“Job opportunity…applicants must be currently employed.”

Employment want ads with wording like this, posted online or in newspapers, have caught the attention of members of Congress, state legislators and the Equal Employment Opportunity Commission (EEOC). At a time when high unemployment numbers dominate national news and political dialogue, these ads have struck a nerve, potentially spurring more government scrutiny of hiring practices.

At the request of more than 50 members of Congress, the EEOC held a hearing in February considering whether the practice of excluding unemployed job applicants from consideration is discriminatory. While there is no federal law specifically protecting the unemployed, some witnesses asserted the practice is covered by Title VII because it has a disparate impact on minorities, who have higher unemployment rates than whites.

While the EEOC has been silent on the topic since the hearing, employment defense attorneys caution that the agency or plaintiffs lawyers could be seeking a test case. They warn that members of Congress, eager to demonstrate their commitment to helping the estimated 14 million unemployed Americans, may pass a law that would add yet another potential liability for employers.

They also suggest that excluding the unemployed from consideration just doesn’t make good business sense, and therefore they question assertions that the hiring practice is widespread.

“Sophisticated employers don’t do that,” says James Urban, a partner at Jones Day, who testified on behalf of employers at the EEOC hearing. “They want qualified candidates to apply regardless of employment status, and they want to hire the best qualified candidates.”

Online Evidence

Urban acknowledges that examples of employment ads specifically excluding the unemployed from consideration were presented at the February hearing. Then in July, the National Employment Law Project (NELP) issued a report on a four-week review of four online job websites. It found 150 postings that contained exclusions based on employment status, including 125 that named the hiring company or staffing agency. Staffing agencies were responsible for more than half of the offending ads, according to NELP. The advocacy group for low-wage workers said the practice is unfair at a time when there is only one job opening for every 4.7 unemployed job seekers, many of whom lost their jobs during recent corporate downsizings.

“This perverse Catch-22 is deepening our unemployment crisis by arbitrarily foreclosing job opportunities to many who are otherwise qualified for them,” NELP said in a statement.

At the hearing, commissioners heard statistics showing the unemployment rate among blacks to be twice that of whites, while the ratio of Hispanic to white unemployment is 1.5 to 1, suggesting the possibility of disparate impact. Other witnesses argued that excluding unemployed applicants would disproportionately disadvantage women, older people and the disabled.

“There is no dispute that the unemployment numbers are higher for certain minorities,” Urban says. “But to go from there to the conclusion that there will be disparate impact on minorities if you exclude unemployed applicants—that would be a very fact-specific analysis.”

Litigation and Legislation

Whether the EEOC will file a case testing the disparate impact theory remains to be seen. Dennis Brown, a shareholder at Littler Mendelson, points out that the EEOC has limited resources.

“They don’t typically take a test case as a flyer,” he adds. “They want to know they have a reasonable chance.”

Even if the EEOC drops the matter, a plaintiffs attorney could bring a case. “Plaintiffs lawyers are a very clever group,” Brown says. “They are good at taking laws already on the books and massaging them to adapt to changing facts.”

Meanwhile, Congress may debate legislation, such as the Fair Employment Opportunity Act of 2011, introduced by Rep. Rosa DeLauro, D-Conn., in July. A companion bill with minor differences was introduced in the Senate in August. These bills would make it unlawful for an employer to refuse to consider an unemployed applicant; to include in any job advertisement a requirement that applicants be currently employed; or to direct an employment agency to consider employment status when screening applicants.

An earlier bill introduced by Rep. Henry Johnson Jr., D-Ga., would make the unemployed a protected group under Title VII. That bill is not expected to pass, and even the milder DeLauro bill, which provides for a private right of action, may face hurdles in the Republican-controlled House, according to Brown.

“To focus on putting yet another burden on employers that will yield lawsuits that have to be paid for strikes me as an incredibly bad idea,” he says. “It will end up becoming a tax on businesses.” Brown thinks it is more likely Congress will pass a bill that simply bans employment advertising that says unemployed people need not apply.

That’s exactly what the New Jersey legislature did earlier this year. Under the new state law, which took effect June 1, an employer can be fined from $1,000 to $10,000 per violation for running such advertising. New York and Michigan are considering implementing similar laws. 

Self-Defeating Practice

As a result of the controversy, employers are advised to work with their human resources department to make sure hiring policies don’t attract EEOC attention or violate state laws.

“If you are an employer in a hiring mode placing ads in a newspaper or on the Internet that expressly state unemployed applicants won’t be considered, you are putting yourself at great risk for greater scrutiny,” Urban says.

He adds that the practice could be self-defeating, potentially excluding excellent candidates. Employers are in a better bargaining position with unemployed applicants, who may be able to start work sooner and may accept a lower salary than an employed applicant. And an employed applicant may simply use an offer to get a better deal from his present employer, he adds.

Paul Monsees, a partner at Foley & Lardner, adds the practice could have public relations, as well as legal, implications.

“Now that we are full-bore into the election season, more candidates want to champion the company that just hired 200 new people,” he says. “You don’t want to be highlighted as someone who is not hiring the unemployed.”

While the motivations of employers who run “employed only” ads are not clear, they may be seeking candidates with specific up-to-date skills. If so, a better approach would be to define the skills you need and make those skills a requirement, says Carrie Rosen, a member at Cozen O’Connor.

“Someone who is unemployed may have those skills,” Rosen says. She also advises checking with recruiters and employment services your company uses to make sure they aren’t screening out unemployed applicants.

Sidebar: Disparate Issues

The EEOC currently is focused on two other factors in job hiring that it contends may have a disparate impact on minorities.

“The extent to which a hiring manager considers an applicant’s criminal history is a big, big issue at the EEOC right now,” says James Urban, a partner at Jones Day. “You can only use criminal history to disqualify someone to the extent his criminal history applies to the particular job.”

The EEOC’s other hot-button hiring issue is the use of credit histories, which also can raise a charge of disparate impact. Pursuit of these issues may preclude the agency from giving attention to alleged discrimination against the unemployed.

“The EEOC has so many different initiatives, it’s hard to tell if the [unemployed applicant] issue will become a high-profile one,” adds Paul Monsees, a Foley & Lardner partner.