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VOL. 128 | NO. 125 | Thursday, June 27, 2013

Arrested Development

Complaints spotlight concerns over criminal-background checks

By Jennifer Johnson Backer

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It’s not illegal for businesses to use criminal-background checks when making hiring decisions, but two recent complaints filed by federal regulators highlight the increasing government scrutiny of criminal and credit checks.

Complaints have been filed against Dollar General and a U.S. unit of German automaker BMW AG over hiring practices. Memphis attorneys caution against blanket rules that prohibit hiring applicants with criminal records.

(AP Photo/Conroe Courier, Eric S. Swist)

Earlier this month, the Equal Employment Opportunity Commission sued Goodlettsville, Tenn.-based Dollar General and a U.S. unit of German automaker BMW AG.

The EEOC complaints said the companies refused to hire applicants with criminal records, when they should have individually considered each applicant. The lawsuits said the companies’ practices disparately impact African-Americans, who tend to have higher arrest and conviction rates than whites.

Joyce Margulies, an attorney with Margulies Employment Law Consulting in Memphis, said employers may consider an applicant’s criminal record when making hiring decisions, but she advises against blanket rules that prohibit all applicants with a criminal record from being hired.

“Employers should not base employment decisions on arrest records,” said Margulies, who works with Memphis-based companies to prevent and resolve employment disputes.

According to a national 2010 survey by the Society of Human Resource Management, about 92 percent of employers use criminal-background checks for at least some job openings.

Stacy McCall, president and CEO of ServiceMaster by Stratos in Downtown Memphis, said the company does use criminal-background checks but carefully evaluates each applicant individually.

“We do ask applicants if they have ever been convicted of a felony, but we don’t use this information negatively against them,” she said. “We understand that people make mistakes … we only ask they that are truthful in their application.”

When an applicant discloses that they have a criminal record, McCall said ServiceMaster by Stratos works to place the candidate in an appropriate environment.

“If they are honest with us, then we will work with our applicants to give them a second chance,” McCall said.

Katharine Kores, district director of the EEOC Memphis District Office, said regulators have not litigated any cases in Memphis tied to disparate impact of criminal record policies, but they did have a case in which a local company adopted a policy that would exclude anyone with a criminal conviction record. While a black employee with a conviction record was dismissed, a white employee with a conviction was not dismissed.

That case was settled before it went to trial.

“Employers run the risk of losing valuable employees if they put these kinds of policies into effect and apply them to their workforce,” Kores said. “Employment policies should be based on the requirements of the specific position.”

Kores said blanket policies that exclude all applicants with a criminal background from employment runs the risk of disparately impacting African-Americans and Hispanics.

Last spring, the EEOC issued new guidance for companies that use criminal-background checks in their hiring process. The new guidelines advised businesses to consider the job for which the applicant applied, the nature of the crime and the amount of time that has elapsed since the crime occurred or the completion of the sentence.

The new EEOC guidance was issued after a division of PepsiCo Inc. said it would pay $3.1 million to settle charges the maker of carbonated beverages used criminal-background checks to discriminate against black applicants.

Margulies said applicants convicted of crimes don’t get special treatment under the new EEOC guidance, but regulators can sue if they believe companies are using information about prior convictions to disparately discriminate against a racial or ethnic group.

“Employers would be well advised to put into place a system which tracks decisions not to hire because of a criminal record,” she said.

National legal experts interviewed by The Wall Street Journal raised concerns that federal hiring rules could prove challenging for businesses that want to prevent people with violent criminal records from working with customers and in specific workplaces that work with vulnerable populations, like children, the sick and senior citizens.

Daphne Large, president and CEO of Cordova-based Data Facts Inc., a company that offers employment and background screenings, encourages her Memphis-area clients to develop specific screening procedures for job positions.

“Employers should have every right to use criminal-background checks as part of their on-boarding process,” she said.

Large says she believe background and criminal checks help protect customers and current employees.

Not all EEOC cases have had past success.

In 2011, a federal judge ordered the EEOC to pay Memphis-based PeopleMark Inc. $750,000 for continuing to sue the company after evidence surfaced that there was no discrimination. PeopleMark said it regularly hired people with past criminal records.

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