Employment Checks Fuel Race Complaints

Federal regulators Tuesday accused two large employers of improperly using criminal-background checks in hiring, the latest salvo in a contentious debate over whether such screening amounts to discrimination against black applicants.

In complaints filed in federal courts in Illinois and South Carolina, the Equal Employment Opportunity Commission said two companies discount retailer Dollar General Corp. DG +0.22% and a U.S. unit of German auto maker BMW AGBMW.XE +0.90% generally barred potential employees based on the criminal checks, when they should have reviewed each applicant. The commission said the policies had the effect of discriminating against black applicants.

The suits underscore increasing government scrutiny of criminal and credit checks, which are widely used to screen job applicants. Some 92% of employers use criminal-background checks for some or all job openings, according to a 2010 survey by the Society of Human Resource Management.

The EEOC issued guidance to employers last year, shortly after a unit of PepsiCo Inc. PEP -0.16% agreed to pay $3.1 million and change its screening policy to settle charges of discriminating against blacks by improperly using criminal checks. In some cases, the Pepsi bottling unit screened out applicants who had been arrested but never convicted.

The guidelines don’t bar the use of criminal checks, but urge employers to consider the crime, its relation to an applicant’s potential job, and how much time that has passed since the conviction. The guidelines also recommend that employers review each case individually, and allow applicants to show why they should be hired despite a conviction.

People convicted of crimes don’t get special protections under civil-rights laws, but the EEOC can sue if it believes information about prior convictions is being used to discriminate against a racial or ethnic group.

The legality of a screening test is “going to depend on what they’re doing for you and what the nature of the conviction was,” said Ronald S. Cooper, a former general counsel of the EEOC who is now a partner at Steptoe & Johnson LLP. “It’s a hard standard to meet and the EEOC means it to be.”

A growing number of states and cities regulate the use of background checks for employment. The issue gained prominence during the recession, when employers were deluged by job applicants and some people complained they couldn’t get past screening tests.

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The commission said Dollar General revoked conditional employment offers for 10% of its black applicants, but only 7% of its nonblack applicants, between January 2004 and April 2007. With more than 344,000 applicants involved, the numbers created an improper “gross disparity” based on race, the commission said. The company has more than 90,000 employees.

In its suit, the commission says Dollar General uses a formula including the crime and how old it is to decide whether to reject an applicant. The commission said the policy is illegal because it isn’t sufficiently job-related and doesn’t consider individual circumstances. One Illinois woman was dismissed three days after the background check showed a six-year-old drug-possession conviction. The commission says Dollar General still uses the same policy.

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