Can Business Owners Use Background Checks to Hire?

by Josh Holden, Senior Account Executive

The scenario: Jenny needs to hire an operations manager

Jenny owns a small, but growing 3D printing company. She wants to invest in her business by purchasing more 3D printers and hiring a new operations manager to oversee production on the new equipment. 

As she goes through the hiring process, Jenny is mindful of the EEOC's (Equal Employment Opportunity Commission) cautious position about the use of background checks to screen applicants. While the EEOC has stated that it is not illegal to rely on background information when making personnel decisions, employers must comply with federal laws protecting applicants and employees from discrimination. Employers that rely on criminal records must ensure that the information is “job related and consistent with business necessity." 

As she sifts through the candidates, one stands out—Ricardo Smith—who has decades of experience in manufacturing and most recently at another 3D printing company. Jenny makes a conditional offer pending a background check. Unfortunately, the background check uncovers that Ricardo served time for grand theft auto and he was acquitted of a breaking and entering charge in his early twenties. Ricardo also happens to be of Mexican descent. If Jenny decides not to hire Ricardo, could she be subjected to an EEOC charge?

Knowing he made mistakes in his youth, Ricardo overcame his past. He was promoted three times at his previous company, but had to leave to care for his sick mother. Believing that Jenny discriminated against him due to his criminal background and his ethnicity, he files a discrimination claim with the EEOC. Ricardo may have a valid claim and Jenny could spend thousands of dollars defending the charge and a possible lawsuit.

EEOC's stance on background checks
In April 2012, the EEOC issued an Updated Guidance regarding the use of background checks to screen job applicants. The guidance raises concerns regarding "stereotyped thinking," which the EEOC refers to as the decision to "reject a job applicant based on racial or ethnic stereotypes around criminality—rather than qualifications and suitability for the position.” Employers may be held liable for disparate treatment claims if individuals in a protected class are treated differently based on a comparable criminal record.1

According to the Updated Guidance, the EEOC relies on both national data and specific data closely related to an employer’s policy to determine if the company excludes African American or Hispanic candidates from employment (or adverse employment actions).2

The EEOC offers guidance about best practices for employers to use to prevent unfair discrimination driven by a criminal background check. Here are a few to consider:3

  • Eliminate policies or practices that exclude people from employment based on any criminal record, unless it is directly related to the position
  • Train managers and decision makers about Title VII and its prohibition on employment discrimination
  • If a criminal background check is still used, determine the specific offenses that may demonstrate unfitness for performing such jobs
  • Note and keep a record of consultations and research considered in crafting the policy and procedures

Best practices to avoid employment-related claims
As most businesses are well aware, EEOC claims can and do happen however well-intentioned an employer may be. Claims can lead to legal and defense costs, punitive damages and reputational damage to the business. Some recommended prevention steps to take are:

  • establishing policies about how to use background information
  • educating management and employees about the policies and workplace guidelines
  • training all employees on proper use of background information
  • considering hiring a legal counselor to review current company employment practices and policies

Also, a company should have Employment Practices Liability coverage that best protects against employment-related lawsuits and claims.

So, can business owners use background checks? The answer is yes; however, the employer must have a compelling business necessity and apply the same standards to everyone, regardless of race, national origin, color, sex, religion, disability, genetic information or age.4

1. Littler's “Criminal Background Checks: Evolution of the EEOC’s Updated Guidance and Implications for the Employer Community,” Rod M. Fliegel, Barry A. Hartstein, Marcy L. McGovern, Jennifer L. Mora, May 2012;

2. Ibid, page 7.

3. Ibid, page 15.

4. “Background Checks What Employers Need to Know,” a joint publication of the Equal Employment Opportunity Commission and the Federal Trade Commission;