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Spring Cleaning Series: Criminal Background Checks

Labor & Employment Law Update Christopher L. Nickels

This is the second in a series of “Spring Cleaning” alerts. As part of this series, we will provide you with various to-do items and tips in the employee benefits, employment, and immigration areas.

There is no one size fits all for employers seeking guidance into employee or applicant criminal background inquiries. Many employers ask for this information as part of the new hire process and some use third parties to perform background checks. What employers can ask for, and what they can do with that information, is subject to a myriad of federal, state, and local statutes. With the summer hiring season just around the corner, spring is a good time to review your company’s employment application and criminal background check policies. 

Inquiries and Use of Criminal Records Information

Federal law. Many employers ask applicants to disclose criminal records information in their employment applications. Federal law does not prohibit employers from inquiring into arrest or conviction records, but the Equal Employment Opportunity Commission (“EEOC”) has taken an aggressive position with respect to how employers may use this information. (Click here for a recent Quarles & Brady client alert relating to the EEOC’s aggressive approach to background checks).

Employers are obviously prohibited from treating applicants differently based upon a characteristic protected under federal law. For example, it is evidence of discrimination if an employer rejects applicants of one ethnicity with certain criminal records, but does not reject applicants of other ethnicities with the same or substantially similar criminal records. Federal law also prohibits “disparate impact” discrimination, under which an employer may violate federal law if it implements criminal records exclusions that disproportionately exclude people in protected categories, such as race or national origin. Seemingly neutral policies with blanket exclusions for particular conduct (e.g., no hiring of persons with a drug, assault, or alcohol-related conviction) may disproportionately impact minorities or other individuals protected under federal law.

Employers are, however, permitted to lawfully exclude applicants from certain positions based on their criminal histories when doing so is consistent with business necessity. After all, a financial firm may not find it prudent to hire an accountant with a recent history of embezzlement, or a retailer might not want to employ a recently convicted shoplifter. According to the EEOC, an employer can make this showing if it: (1) considers the nature of the crime, the time elapsed since the criminal conduct occurred, and the nature of the specific job in question; and (2) gives an applicant who is excluded by the screen the opportunity to show why he or she should not be excluded.

Blanket exclusions that do not take into consideration the circumstances of the particular job and the applicant’s criminal history may violate federal law and are likely to raise the ire of the EEOC. Therefore, we recommend that all employment decisions be made based upon an individualized, job-related analysis and that employer policies do not contain per se disqualification standards.

State law. State law potentially adds another layer of regulation into criminal background inquiries. If your company’s operations recently expanded into other states, if the law of a particular state has recently changed, or simply if you did not fully vet state law issues when initially crafting a background check policy, now is the time to review whether your company’s practices comply with state law.

Many states (including Illinois, Iowa, Colorado, Pennsylvania, and others) prohibit inquiries into arrest records. Others (such as Michigan) limit arrest inquiries into only pending felony charges. Still others (such as Ohio, Georgia, and Maryland) prohibit employers from inquiring into convictions or other criminal records that have been sealed or expunged. States may present a combination of these and may have still other prohibitions such as how far back an employer can inquire. Notably, most states require employers to conduct certain background checks on employees who work in specific industries, such as health care and education.

Some states, such as Wisconsin, go even further and prohibit discrimination based on an individual’s arrest or conviction records. Thus, like race, age or disability, an individual with records of an arrest or conviction is protected from discrimination. Wisconsin allows an exception if the employer can show that the arrest or conviction substantially relates to the circumstances of the particular job. Notice the theme: Per se exclusions are problematic, while individualized exclusions based upon conduct that is reasonably related to the job are generally permissible.

There is no simple, consistent policy that satisfies the requirements in all 50 states. Therefore, it is necessary to review the law in each state in which a company hires employees.

Local law. A number of municipalities (and even some states) have enacted “ban the box” statutes, which typically prohibit employers from inquiring into criminal history until after a conditional offer of employment has been made. The purpose of ban the box legislation is to enable ex-offenders to display their qualifications in the hiring process before being asked about their criminal records. (Click here for a recent Quarles & Brady client alert relating to ban the box legislation).

Consumer Reporting Agency Background Checks

In addition to, or in lieu of, asking for criminal records, some employers retain consumer reporting agencies to perform background checks on applicants or employees. If so, there are required procedures under the Fair Credit Reporting Act (“FCRA”) that must be followed. Keep in mind that employers must comply with the same federal, state, and local statutes described above in deciding how to use information obtained from a background check.

Under the FCRA, employers must inform the applicant or employee that the employer might use the information obtained for decisions about his or her employment and must receive the individual’s written permission to perform the background check. This notice must be in writing and in a stand-alone format. The notice cannot be in an employment application. If you use a third party to provide an “investigative report” — a report based on personal interviews concerning a person’s character, general reputation, personal characteristics, and lifestyle — you must also tell the applicant or employee of his or her right to a description of the nature and scope of the investigation.

If taking adverse action (for example, not hiring an applicant or firing an employee) based upon background information obtained through a company in the business of compiling background information, the FCRA has additional notice requirements including providing a summary of rights notice and informing the applicant that he or she has the right to dispute the accuracy or completeness of the background check.

A handful of states have promulgated state mini-Fair Credit Reporting Acts. These mini-FCRA laws often track the FCRA’s consent and disclosure, pre-adverse action and adverse action requirements, but may have other requirements that differ from the federal regulations of which employers should be aware.

The only thing that is clear is that the rules relating to background checks are far from clear and can vary widely depending on your jurisdiction.

For more information or assistance performing criminal background checks, please contact Christopher L. Nickels at (414) 277-5519 / [email protected], Tracy Bradford Farley at (312) 715-5214 / [email protected], Fred Gants at (608) 283-2618 / [email protected], Otto W. Immel at (239) 659-5041 / [email protected], Eric B. Johnson at (602) 229-5425 / [email protected], or your Quarles & Brady attorney.