Judge Dismisses EEOC’s Employment Background Check Case As ‘Laughable’

Nick Fishman

EEOC Employment Background Checks

Make sure to read the words in this word cloud carefully. “Laughable”. “Unreliable”. “Mind Boggling”.

Those are the words Judge Roger Titus of the U.S. District Court in Maryland used when he dismissed the Equal Employment Opportunity Commission’s (EEOC) case against Freeman Companies for what the commission alleged as discriminatory hiring practices related to Freeman’s use of criminal background checks and credit reports.  I’ve included a copy of Freeman’s press release for their take on the case because the EEOC didn’t see fit to allow them to respond when they announced “this egregious” case.

The outcome of this case is no surprise; so far the courts have not been swayed by the EEOC’s arguments in similar cases (see EEOC v Kaplan Higher Education).  What is shocking is that the EEOC has now suffered another embarrassing setback in their quest to punish employers for their reliance on employment background checks (see EEOC v PeopleMark).

Add the recent efforts of nine state Attorneys General who have taken the EEOC to task for what they deem to be misguided and an example of gross federal overreach for their lawsuits against BMW and Dollar General and you begin to see that the courts seem to be protecting employers’ responsible use of employment background checks.  I am hopeful that the EEOC will reassess their tactics and focus their energies on real instances of discrimination.

Seyfarth Shaw’s Pam Devata, Gerald Maatman Jr. and Howard Wexler did a remarkable job of explaining the judge’s ruling and the anticipated effect it will have on employers.  See below.

Court Dismisses EEOC’s Background Check Lawsuit Based On Its Reliance On “Laughable” And “Unreliable” Expert Report Filled Of “Errors and Analytical Fallacies”

In a scathing opinion issued today in EEOC v. Freeman,No. 09-CV-2573 (D. Md. Aug. 9, 2013), Judge Roger Titus of the U.S. District Court for the District of Maryland dismissed a nationwide pattern or practice lawsuit brought by the EEOC (previously discussed here and here) that alleged that Freeman, Inc., a service provider for corporate events, unlawfully relied upon credit and criminal background checks that caused a disparate impact against African-American, Hispanic, and male job applicants. This decision marks yet another blow to the EEOC’s use of systemic lawsuits to challenge employers’ reliance on background checks in making hiring decisions.

The Court’s Opinion

Prior to analyzing the EEOC’s disparate impact claim, Judge Titus discussed the utility of credit and criminal background checks, as well as the EEOC’s recent targeting of employers for such background checks, including the recent cases it filed against BMW and Dollar General Corp. In discussing these lawsuits, Judge Titus noted that:

“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 Caucasian. Indeed, the higher 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 positions, and conducts credit background checks on approximately 90 percent of its positions.”

Id. at 2. Turning to the specific case before him, Judge Titus focused on whether the EEOC provided the requisite evidentiary foundation that Freeman’s policies had a disparate impact based on reliable and accurate statistical analysis. Judge Titus held that the EEOC had not made such a showing and spent a majority of his 32-page ruling bashing the “expert” reports prepared by Dr. Kevin R. Murphy, the EEOC’s statistical expert. This is not the first time a U.S. District Court Judge has criticized the EEOC’s reliance on Dr. Murphy’s statistical analysis.  As previously reported here, Judge Patricia A. Gaughan of the U.S. District Court for the Northern District of Ohio granted summary judgment to the defense in EEOC v. Kaplan Higher Education Corp. (discussed here) – in part based on the “great concern” she had regarding several aspects of Dr. Murphy’s disparate impact analysis in that case.

Judge Titus pulled no punches in taking the EEOC to task based on the flaws in the data it relied upon in support of its disparate impact claims, labeling Dr. Murphy’s expert reports as:  “laughable”; “based on unreliable data”;  “rife with analytical error”; containing “a plethora of errors and analytical fallacies” and a “mind-boggling number of errors”; “completely unreliable”; “so full of material flaws that any evidence of disparate impact derived from an analysis of its contents must necessarily be disregarded”; “distorted”;  “both over and under inclusive”; “cherry-picked”; “worthless”; and “an egregious example of scientific dishonesty.” Id. at 14-20.

Given Dr. Murphy’s “continued pattern of producing a skewed database plagued by material fallacies” the EEOC left Judge Titus with “no choice but to entirely disregard his disparate impact analysis.” Id. at 24-25. Left without credible expert analysis, Judge Titus held that the EEOC’s case cannot survive as “it is sufficient for Defendants to point out the numerous fallacies in Murphy’s report, which raise the specter of unreliability” to defeat the EEOC’s prima facie case. Id. at 24.

Finally, Judge Titus held that even putting aside the unreliability of Dr. Murphy’s expert reports, the EEOC nonetheless failed to identify the specific policy or policies causing the alleged disparate impact and made “no effort to break down what is clearly a multi-faceted, multi-step policy.” As the EEOC could not demonstrate “which such factor is the alleged culprit” of the purported disparate impact, Judge Titus held that the EEOC failed to meets its prima facie case of discrimination. Id. at 25-28.

Implications for Employers

The defeat of the EEOC’s case is significant. Judge Titus’ decision is yet another favorable opinion for employers who fall victim to the EEOC’s “do as I say, not as I do” litigation tactics, especially in pattern or practice cases that rely heavily on the use of statistical analysis. While the criticism of Dr. Murphy’s statistical analysis is noteworthy given his use as an expert in many of the EEOC’s larger cases, an equally important take-away for employers is the fact that Judge Titus rejected the EEOC’s argument that it had no duty to identify the specific aspect of Freeman’s policies that caused the alleged disparate impact and could merely rely upon the policy in general in support of its claims – a tactic frequently advanced by the EEOC in these type of cases.

Given the magnitude of this decision, it is possible (if not likely) the EEOC will appeal Judge Titus’ decision, and we will keep you posted with any further updates regarding this important systematic case.

 

Nick Fishman
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Nick Fishman

Nick Fishman is the co-founder of EmployeeScreenIQ, a leading, global employment background screening provider, and serves as the company’s executive vice president and chief marketing officer. He pioneered the creation of EmployeeScreen University, the #1 educational resource on employment background checks for human resources, security and risk management professionals. A recognized industry expert, Nick is a frequent author, presenter and contributor to the news media. Nick is also a licensed private investigator in the states of Ohio and Texas.
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