The use of background checks for employment purposes continues to be a hot topic. The Equal Employment Opportunity Commission (EEOC) has increased scrutiny of employers’ use of background checks, analyzing whether the use of those background checks has an adverse impact on minority groups, and bringing class action lawsuits alleging adverse impact. One such pending lawsuit is against BMW North America, where the EEOC alleges that BMW’s criminal conviction background check policy disparately impacts African American employees and applicants because BMW allegedly does not conduct an individual assessment of the nature or seriousness of the criminal offense, how old the conviction is, or the nature of the position at issue. The second pending lawsuit is against Dollar General Stores, where the EEOC alleges that Dollar General’s criminal convictions policy disparately impacts African American applicants because there is no legitimate business reason for the policy and there is a gross disparity in the hiring of African American versus non-African American employees.

At the same time, class action lawsuits are also being filed over employers’ failure to follow the requirements of the Fair Credit Reporting Act (FCRA), and employers have increasingly been entering into settlements to resolve those claims. In the past year, K-Mart agreed to pay $3 million over allegations that it failed to make adequate disclosures, US Xpress agreed to pay $2.75 million over allegations that it failed to obtain valid consent and/or provide notice of the right to obtain a free copy of the consumer background report, and Domino’s Pizza agreed to pay $2.5 million over allegations that it used a Background Investigation and Consent form that contained a liability release and/or failed to provide a pre-adverse action letter.

The most recent case in this trend of settling FCRA class action lawsuits was against Swift Transportation. In that case, it was alleged that Swift failed to comply with pre-adverse action notification requirements. As a result of this lawsuit, Swift recently agreed to pay $4.4 million to settle the claims of more than 10,000 applicants, covering a more than four year time period. Whole Foods (alleged use of invalid authorizations) and Disney (failure to provide pre- and post-adverse action notifications) continue to defend FCRA class action lawsuits.

With the multiple technical requirements of the FCRA that need to be followed in order to properly obtain a background check, as well as the potential that the subsequent use of that background check will trigger a disparate impact claim, it is more important than ever to ensure that your policies and paperwork are in compliance. The recent trend of EEOC and class action lawsuits make this point clear, as non-compliance can and has resulted in millions of dollars in settlement as well as substantial defense costs.

Employers should update their background/criminal record/credit screens for incoming and existing employees. Even seemingly “standard” screens may be unlawful, or may have an unlawful/disparate impact on one or more protected groups.