On June 11, 2013, the Equal Employment Opportunity Commission filed its first two lawsuits asserting that an employer’s use of felony conviction records to disqualify employees and applicants runs afoul of Title VII because using felony conviction records has a disparate impact on blacks. The EEOC’s lawsuits in Chicago and South Carolina follow its April 25, 2012 issuance of “Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964” (the “Guidance”). Although the EEOC described the Guidance as an “update,” the accompanying EEOC Questions and Answers [link] demonstrate the EEOC’s disdain for employers’ use of both arrest and conviction records when making employment decisions and signal an aggressive extension of previous pronouncements and rulings. A detailed analysis of the Guidance can be found by clicking here.

EEOC v. Dolgencorp LLC d/b/a Dollar General (Northern District of Illinois)
The EEOC’s complaint against Dolgencorp LLC d/b/a Dollar General (“Dollar General”) alleges that since at least 2004, Dollar General has engaged in ongoing, nationwide race discrimination in violation of Title VII by using criminal justice history information in the hiring process that the EEOC claims results in a disparate impact on a class of black job applicants.

According to the EEOC, Dollar General, working with a third-party vendor, created a criminal convictions matrix identifying various felonies[1] and misdemeanors,[2] and specifying how recent these convictions must be before they are deemed to require rescinding an employment offer or disqualifying of an applicant. The EEOC concludes that Dollar General’s utilization of its criminal convictions policy. Furthermore, the EEOC charges that the policy as applied does not provide for an individualized assessment for those applicants who receive a “Fail” result to determine if the reason for the disqualification is job-related and consistent with business necessity (for example, the EEOC points out that the policy does not allow for consideration of the age of the offender; any actual nexus between the crime and the specific job duties; employee, safety, or other matters necessary to the operation of Dollar General’s business; or the time or events that have transpired since the offense).

The EEOC cited to a variety of data to support its claim of disparate impact. It asserts that during the period of January 2004 to April 2007, of all of the conditional offers of employment made by Dollar General nationwide, approximately 259,000, or 75%, were made to non-blacks and approximately 84,700, or 25%, were made to blacks. Of the conditional non-black employees, approximately 18,300, or 7%, were discharged for failing the background check. In comparison, of the conditional black employees, approximately 8,400, or 10%, were discharged for failing the background check. The EEOC concludes that the “gross disparity” in the rates at which black vs. non-black conditional employees were discharged on account of the criminal background check policy is “statistically significant.”

EEOC v. BMW Manufacturing Co., LLC (District of South Carolina)
The EEOC’s complaint against BMW Manufacturing Co., LLC alleges that BMW maintains a criminal conviction background check policy that has a disparate impact on black employees and applicants in violation of Title VII.

The claimants in the lawsuit are former employees of UTi Integrated Logistics, Inc. (“UTi”), which previously provided logistics services to BMW. In July of 2008, the contract between UTi and BMW was terminated, and BMW contracted with a new contractor to perform its logistics services. BMW directed the new logistics contractor to perform criminal background checks on every UTi employee applying for transition of employment to the new logistics contractor, a total of 645 UTi employees. 

According to the complaints, the new logistics contractor discovered that 88 current UTi employees had criminal convictions in violation of BMW’s policy.[3]  The EEOC claims that the conviction policy operated to disproportionately exclude blacks:  of all the employees assigned by UTi to work at the BMW facility, 355, or 55%, were black and 290, or 45%,were non-black. Of the 88 employees who were determined to have violated BMW’s conviction policy, 70, or 80%, were black, and 18, or 20%, were non-black. The EEOC concludes that this “gross disparity” in the rates at which black and non-black employees were excluded from BMW on account of BMW’s criminal history background check policy is “statistically significant.”

The EEOC further alleges that the claimants were not provided with any individualized assessment of the nature and gravity of their criminal offenses, the ages of the convictions, or the nature of their respective positions. The EEOC also pointed out that the claimants were prohibited from the BMW facility without assessment or consideration of the fact that many had been working there for years without incident; as an example, the EEOC cites a black female claimant who was denied access to BMW solely based upon a 1990 misdemeanor conviction for a simple assault, punished only by a $137 fine, after nearly 14 years of service for UTi and prior BMW logistics service providers.

Lessons Learned From Dollar General and BMW
Although it remains to be seen how the federal courts will treat the EEOC’s new wave of lawsuits, the Dollar General and BMW complaints provide valuable insight into the expansive manner in which the EEOC intends to interpret the Guidance.

Individualized Assessment
The EEOC appears to have bootstrapped its Guidance contentions into allegations of wrongdoing in the two lawsuits: the complaints in both Dollar General and BMW specifically cite the employers’ failure to undertake an individualized assessment of their candidates for employment, even though the Guidance concedes that Title VII does not require such review. This suggests that the commitment to individualized assessments in a background check policy may prove to be a pivotal issue in the EEOC’s interpretation of its Guidance. Employers may have to review their policies and procedures to ensure that this individualized assessment is adequately provided for both in the written terms of the policy, and in its application.

Statistical Analysis
The EEOC has stayed true to its promise in the Guidance to utilize statistical analysis in evaluating whether a criminal background check policy has a disparate impact on a protected class. These cases will certainly evolve into a battle of statisticians trying to draw significance from a variety of facts in the EEOC’s attempt to demonstrate a disparate impact. What is noteworthy is the measure that the EEOC deems to be “statistically significant.” In the Dollar General case, the EEOC alleges that where 7% of non-black employees were discharged for failing the background check compared with 10% of black employees, a “gross disparity” exists. 

The characterization of this difference as “gross” is consistent with the EEOC’s historical four-fifths rule and confirms that even small statistical differences will be considered significant by the EEOC. Employers should bear this in mind when assessing the impact of their criminal background check policies.

Job Relatedness and Business Necessity
The EEOC’s view that disqualification of applicants or employees with the types of felony convictions at issue in Dollar General and BMW is not job-related and consistent with business necessity is certainly not shared by many, if not most, employers and will undoubtedly be hotly contested. Whether the EEOC will be able to prevail on those issues and whether the employers will be able to convince the courts that the felony convictions at issue are job-related and a matter of business necessity remain to be seen.

Policy Assessment
In both Dollar General and BMW, the EEOC appeared to take a hard look at the criminal background check policy at issue, with a particular focus on: (1) the types of offenses covered by the policy; (2) how far back in time the records check extends; (3) the nature of the positions that the policy applies to; (4) whether the policy is job-related and consistent with business necessity; and (5) whether the policy is capable of measuring the person for the job, and not the person in the abstract.

Employers who utilize criminal conviction records in employment decisions need to prepare for challenges by the EEOC and plaintiffs’ lawyers. Employers would be well-advised to review their current criminal background check policies to ensure that the issues raised by the EEOC in Dollar General and BMW have been adequately addressed.