Can employers get in trouble for using criminal background checks in the hiring process? Technically, yes.

On Tuesday, the U.S. Equal Employment Opportunity Commission sued BMW arguing its criminal background checks on workers at a South Carolina plant became discriminatory when the company refused to rehire any employees with convictions on their records. Some employers argue the government is trying to force BMW to hire convicted criminals – and calling them racist when they don’t. Is this the case?

Not exactly, says Derek Smith, a New York City employment lawyer. Smith says it boils down to a concept called “disparate impact,” where an employer practice “may be discriminatory and illegal if it has a disproportionate adverse impact on members of a protected class.”

In the case of BMW, the blanket policy didn’t intentionally or overtly discriminate against African Americans – but 80% of the employees who weren’t rehired because of criminal convictions were black.

The lawsuit doesn’t mean companies need to hire applicants with criminal convictions, though, says Eric Broutman, an employment lawyer with Abrams Fensterman. “The most important thing is to have individualized criteria,” he says, rather than a blanket policy dismissing all applicants with prior convictions.

Broutman says employers need to look at the type of conviction and when it happened. Then they should consider whether the crime is at all related to the responsibilities of the open job position.

“If someone embezzled large sums of money, you probably don’t want to hire them as the CFO 30 years later – and that’s a reasonable decision,” says Broutman. But if the conviction happened many years ago and is totally unrelated to person’s ability to perform a job, then the hiring manager may be on shakier ground.

“Take a person with a drunk-driving record applying for a job as a construction worker. There’s no direct relationship between the two,” says Smith.

While Broutman says time should be a factor when considering convictions in hiring decisions, there’s no specific guideline. “The more attenuated the crime is to the position, that’s where the time factor comes into play,” he says.

Background Checks 101
The Small Business Administration underscores the importance of background checks, noting that replacing experienced workers with ones who don’t fit a role can cost up to 50% of that person’s salary – a huge cost, especially for small businesses.

By conducting background checks, the SBA says employers can make more informed decisions and hire higher quality employees.

SCORE spokesman Raj Tumber says background checks are crucial both for the protection of the employer and for the safety of other employees working at a business.

“Legal issues can sometimes backfire for the company,” when hiring an employee with prior criminal convictions, says Tumber.

He says small businesses should follow guidelines of the Fair Credit Reporting Act, to ensure all checks are legal.

When it comes to credit checks, Tumber says they can also be important, especially if the applicant will be handling payments or overseeing any accounting responsibilities. As stated on the SBA website, employers must notify applicants first before conducting credit checks – and are required to let applicants know if information in the credit report has led the hiring manager to reject them.

For more information on conducting pre-employment criminal background and credit checks, visit the SBA guide here.

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