The ruling was handed down on 8/913 by Judge Roger W. Titus of the District Court of Maryland and may be read at the following site:

This is the second defeat in a row for the EEOC on background checks following EEOC v. Kaplan’s Higher Learning (or KU), decided on January 28 by Judge Patricia A. Gaughan of the District Court for the Northern District of Ohio, Eastern Division (2013 U.S. Dist. LEXIS 11722) (see Alert posted on 3/20/13). In Kaplan, Judge Gaughan ruled that the EEOC’s report was inadmissible under Daubert standards, and therefore, there was no evidence of adverse impact, and KU was awarded summary. Pretty much the same thing happened in Freeman.

After much wrangling, the case reduces to evaluating selection rates for two classes, including: (1) 51 black applicants passed over between March 23, 2007, and Aug. 11, 2011 because of credit histories, and (2) 83 black and male workers passed over between Nov. 30, 2007 and July 12, 2012, based on criminal records. In attempting to make a prima facie cases of adverse impact, the EEOC’s expert submitted an initial report that was admittedly flawed. A second report designed to correct the flaws was then submitted, and independently replicated by another expert. According to Judge Titus, despite the attempt to de-flaw the data, there remained a “mind-boggling number of errors,” most notably using “cherry-picked” data that supported the EEOC’s theory of adverse impact, but did not include data on all available applicants for the two classes for the entire class period. Judge Titus used various descriptors of the analysis, including “flawed,” “skewed,” “rife with analytical errors,” “laughable,” and “an egregious example of scientific dishonesty” designed to fit the EEOC’s theory. He also cited the EEOC’s failure to isolate a specific selection practice that purportedly caused the adverse impact.

From my perspective, Freeman’s use of credit checks was, ironically (at least in my opinion) consistent with EEOC policy guidance. They used a well-structured system in which background checks were not automatic exclusionary factors. The checks were tied to specific types of jobs where they seemed relevant, and flags were followed up to determine whether applicants should be excluded.

One final point. I would caution employer to refrain from ignoring EEOC guidance on background checks on grounds that Kaplan and Freeman are indicative of how all such cases will go in the future. Critically, neither of these cases got to a defense phase which, undoubtedly will occur in a future case if the EEOC gets its act together and does a better job of proving adverse impact. My advice is follow the guidance and be prepared.

by Art Gutman, Ph.D., Professor, Florida Institute of Technology

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