In an effort to persuade employers to substantially curtail the use of applicants’ criminal backgrounds in the hiring process, the Equal Employment Opportunity Commission issued an enforcement guidance on April 25 calling into question an employment screening technique used by the vast majority of employers in the United States. Although the EEOC guidance largely reiterates positions that it has taken over the years regarding the impact that such criminal-history checks may have on minorities, the EEOC’s recommendations regarding the use of this information are more forceful than ever.

Few employers want to risk an EEOC investigation or lawsuits brought by groups of employees alleging that the employer’s policy on criminal-background checks is illegal. At the same time, employers are reluctant to give up criminal checks for fear that not doing them could create an unsafe working environment or lead to claims of “negligent hiring” should a person with a criminal background do something to harm a member of the public. It’s this “pick your poison” dilemma that has many employers wondering how they should proceed.

Title VII of the Civil Rights Act prohibits discrimination in employment on the basis of race, gender, color, national origin and religion. Most Title VII cases are “disparate treatment” cases, in which an employee alleges that an employment decision affecting her was based upon a protected category. It’s the direct reliance on impermissible factors when making an employment decision that gets employers in trouble in these cases.

But there is another legal theory under Title VII, one that often takes many employers by surprise. It is illegal under Title VII for an employer to apply a facially neutral policy — one that does not, on its face, discriminate against one group or another — that has a disparate impact on members of a protected group, at least when the employer cannot show that the policy is job-related and consistent with business necessity. See Griggs v. Duke Power, 401 U.S. 424 (1971). A suit challenging a decision to terminate an employee for breaking a rule that others outside the protected class also violated with no repercussions would be a discriminatory-treatment claim; a challenge that the rule itself, even when applied to everyone uniformly, tends to negatively affect members of one group more than another is a disparate-impact claim.

Most employers believe that they are fully compliant with Title VII so long as they do not intentionally discriminate against employees and applicants. Few understand that they can unintentionally violate the law by maintaining policies that, although not designed to single out any particular group, have the unintended effect of doing so.

This is where criminal-background checks come in. For years, the EEOC has taken the position that the use of applicants’ criminal histories as a screening tool runs the risk of violating Title VII because this tool tends to screen out minorities — including blacks and Hispanics — who get arrested and convicted at a higher rate than white people, according to social science statistics. The recent guidance revisits and supplements the social science research.

THE SAFETY ARGUMENT

Employers usually justify criminal checks of potential employees on safety and security grounds. They suggest that the checks are necessary to ensure that potentially dangerous criminals are not placed in a position in which they could harm co-workers or members of the public. Employers would argue that failing to check an applicant’s criminal background is precisely the kind of fact that could support a claim of negligent hiring, which is recognized in most states.

Indeed, some states already require that private employers run criminal checks on employees in certain industries. For example, Chapter 145 of the Texas Civil Practice and Remedies Code requires that in-home service companies and residential-delivery businesses obtain a complete criminal history report for all employees and applicants. The statute establishes a presumption of “no negligence” for employers who comply with the law but nevertheless find themselves sued for negligent hiring. Texas Civ. Prac. Rem. Code 145.003(a).

Texas employers in those industries should not take too much comfort in that statute, however; according to the EEOC, following a state law is not necessarily a valid defense to a disparate-impact claim under federal law, since Title VII pre-empts state law. The requirement of a state or local statute to conduct background checks is likely strong evidence of job relatedness, so an employer might still be able to establish one of the defenses outlined in the guidance.

Specifically, the EEOC takes the position that any employer conducting criminal checks can consistently establish business necessity in only one of two ways: a “validation” study consistent with the commission’s “Uniform Guidelines on Employee Selection Procedures” or a “targeted screen” followed by an “individualized assessment” of people flagged in the screening process. Since validation studies are onerous and expensive, and would need to rely upon data that may or may not exist (by the EEOC’s own admission), most employers will select the second option. Those employers will need to consider the following three factors for each position for which it is hiring: the nature and gravity of the offense or conduct in question; the time that has passed since the infraction; and the nature of the job held or sought. It is the last of these three factors that is most important. The more tenuous a connection between the criminal background and the position in question, the more likely the check will be deemed unlawful by the EEOC.

INDIVIDUALIZED ASSESSMENT

Even if the factors are fairly considered and the check is deemed narrowly tailored, the EEOC still urges an individualized assessment after a check turns up criminal history. This applicant-employer dialogue is designed to give the applicant a chance to explain why the information in the check should not disqualify him from the job in question. In this sense, the EEOC’s proposed individualized assessment sounds a lot like the “interactive process” that employers must engage in when attempting to determine whether an employee’s disability might prevent him from performing the essential functions of a job under the Americans With Disabilities Act.

The EEOC has even gone so far as to recommend that employers refrain from including a question on employment applications seeking information about prior convictions. Employers who intend to ask questions about convictions on applications can better comply with the guidance by limiting the temporal scope of the request to a reasonable period of time and providing a space allowing the applicant to explain the circumstances of the conviction. Moreover, employers should consider advising applicants that answering “yes” to a question about convictions is not an automatic bar to employment.

It should be noted that the House Appropriations Committee voted in late April to approve an amendment to the 2013 appropriations bill that would effectively prohibit the use of EEOC funds for implementing, administering or enforcing the guidelines. On May 10, the House passed the appropriations bill containing the de-funding amendment, meaning the EEOC is technically prevented from using its regular budget to enforce the guidance. But since the EEOC’s position regarding criminal histories has been established for years, it is likely that EEOC will simply continue to pursue its policy through day-to-day enforcement of Title VII. And that means that employers that would prefer to ignore the commission’s guidance do so at their own peril. Prudent employers will seek to fine-tune their employment screening policies to find the “sweet spot” in which the risk of negligent-hiring and disparate-impact claims are both minimized.

Stephen J. Roppolo is the regional managing partner of the Houston office of Fisher & Phillips.