as a surrogate for the class of qualified job applicants, because it contains many persons who have not (and would not) be” applying for a job with the Defendant.  Moreover, the general statistics that the EEOC’s experts rely on relate to things that are not even considered under Defendant’s hiring criteria, such as arrest and incarceration rates.”    

Ultimately, the EEOC bears the burden to establish their case through usable and credible statistical evidence.  It is not the burden of the Defendant to conduct their own analysis; however, rebut the statistics provided by the EEOC.  Without the support of national statistics or reliable applicant data to support the EEOC’s case it could not survive. 


The important take-a-way from this case is that the EEOC must isolate and identify the step or steps in the hiring process which are the alleged cause of disparate impact.  General population statistics will not support the EEOC’s position on the use of criminal records and credit history data to prove that background checks alone create a disparate impact.

EBI, along with other industry experts will continue to weigh-in and keep you informed regarding developments regarding this topic.  We are committed to providing employers with valuable education and resources on changing legislation, cutting-edge, and compliant solutions to meet federal, state, local, and international mandatory legal guidelines.  EBI is not providing legal advice or counsel and nothing provided in this publication should be deemed as legal guidance or advice.  Readers should consult with their own legal counsel to determine their responsibilities or if they have questions on any information provided by EBI.

Employers are urged to consult with their employment legal counsel to review policies and procedures on an on-going basis to avoid discrimination claims along with keeping their background screening program current and compliant.

About EBI

EBI is a technology driven innovator and leader in providing domestic and global employment background checks, drug testing, occupational healthcare, and I-9 compliance solutions for employers.  With emphasis on business process optimization, EBI services over 5,000 clients in over 200 countries and territories worldwide and specializes in the development, implementation and management of comprehensive and customized employment screening programs for large and multi-national clients.  EBI is a founding member and active participant within the National Association of Professional Background Screeners (NAPBS).  EBI is the only background screening firm to hold an ISO27001:2005 certification for information security and to be accredited by the Background Screening Credentialing Council (BSCC) created by the NAPBS.

Background Checks, EEOC & FCRA

Robert Capwell

Posted By: Robert Capwell

EBI’s Chief Knowledge Officer, Mr. Robert E. Capwell, is considered one of the leading experts in the background screening industry with over 22 years of experience in the field. Mr. Capwell was a contributing author of the second edition of the ASIS Pre-employment Background Screening Guidelines and has written numerous articles and whitepapers for various publications including a periodic column on background screening for The Society for Human Resource Management (SHRM) Online. He has been quoted in The Wall Street Journal, Human Resource Executive Magazine, Entrepreneur Magazine, and several HR-related publications. Mr. Capwell speaks regularly to industry colleagues and HR Professionals both nationally and internationally.