February 4, 2023

Volume XIII, Number 35

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Fourth Circuit Affirms Summary Judgment against EEOC in Background Check Suit

Last week, in Equal Employment Opportunity Commission (“EEOC”) v. Freeman, No. 13-2365 (4th Cir. Feb. 20, 2105), the Fourth Circuit affirmed the award of summary judgment against the EEOC in its suit alleging that the defendant’s use of credit and criminal background checks had a “disparate impact” on African-American job applicants in violation of Title VII of the Civil Rights Act of 1964.  Consistent with the Sixth Circuit’s ruling last year in EEOC v. Kaplan Higher Education Corp., 748 F.3d 749 (6th Cir. 2014), the Freeman decision also turned on the agency’s failure to muster the expert testimony necessary to meet its evidentiary burden in a disparate impact case.

By way of background, the defendant Freeman required criminal background checks for all applicants and credit checks for positions involving money handling or access to sensitive financial information.  Company policy disqualified applicants if their credit or criminal histories revealed “certain prohibited criteria.”  The defendant had modified these criteria from time to time, ultimately phasing out the use of credit checks.

Several years ago, the EEOC commenced an investigation into the defendant’s background check policy, determining that the company’s use of credit and criminal history in hiring decisions violated Title VII.  To support the “disparate impact” claim it subsequently filed with the district court, the EEOC relied on a statistical report prepared by its expert, Kevin Murphy, an industrial and organizational psychologist (and the same expert the agency used in the Kaplan case).  In granting the defendant’s motion for summary judgment, the lower court excluded Murphy’s testimony as “rife with analytical errors” and “completely unreliable.”

The Sixth Circuit affirmed summary judgment, agreeing with the district court that there were an “alarming number of errors and analytical fallacies in Murphy’s reports,” including that the reports did not consider “background check logs for hundreds, if not thousands, of applicants,”  incorrectly coded applicant race and gender, and wrongly classified applicants as having passed or failed the background check.  In a scathing concurrence, Judge Steven Agee took particular issue “with the EEOC’s disappointing litigation conduct,” urging the agency “to reconsider how it might better discharge the responsibilities delegated to it or face the consequences of failing to do so.”

This latest defeat may cause the EEOC to reconsider its scrutiny of background checks and move to refocus on other enforcement priorities.  Employers should nevertheless remain vigilant in keeping up with developing law and modify background check policies and procedures as needed.

© 2023 Proskauer Rose LLP. National Law Review, Volume V, Number 54
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About this Author

Katharine H Parker, Labor Employment Attorney, Proskauer Rose Law Firm
Partner

Katharine Parker is a Partner in the Labor & Employment Law Department and co-head of the Employment Law Counseling & Training and Government Regulatory Compliance and Relations Groups.

212-969-3009
Daniel L Saperstein, Proskauer Law Firm, Labor Employment Attorney
Associate

Daniel L. Saperstein is an Associate in the Labor & Employment Law Department, resident in the Newark office. He is a member of the Employment Litigation & Arbitration, Labor-Management Relations, Employment Law Counseling & Training, International Labor & Employment, and Whistleblower & Retaliation Groups, as well as the Dodd-Frank Task Force.

973-274-3272
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