Compliance with the Fair Credit Reporting Act

This week, the Equal Employment Opportunity Commission (EEOC) filed lawsuits against Dollar General Corp. and a BMW manufacturing plant in South Carolina over their alleged improper use of criminal background checks to screen employees.

In both suits, the EEOC claims that the employers’ policies and procedures on screening job applicants and employees violated the Fair Credit Reporting Act (FCRA) and had the effect of discriminating against African-Americans, who have higher arrest and conviction rates than whites.

According to the EEOC, the BMW plant had a “blanket exclusion” of not hiring or employing any individual with a criminal record. The Dollar General’s policy claims to disqualify anyone who had a certain criminal background within the past 10 years. The EEOC has taken the position that these types of policies discriminate against certain classes of individuals because they disproportionately affect minorities.

The Fair Credit Reporting Act (FCRA) is a law that is designed to promote fairness, accuracy, and privacy of information in the files of consumer reporting agencies. Many employers use such agencies to run credit reports or criminal background checks on job applicants and employees. The FCRA places certain restrictions on the usage of these reports.

For example, before requesting such a report, an employer must obtain the permission of the job applicant or the employee. The employer must also advise the employee or job applicant if any adverse decision is made and provide the name and contact information for the agency that issued the report.

Last year, the EEOC issued revised guidelines warning employers of using overly broad background checks in a way that could limit job opportunities for individuals with past convictions. These 2 lawsuits are the first since the guidelines have been revised. Such lawsuits are a cautionary tale for employers.

If you are an employer that uses such reports, before making an employment decision about the applicant or employee, you should consider the gravity of the offense, length of time since the offense, and the relevance of the offense to the type of work performed. Further, if you have policies prohibiting the hiring or employment of individuals with criminal backgrounds, those policies should be revised so that a determination is made on a case by case basis rather than an across the board exclusion.