In Defense of Common Sense: Lessons from the Freeman Case Dismissal

Angela Preston

Background Checks Compliance

Nearly a month has passed since U.S. District Judge Roger W. Titus slammed the Equal Employment Opportunity Commission (EEOC), dismissing the agency’s discrimination case against Freeman Cos. (Md., No: 8:09-cv-02573, 8/9/13). The EEOC sued Freeman in Maryland District Court for discriminating against workers with a criminal or credit history in 2009, and those of us who have followed the case have eagerly awaited the final decision. We also wrote about the decision when it was first released–if you missed that article you can find it here. Now that the situation has had time to sink in, I wanted to share some thoughts on the implications for employers.

By way of background, Freeman, an international provider of trade show and exhibit services, employs over 4,100 full time employees and 25,000 part time workers in the US and the UK.  In the case, the EEOC claimed that Freeman’s use of credit and criminal background checks had a “disparate impact” on protected classes—namely male minority job applicants—who were more likely to be denied job opportunities due to a disproportionate impact on black males.

The disparate impact theory used by the EEOC in Freeman has become the go-to legal argument used by the EEOC to challenge the use of background checks (both criminal and credit) in hiring. Unlike disparate treatment cases, where an individual who is a member of a protected class under Title VII of the Civil Rights Act of 1964 claims discriminatory treatment, disparate impact has a much broader scope. Disparate impact cases focus on policies that are neutral on their face, claiming that they have an unintended discriminatory impact on big pools of applicants. This theory has its roots in the EEOC’s “E-RACE” (Eradicating Racism and Colorism from Employment) Initiative and the EEOC’s strategic plan to focus on big-scale discriminatory patterns and practices that have a high likelihood of impacting large groups. In other words, the bigger the employer, the more likely you will be targeted for an EEOC investigation and class action lawsuit for a discriminatory pattern or practice under disparate impact theory.

Much has been said about Judge Titus’s opinion in Freeman, particularly his critique of the EEOC’s expert, whose report he described as containing a “plethora of errors and analytical fallacies.” The EEOC’s case was described by the judge as a theory in search of facts to support it, and he concluded that there were no facts to support the theory of disparate impact based on any specific or identified policies of the defendant.

The judge granted Freeman’s motion for summary judgment, saying that, as a matter of common sense, far more evidence would be required to support a claim of disparate impact based on the use of criminal or credit background checks.

Lessons from Freeman

Here are a few take-aways for employers from the Freeman case:

  • No Cumulation: Lead counsel for Freeman, Donald Livingston with Akin Gump Strauss Hauer & Feld, is a former EEOC General Counsel. He recently spoke to Corporate Counsel about the implications and significant fallout from Freeman. Livingston pointed out that one of the key holdings was the court’s rejection of a “cumulative” theory of impact on employees. The court held that, in order to make a showing of a disparate impact, the plaintiff could not rely on an argument that the cumulative effect of the employer’s selection practices violated Title VII and adversely affected a protected group. The no-cumulation rule of Title VII of the Civil Rights Act of 1964 was a key factor in Freeman.
  • EEOC Needs to Be Specific: The Maryland District Court in Freeman held that the EEOC failed to point out specific practices that lead to the alleged discrimination.  The EEOC was required to pinpoint the specific element in a criminal background check or credit check that caused the disparate impact. The court said the EEOC failed to link the discrimination to a particular practice or part of the policy, and granted summary judgment for the employer. If employers can defend their policies by linking the hiring policy to specific job duties, disparate impact is more difficult to prove.
  • Seven Year Limit/No Arrests was “Reasonable”: The Court noted thatFreeman limited its background policy to convictions in the past seven years and didn’t consider arrests that didn’t result in conviction.
  • One Size Does Not Fit All: Freeman’s background check process varied depending on the job.  The court noted that Freeman used different types of checks depending on the position being sought, and subjective and objective criteria and other factors in making the hiring decision.
  • Common Sense: Titus’s opinion struck a chord for many who feel that the use of criminal background checks has been under attack. His statement that “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.” This tone supported the argument that you don’t always need an expert to prove that a background check makes sense for certain jobs.

Time will tell as to whether other courts follow the Maryland District Court’s lead. In June, the EEOC filed suit against retailer Dollar General Corp. and a U.S. unit of German auto maker BMW AG, alleging that those companies discriminated against black applicants by checking criminal histories. Those cases are fundamentally similar to the Freeman case, and they remain pending. Shortly before the district court’s decision in Freeman came down, nine state attorneys general wrote a letter to the EEOC protesting its position on criminal-background checks. The letter called the EEOC’s suits against Dollar General and BMW “gross federal overreaching” and questioned the need for an individualized assessment. Meanwhile, the issues are far from settled. Stay tuned for more updates.

Angela Preston
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Angela Preston

Vice President of Compliance & General Counsel at EmployeeScreenIQ
Angela Preston has more than 20 years as a licensed attorney and over 10 years in the background screening area. She serves on the Board of Directors of the National Association of Professional Background Screeners (NAPBS), is a member of the NAPBS Background Screening Credentialing Council (BSCC), and is actively involved in the Society for Human Resource Management (SHRM) and ASIS International. Angela is also a member of the Ohio State and Columbus Bar Associations. Angela has direct oversight and management of compliance programs, and will provide guidance in complex legal matters including state and federal legislation, EEO law, client education, adjudication, pre/adverse action process, NAPBS Accreditation and client and vendor contract management.
Angela Preston
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