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EEOC v. Freeman

United States District Court, Fourth Circuit

August 9, 2013

EEOC Plaintiff,
FREEMAN Defendant.



For many employers, conducting a criminal history or credit record background check on a potential employee is a rational and legitimate component of a reasonable hiring process. The reasons for conducting such checks are obvious. Employers have a clear incentive to avoid hiring employees who have a proven tendency to defraud or steal from their employers, engage in workplace violence, or who otherwise appear to be untrustworthy and unreliable. However, under Title VII of the Civil Rights Act of 1964, a specific hiring policy may constitute an unlawful employment practice if it has a disparate impact on the basis of race, color, religion, sex or national origin and the employer fails to demonstrate that the challenged practice is job-related for the position in question and consistent with business necessity. 42 U.S.C. § 2000e-2(k)(l)(A)(i).

As the agency responsible for investigating possible violations of the Act and enforcing anti-discrimination laws in the employment realm, the EEOC has brought this action against the Defendant, Freeman, alleging that it has implemented a hiring policy that, though facially neutral, has a discriminatory effect on African-American and male applicants. The present case is only one of a series of actions recently brought by the EEOC against employers who rely on criminal background and/or credit history checks in making hiring decisions. For example, in two recent complaints filed against discount retailer Dollar General Corp. and car manufacturer BMW, the EEOC claimed that those employers improperly used criminal background checks to bar potential employees, resulting in a disparate impact on African-American applicants. Scott Thurm, Employment Checks Fuel Race Complaints, Wall St. J., June 12, 2013, at Al, available a/

Because of the higher rate of incarceration of African-Americans than Caucasians, indiscriminate use of criminal history information might have the predictable result of excluding African-Americans at a higher rate than Caucasians. Indeed, the higher incarceration rate might cause one to fear that any use of criminal history information would be in violation of Title VII. However, this is simply not the case. Careful and appropriate use of criminal history information is an important, and in many cases essential, part of the employment process of employers throughout the United States. As Freeman points out, even the EEOC conducts criminal background investigations as a condition of employment for all employees, and conducts credit background checks on approximately 90 percent of its positions. ECF No. 114-44 at 7-8.

Thus, it is not the mere use of any criminal history or credit information generally that is a matter of concern under Title VII, but rather what specific information is used and how it is used. Because of this, it is simply not enough to demonstrate that criminal history or credit information has been used. Rather, a disparate impact case must be carefully focused on a specific practice with an evidentiary foundation showing that it has a disparate impact because of a prohibited factor.

Proof of disparate impact requires reliable and accurate statistical analysis performed by a qualified expert. As the Supreme Court has noted, "the inevitable focus on statistics in disparate impact cases" results in a very "high standard[] of proof that can be difficult for plaintiffs to meet. Watson v. Fort Worth Bank and Trust, 487 U.S. 977, 992, 999 (1988). Merely pointing to "statistical disparities in the employer's work force" is not sufficient; the plaintiff must provide "statistical evidence of a kind and degree sufficient to show that the practice in question has caused the exclusion of applicants for jobs or promotions because of their membership in a protected group." Id. at 994. Even if the plaintiff is able to proffer such evidence, neither "courts [n]or defendants [are] obliged to assume that plaintiffs' statistical evidence is reliable, " but can challenge the techniques or data used in the analysis. Id. at 996. Moreover, even if meaningful and reliable statistics are presented, a plaintiff is required to separate out and identify the "specific" employment practice that is allegedly responsible for the disparate impact, particularly where employers combine objective and subjective hiring criteria. Id. at 994.

While some specific uses of criminal and credit background checks may be discriminatory and violate the provision of Title VII, the EEOC bears the burden of supplying reliable expert testimony and statistical analysis that demonstrates disparate impact stemming from a specific employment practice before such a violation can be found. For the reasons explained below, the EEOC has failed to do so in this case. Accordingly, summary judgment shall be granted to Defendant.


Defendant is a provider of integrated services for expositions, conventions, corporate events, meetings, and exhibit programs, with annual revenues exceeding $1.3 billion. ECF No. 114-3 at ¶¶ 3-4. The family-owned company employs over 3, 500 full-time and 25, 000 part-time and seasonal workers, with offices in major cities throughout the United States. Id.

Like many employers, Defendant has experienced problems with embezzlement, theft, drug use, and workplace violence by its employees. ECF Nos. 114-38 at 6-9; 114-39 at 12, 16-18. In 2001, Defendant began conducting background checks on applicants so that it could better evaluate the trustworthiness, reliability, and effectiveness of prospective employees. Id. The background checks were designed with five goals in mind: "(1) avoid exposure to negligent hiring/retention lawsuits; (2) increase the security of Defendant's assets and employees; (3) reduce liability from inconsistent hiring or screening practices; (4) proactively reduce the risk of employee-related loss; and (5) mitigate the likelihood of an adverse incident occurring on company property that could jeopardize customer or employee confidence." ECF Nos. 114-1 at 5; 114-38 at 6-8, 18; 114-39 at 9-10, 13; 114-4 at 1.

From July 20, 2006[1] to August of 2011[2], the types of background checks performed by Defendant varied with the nature of the job sought. ECF Nos. 114-41; 114-38 at 20; 114-40 at 6. For "general employees, " i.e., those who did not hold credit sensitive jobs, the check included only a criminal history investigation and social security verification. ECF No. 114-41. For "credit sensitive" positions, the check also included a credit history review. Id. A position was deemed credit sensitive if the employee holding that position had access to client or company credit card information, handled money, checks, or similar valuable items, had budgetary authority, had authority to make agreements with respect to customer invoices, or made purchases from vendors. ECF Nos. 114-38 at 17, 22; 114-39 at 21-24. Finally, for company officers, general managers, and department heads, the Defendant performed an education and certification verification in addition to the above checks. ECF No. 144-41. In total, Defendant regularly ran credit checks for 44 job titles, compared to 109 positions that did not require a credit check. ECF No. 114-7 at 10-13.

Defendant's standard employment application form asked: "Have you ever pleaded guilty to, or been convicted of, a criminal offense." ECF No. 144-4. If the applicant responded in the affirmative, they were given space to describe the date and circumstances. Id. The form contained the following advisement:

A conviction does not automatically mean you will not be offered a job. What you were convicted of, the circumstances surrounding the conviction and how long ago the conviction occurred are important considerations in determining your eligibility. Give all the facts, so that a fair decision can be made.

Id. Applicants were also required to sign a form authorizing a vendor, PreScreen America (PSA), to conduct the background investigation. ECF No. 114-3 at ¶ 12. The authorization form contained the same questions as the employment application regarding prior criminal offenses. ECF No. 114-5.

Generally, the background check was run after the applicant was offered and accepted a position, but before he or she began work. ECF No. 114-38 at 15-16. For credit checks, PSA obtained credit histories from TransUnion, a national credit bureau; for criminal checks, PSA collected information on convictions and their equivalents and active criminal warrants, but not arrests. ECF No. 114-45 at 5-7. Defendant limited its consideration of convictions to those that occurred within seven years of the application date. Id. at 8.

Defendant used a multi-step evaluation process to review the information obtained by PSA and determine whether an applicant was qualified to begin work. First, Defendant considered whether the applicant was truthful about his or her criminal convictions on the application and authorization forms. Under one of the few bright-line rules in Defendant's policy, an applicant who failed to disclose a conviction, seriously misrepresented the circumstances of a criminal offense, or made any other materially dishonest statement on the application, was automatically disqualified. ECF No. 108-15 at ¶16; ECF No. 114-3 at ¶17. Second, Defendant examined any outstanding arrest warrants. Applicants with pending warrants were given a reasonable opportunity to resolve the matter and have the warrant withdrawn; failure to do so made it unlikely, but not impossible, for the applicant to be hired. ECF No. 108-15 at ¶14. Third, Defendant considered the existence of any criminal convictions which the applicant committed, or was released from confinement for, within the past seven years.[3] Id. Finally, Defendant evaluated whether the criminal conduct underlying a particular conviction made an applicant unsuitable for employment. ECF No. 108-7 at 3-5. Types of convictions that were of particular concern to Defendant, and would generally disqualify an applicant, included those involving violence, destruction of private property, sexual misconduct, felony drug convictions, or job-related misdemeanors. ECF No. 108-15 at ¶15. In general, initial decisions by Defendant's office manager not to hire an applicant because of a particular conviction were reviewed and approved by Defendant's senior vice president for human resources or vice president of benefits and compliance. ECF No. 114-43 at 15-19.

For credit checks during the relevant time period covered by the EEOC's complaint, Defendant's policy consisted of a list of hiring criteria. ECF Nos. 108-15 at ¶7; 108-17. Applicants whose credit histories revealed any of the following issues were excluded from employment for a credit-sensitive position:

1) More than two accounts of $300 or more that were 90 days past due;
2) More than three collection accounts that were not medically related;
3) More than two paid charge-offs in the prior 12 months;
4) Any unpaid charge-offs in the prior 12 months;
5) A car repossessed in the prior three years;
6) A house foreclosure in the prior three years;
7) Filed for bankruptcy in the prior seven years;
8) A judgment in the prior seven years;
9) A default on student loans;
10) Any unsatisfied liens;
11) Any satisfied liens in the prior three years;
12) Any delinquency in paying child support.


The EEOC has not challenged any of the specific criteria or procedures described above, but has merely alleged that Defendant's policy of conducting criminal and credit background checks, as a whole, produces a disparate impact on protected classes.


On January 17, 2008, applicant Katrina Vaugn filed a discrimination complaint with the EEOC, asserting that Defendant violated Title VII by rejecting her for employment based on information about her credit history. ECF No. 27-2, Ex. 1. Based on Ms. Vaughn's charge, on September 30, 2009, the EEOC filed a complaint in this Court under Sections 706 and 707 of Title VII of the Civil ...

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