Knockout.jpegThe Equal Employment Opportunity Commission (EEOC) was recently smacked down by the Sixth Circuit Court of Appeals in EEOC v Peoplemark, Inc. In that appeal, the Court agreed with a decision from the federal district court out of Western Michigan that awarded an employer its attorney’s fees and expert fees in defending against a discrimination claim brought by the EEOC. The amount awarded to the employer totaled $751,942.48.

This case arose out of Peoplemark’s employment application, which asked applicants whether they have a felony record. Peoplemark also conducted an independent investigation into the criminal records of all applicants.

The reason Peoplemark’s policy was an issue is because the EEOC has taken the position that a blanket policy of using criminal history, including convictions for denying applicants employment may, in some instances, violate the prohibition against employment discrimination under Title VII of the Civil Rights Act of 1964. This is a policy that has had “teeth” in the past as this blog previously reported that in 2012 Pepsi reached a $3.13 million settlement with the EEOC in relation to its use of pre-employment criminal background checks.  

Returning to the Peoplemark case, in 2005 a female African-American with a felony conviction submitted an application to Peoplemark’s Grand Rapids office. Peoplemark did not refer the job applicant for employment and because of this refusal, the applicant filed a charge of discrimination with the EEOC. The applicant alleged that Peoplemark denied her application because of her race and felony record.

It was interesting and for reasons not disclosed in the Court’s opinion, early in the EEOC’s investigation a person having the title of Vice President and Associate General Counsel for Peoplemark represented to the EEOC that Peoplemark had a companywide policy of rejecting felon applicants. However, Peoplemark later denied that such a policy existed and produced information from a database and other documentary evidence showing that it had referred felons to job opportunities in the past.

In light of this evidence, the trial court determined that the statements of the employer’s vice president and general counsel were not supported by the facts. And in light of the facts and documents produced, the EEOC should have reassessed its claim: “From that point forward, it was unreasonable to continue to litigate [plaintiff’s] pleaded claim because the claim was based on a companywide policy that did not exist.” 

Take-Aways for Employers

I’ve never agreed with this particular EEOC initiative and it was good to see a court thoughtfully address the EEOC’s  pursuit of this policy under the circumstances presented. But two issues should stand out for employers:

  • First, while under 42 U.S.C. § 2000e-5(k), a court may award the prevailing party in a Title VII action “a reasonable attorney’s fee (including expert fees)” such awards are generally not routine and certainly not in the amount in question. Accordingly employers should not expect to be so fortunate (if being sued could ever be considered “fortunate”) if their hiring practices involve blanket policies against hiring felons. Follow this link for more information about using criminal background checks in your employee application process. 
  • Second, Peoplemark handled the EEOC investigation internally. And during the investigation, Peoplemark initially advised the EEOC that it had a companywide policy of rejecting applicants with felonies. This representation came from Peoplemark’s vice-president. But after the EEOC filed suit, the company denied that representation. This should be a wake-up call for organizations and their management to make certain they understand the inner workings of the business organization before communicating with outside governmental agencies. Such communications should, at a minimum, first be screened by in-house counsel before being provided outside of the organization. Ideally, however, the organization should consider bringing in an experienced employment attorney who is well-versed with the nuances of federal or Michigan employment law.       

Also, for an insightful perspective on the shortcomings with the EEOC’s policy initiatives regarding criminal background investigations in employment decisions and what Congress should do about it, see Jon Hyman’s The High Price of EEOC Background Check Litigation

For more information about responding to an Equal Employment Opportunity investigation or charge of discrimination, contact Jason Shinn. Mr. Shinn works with business owners and companies to comply with federal and Michigan employment laws and, if necessary, represent those clients in employment discrimination and related lawsuits in state and federal court.