Dollar General is the latest employer to settle with the Equal Employment Opportunity Commission (EEOC) over its use of criminal background information in the hiring process. The EEOC’s lawsuit argued that Dollar General’s hiring and screening procedures, even though facially neutral, had a disproportionately negative effect on African American applicants as compared to white applicants. Equal Employment Opportunity Commission v. Dolgencorp, LLC, d/b/a Dollar General, 1:13-CV-04307 (N.D. Ill. June 11, 2013).

The consent decree memorializing the settlement requires Dollar General to pay $6 million to aggrieved applicants. It also prohibits the company from considering criminal history when hiring unless it engages a criminology consultant to reevaluate its practices. The purpose of this requirement is to ensure Dollar General’s consideration of criminal history in hiring is job-related and consistent with business necessity.

This outcome sends a strong message to employers that the EEOC has no plans to back down on its stance that background checks can be unlawful under a disparate impact theory. Even if a policy is not discriminatory on its face, it can still be unlawful under federal and state anti-discrimination laws if it has a disproportionate impact on a protected class. Employers that consider criminal histories while hiring should ensure there is a valid job-related reason and business need for doing so. In addition, while not specifically at issue in this case, employers must be aware of applicable state and local “ban the box” laws, which may restrict what employers can ask applicants about criminal histories.

Further, employers that use consumer reports (like background checks) when making employment decisions must also comply with the Fair Credit Reporting Act (FCRA) and any state fair credit reporting laws. The FCRA sets forth certain steps employers must take before obtaining a consumer report and when taking any adverse action based on information in the report. To help navigate this process, consult your employment counsel to ensure your screening policies are compliant with all applicable laws.