EEOC Issues Guidance on Criminal Background Checks and Final Rule on RFOA Defense to Age Discrimination Claims
May 10, 2012
The Equal Employment Opportunity Commission (EEOC) has been active lately in providing additional rules and guidance on federal employment laws. In late April, the EEOC issued Enforcement Guidance on the use of criminal background information. In the view of the EEOC, employers should never rely upon arrest history in making employment decisions and should only rely upon conviction history after considering at least the nature of the crime, the time that has elapsed since it was committed, and the nature of the job. In addition, employers should provide individuals who have prior convictions in their records an opportunity to show that they should not be excluded from a position.
In March, the EEOC issued its final rule interpreting a unique defense available to employers under the Age Discrimination in Employment Act (ADEA). Known as the “reasonable factors other than age” (RFOA) defense, it permits an employer to justify certain practices that are neutral on their face but that have a disparate impact on older employees. To establish the defense, an employer must show that a practice was both reasonably designed to achieve a legitimate business purpose and administered in a way that reasonably achieves that purpose in light of the of the particular facts and circumstances that were known, or should have been known, to the employer. The EEOC has provided a non-exclusive list of “considerations” that an employer should use to determine if the RFOA defense may be available.
With respect to criminal background information:
- Develop a narrowly tailored written policy and procedure for screening applicants and employees for criminal conduct
- Make individualized assessments about whether excluding an applicant or employee because of a conviction is job related for the position in question and consistent with business necessity
- Train hiring managers on how to assess whether a criminal record should disqualify an applicant or employee from a position
With respect to practices (such as layoff criteria, hiring rules, etc.) that have a disparate impact on older employees but are based on factors other than age, use the considerations identified by the EEOC to determine if the practices can be defended based on the RFOA defense
Enforcement Guidance on the Consideration of Arrest and Conviction Records
The EEOC and various courts have long taken the position that certain uses of criminal history information (e.g. arrest and conviction records) may be unlawful under Title VII of the Civil Rights Act of 1964. On April 25, 2012, the EEOC issued Enforcement Guidance summarizing and updating its position on the use of such information.
As explained by the EEOC, the use of criminal history information may be unlawful under two sets of circumstances. First, an employer may violate the law if it treats criminal history information differently for different applicants or employees based on their race or national origin. For example, if an employer refuses to hire Hispanic employees who have convictions for shoplifting, but does not exclude similarly situated Caucasian employees with shoplifting convictions, it will violate Title VII.
Second, an employer may be in violation of Title VII even it treats criminal history information the same way for all applicants or employees if this has a disproportionate impact on certain racial or ethnic groups and the employer’s use of criminal history information cannot be shown to be job related and consistent with business necessity. This second theory of liability, known as “disparate impact” discrimination, is often overlooked by many employers who assume that they cannot be in violation of the law if they are not expressly taking race or national origin into account.
So how does an employer show that its use of criminal history information is job related and consistent with business necessity and therefore lawful? The EEOC answers this question by distinguishing between arrest history and conviction history. According to the EEOC, arrest history, in and of itself, should never be used as the sole basis for excluding an applicant or employee from a position. Arrest history is not indicative of any actual guilt on the part of the applicant or employee, and as the EEOC points out, African Americans and Hispanics are arrested at a rate that is 2 to 3 times their proportion in the general population.
Importantly, the EEOC does not suggest employers are prohibited from considering the facts underlying an arrest in making employment decisions. The EEOC provides the example of an assistant principal at a school who is arrested after several girls at the school complain that he touched them inappropriately on the chest. If the school investigates the allegations and makes a determination that the girls’ complaints are valid, then the termination of the assistant principal would not be discriminatory. However, the school could not, on the basis of the arrest alone, take action against the assistant principal.
In contrast, the EEOC concedes that conviction information will usually serve as sufficient evidence that a person engaged in particular conduct. However, the use of conviction information will not be deemed to be job related and consistent with business necessity unless (1) “the employer develops a targeted screen considering at least the nature of the crime, the time elapsed, and the nature of the job,” and (2) the employer conducts “an individualized assessment” for individuals excluded by the screen. The “individualized assessment” generally would involve informing the individual of the information that had been obtained about him, providing him an opportunity to explain why he should not be screened out on the basis of the conviction information, and considering whether his explanation warrants an exception to the exclusion.
The EEOC concludes its Enforcement Guidance by providing a list of various “best practices” for employers. Like the rest of the Enforcement Guidance, these best practices do not have the force of law. However, following the practices may be helpful in the event the EEOC conducts an enforcement investigation. The best practices include:
- getting rid of any blanket exclusions of employees on the basis of criminal history information
- putting in place an appropriate policy governing the use of such information
- limiting inquiries to information that will be job related and consistent with business necessity
- training managers on how to appropriately use criminal history information
- handling such information in a confidential manner
Final Rule on Disparate Impact and Reasonable Factors Other Than Age Under the ADEA
As explained above in the context of criminal history information, in some situations employers can be held liable for discrimination if they have a facially neutral policy or practice that has a disparate impact on a particular protected class of individuals. In general, policies or practices that have disparate impact are not per se unlawful, but instead must be justified based on business reasons relied upon by the employer. For example, under Title VII, an employer must show that a policy or practice having a disparate impact is “job related and consistent with business necessity.”
For many years, courts debated whether this “disparate impact” theory existed with respect to age discrimination and, assuming it did exist, whether the “job related and business necessity” standard, or something similar, should be applied under the Age Discrimination in Employment Act (ADEA). Unlike Title VII and other civil rights laws, the ADEA has a specific provision permitting employers to take actions based on “reasonable factors other than age” (RFOA). This provision was seen by some courts as protecting employers from claims of disparate impact.
In Smith v. Jackson, 544 U.S. 228 (2005), the United States Supreme Court upheld the viability of the disparate impact theory in cases filed under the ADEA. The Court also clarified the purpose behind the RFOA defense. Since the Smith decision, the EEOC has been struggling to rework its age discrimination regulations. On March 30, 2012, the EEOC published its final rule amending its age discrimination regulations to be consistent with the Supreme Court’s decision.
According to the final rule, an employer does not have to show that a factor it relied upon and that resulted in a disparate impact is “job related and consistent with business necessity,” but it nevertheless must show something more than simply a “rational basis” for its use of the factor. Under the final rule, the employer has the burden of production and persuasion to demonstrate “that the employment practice was both reasonably designed to further achieve a legitimate business purpose and administered in a way that reasonably achieves that purpose in light of the particular facts and circumstances that were known, or should have been known, to the employer.”
The EEOC has come up with various “considerations” that are intended to assist employers (and courts) in determining whether the standard above can be met. If a factor used by an employer results in a disparate impact, the employer should consider:
- The extent to which the factor is related to the employer's stated business purpose;
- The extent to which the employer defined the factor accurately and applied the factor fairly and accurately, including the extent to which managers and supervisors were given guidance or training about how to apply the factor and avoid discrimination (the comments to the final rule clarify, however, that the measures anticipated here can take many forms and need not be as rigorous as those required, for example, to prevent workplace harassment);
- The extent to which the employer limited supervisors' discretion to assess employees subjectively, particularly where the criteria that the supervisors were asked to evaluate are known to be subject to negative age-based stereotypes;
- The extent to which the employer assessed the adverse impact of its employment practice on older workers; and
- The degree of the harm to individuals within the protected age group, in terms of both the extent of injury and the numbers of persons adversely affected, and the extent to which the employer took steps to reduce the harm, in light of the burden of undertaking such steps.
The new rule specifically states that “[n]o specific consideration or combination of considerations need be present for differentiation to be based on reasonable factors other than age. Nor does the presence of one of these considerations automatically establish the defense.”
Employers once had hoped that the RFOA defense would be an easy safe harbor that could be used to defeat claims for disparate impact under the ADEA at an early stage. To the extent this hope survived the Supreme Court’s decision in Smith v. Jackson, it likely has been extinguished once and for all by the nature and complexity of the standard developed by the EEOC in the final rule.