EEOC v. Freeman: Another Employer Victory in EEOC’s Enforcement Efforts Regarding Employer Use of Background Checks

Last summer, we wrote about the federal Fair Credit Reporting Act (“FCRA”) requirements in conjunction with the EEOC’s effort to sue employers who use background checks for job applicants and employees. Essentially, the EEOC alleges that an employer’s use of background checks can lead to a disparate impact among applicants and employees. Thus far, the EEOC’s effort in this regard has been basically unsuccessful—albeit relentless.

Nevertheless, the Fourth Circuit recently issued another resounding defeat against the EEOC in its opinion, EEOC v. Freeman, No. 13-2365, 2015 WL 728038 (4th Cir. Feb. 20, 2015). Specifically, the Fourth Circuit affirmed the district court’s holdings in EEOC v. Freeman, 961 F. Supp. 2d 783, 793–96 (D. Md. 2013), which we discussed in our June 2014 Work Knowledge Blog post on this issue. Id. at *3. Like the district court, the Fourth Circuit took issue with the EEOC’s expert, Kevin R. Murphy, noting the “‘sheer number of mistakes and omissions’” in the EEOC’s expert’s analysis. Id. These errors included “double-counting applicants who had failed their background checks” and a failure to “change ‘incorrect coding of race and pass/fail status for several individuals’” in the data set. Id.

Though, perhaps most relevant for employers defending against this sort of action was Judge Agee’s concurring opinion. Id. at *3-7 (Agee, J., concurring). He reminded the EEOC that its “actions can be also expected to have broader consequences than those of an ordinary litigant given the ‘vast disparity of resources between the government and private litigants.’” Id. at *7. That is, the EEOC owes a duty not only to employees, but also to “employers as well: a duty reasonably to investigate charges, a duty to conciliate in good faith, and a duty to cease enforcement attempts after learning that an action lacks merit.” Id. (citing EEOC v. Argo Distrib., LLC, 555 F.3d 462, 473 (5th Cir. 2009)). Judge Agee found that the EEOC failed in this duty, and he encouraged the EEOC “to reconsider how it might better discharge the responsibilities delegated to it or face the consequences for failing to do so.” Id.

The Fourth Circuit’s opinion in Freeman, particularly Judge Agee’s concurrence, represents another victory for employers in the battle against the EEOC’s argument that certain background checks lead to a disparate impact among job applicants and employees. Nevertheless, the EEOC currently has other background check related cases still ongoing, so the question of whether the EEOC will continue this enforcement effort remains open. This means employers should still proceed cautiously when using background checks in the workplace.