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There are a great deal of regulatory guidelines, publicity, and confusion, about the need for criminal background checks of job applicants. A recent federal appeals court case indicates that in at least some circumstances, an employer may be sued in a negligent hiring claim based on a company’s failure to conduct a criminal background check. Keen v. Miller Environmental Group, Inc., 702 F. 3d 239 (CA 5 2012). In that case, an applicant had not informed the employer of his criminal history and indeed stated he had no criminal history on his application. Although the applicant had consented to a background check as part of the employment application, the employer did not do a background check. Later, this job applicant raped a co-worker, and the plaintiff sued for negligent hiring contending that a criminal background check should have been performed.

The court cited general law in Restatement (Second) of Agency Section 213, that “One can normally assume that another who offers to perform simple work is competent. If, however, the work is likely to subject third persons to serious risk of great harm, there is a special duty of investigation.” In this case, the court found that there was nothing in the nature of the work, which was to remove tar balls from the Gulf Coast, suggesting that the applicant was likely to subject his co-workers to the risk of assault, noting that if a criminal background check were necessary to screen for the possibility that a manual laborer might assault a co-worker, it is difficult to envision a fact pattern in which a background check would not be necessary.

However, if criminal background checks are conducted, there both accuracy issues as well as legal issues. Accuracy issues relate to the fact that relying solely on “national” database information results in receiving only partial information, as most state-level and municipal courts are not represented in such databases. Further, a national database is composed of material from many different sources, each updated at different times, and thus accuracy is questionable.

The legal issues relate first, to the requirements of the Fair Credit Reporting Act (FCRA), and second, the guidelines issued by the Equal Employment Opportunity Commission (EEOC). The use of a third party to conduct such criminal background checks even using commercial data bases, requires meeting the specific requirements of the FCRA, including consent, notice, and an opportunity to make corrections.

The EEOC guidelines are particularly concerned about the fact that the rates of conviction are much higher for African American and Hispanic persons than for Caucasians. Thus, disparate impact discrimination claims can occur that allege that an employer’s facially neutral policy or practice disproportionately screens outs out a Title VII - protected group, like African Americans or Hispanics, without any business justification. A discrimination claim can also occur alleging that the employer rejected, for example, an African American applicant based on his criminal record, but hired a similarly situated white applicant with a comparable criminal record.

The Labor Department’s Office of Federal Contract Compliance Programs (OFCCP), has also issued a directive on similar issues. The agency recommends that government contractors engage in individualized assessments if they have policies and procedures that use criminal conduct as a screening tool for applicants and employees. “Such policies and procedures should be narrowly tailored to the essential job requirements and actual circumstances under which the jobs are performed; to the specific offenses that may demonstrate unfitness for performing such jobs; and to the appropriate duration of exclusions for criminal conduct, based on all available evidence.” Although neither the OFCCP or the EEOC favors contractors including questions about applicants’ criminal convictions on their employment applications, they do indicate that if a contractor makes such a request, the inquiry should be “limited to convictions for which the exclusion would be job-related for the position in question and consistent with business necessity.”

In spite of the legal issues, a 2010 survey by the Society for Human Resource Management (SHRM) found that 73% of responding employers conduct criminal background checks on all of their job candidates and 9% conduct them on selected job candidates. Only 7% do not conduct them at all.

So what should an employer do in light of this dilemma? First, in the case of those employers that have questions about criminal records on job applications, disclaimers should be added to indicate that an affirmative answer doesn’t constitute an automatic bar to a job but that the employer will take the information into account based on the nature, timing and job-relatedness as to the offense. The applicant might even be invited to share more information on a blank piece of paper if they want to provide an explanation. Next, employers need to apply a balancing test to review the criminal record, and in reviewing the various factors such as the nature of the job, the nature and gravity of the offense, and the time that has past since the events. The requirements of the FCRA must also be met, and as a general rule arrest records should not be considered since they are the hardest to justify as a business necessity. Occasionally, particular egregious and recent arrest might result in an investigation of the underlying facts, but the employer would be relying on the circumstances and not just the fact of the arrest.


Obviously many jobs require the ability to effectively communicate. Sometimes, however, there is tension between an employer’s legitimate need to require an ability to communicate, and an applicant’s right be free of discrimination based on national origin. In a recent case, a Jamaican born applicant was not hired because his accent was too heavy for interviewers to understand him. A federal judge ruled that the case could proceed to a jury trial, because the employer did not make the applicant aware of other positions that he could apply for, and the employer did so for other applicants who were rejected. EEOC v. West Customer Management Group, LLC, (N.D. Fla. 2012).

The position required employees to provide telephone support service to clients regarding telephone repair and billing issues. One of the requirements for the job was to speak in a clear and understandable voice. During the plaintiff’s interview, the interviewer had to repeat questions several times because he was unable to understand the plaintiff’s responses. The interviewer also asked one of this colleagues to sit in the interview, who confirmed the difficulty in understanding the plaintiff. The plaintiff was not hired because he was “very difficult to understand” due to a “heavy accent.”

During the EEOC investigation, the EEOC even admitted during conciliation that it had difficulty understanding the plaintiff. Characterizing the decision as a “close call,” the district court judge noted that, “An employee’s heavy accent or difficulty with spoken English can be a legitimate basis for adverse employment action where effective communication skills are reasonably related to job performance.” However, the court stated that the issue in this particular case was not whether the plaintiff was properly rejected due to his heavy accent, but the employer not applying its normal practice to the plaintiff of inviting him to reapply for other positions. The court noted that only two candidates during the relevant time period were not invited to apply for another position, and they were the plaintiff and an applicant from Puerto Rico who was rejected for the same reason as the plaintiff.

Editor’s Note- The author has had some experience in these type cases that may of interest. In one case, two clean-up employees had worked in their positions for several years, when the employer contended that they could not be retained because they could not read English and thus couldn’t read the labels on the various cleaning solutions. The case was settled during the EEOC charge stage, because it is hard to show that an employee is unable to perform a job that he has been successfully performing for a number of years. In another case, the plaintiff in an interview for a truck driving position, was very difficult to understand, but the interviewer made the mistake of asking the applicant a lot of questions as to where he was from and the like. This particular plaintiff was in the author’s view, a “professional plaintiff,” and actually sued a number of trucking employers on similar grounds. This particular case was settled not so much due to the merits, but because the plaintiff was willing to accept a relatively small amount for each defendant he sued. [Pull case file of this trucking employer case we handled within the last two years.]


It may be helpful to sum up the dilemma facing most employers before the end of this year, and suggest some potential solutions. The problem is that an employer must pay a non-deductible tax of $2,000 per full-time employee per year (in excess of 30 employees) if the employer employs at least fifty full-time equivalent employees during a calendar year and does not offer certain coverage to at least 95% of its full-time employees (and after 2014, their eligible dependents as well), and if at least one of the employer’s full-time employees receives subsidized insurance at a state exchange.

The second part of this problem, is that even if an employer offers coverage to at least ninety-five percent (95%) of its full-time employees, when that coverage is not “affordable” and does not provide “minimum value,” the employer must pay a non-deductible tax of $3,000 per year for each full-time employee who obtains coverage at a state exchange and qualifies for the premium subsidy. Both of these taxes are paid on a monthly basis.

Coverage is deemed “affordable” if the employee’s contribution does not exceed 9.5 % of the employee’s household income. “Minimum value” means that the plan must cover at least 60% of the plan’s total allowed costs.

One possible solution is to provide “minimum essential coverage,” perhaps with multiple levels of coverage, so that lower-wage employees can find an affordable coverage option. An employer who offers such coverage will not have to pay penalties so long as the coverage is “affordable” and provides “minimum value,” even if their employees don’t sign up.

Many employees may continue to decline company-offered insurance, either because they can get insurance through Medicaid or a family member, or because they elect to pay the penalty for not having health insurance. The penalty for 2014 will be as low as $95, much less than most employees will be asked to pay through company-sponsored plans. However, the penalties to employees for being uninsured increase to at least $325 per adult in 2015 and $695 per adult in 2016. The higher penalties may cause more employees to accept employer-offered coverage.

A second option for the employer is to abandon its healthcare plans all together and pay the penalty. One employer reports that it spends about $140,000 a year on insurance premiums to cover 25 managerial positions, but under the new law he will be required to offer insurance to all of his 100 full-time employees starting in January. His premiums could increase to over $500,000 a year, exceeding his current profit. He believes that if he drops insurance entirely, he would pay a penalty of about $144,000 a year, about the same as his current cost (although the penalty is not tax deductible). An employer could make this approach more palatable to employees by providing some cash to pay for coverage from the Exchange.

While thus far, no large national employers have announced an election to drop healthcare coverage, there was quite a lot of publicity several years ago when Congress subpoenaed certain studies that national employers made to consider dropping such coverage.

A third option being considered by some employers is to reduce their full-time employment, and convert more workers to part-time. Obamacare defines a “full-time” employee as one who works or is paid for thirty or more hours per week on average, as determined on a monthly basis. Thus, penalties will be reduced if the employer cuts the number of hours his employees work so they will be considered part-time under the law or hires more part-timers in the future. Many employers have publicly announced plans to do this, in whole or in part, including a number of companies such as Darden, CKE Restaurants, Pillar Hotels and Resorts, and AAA Parking.

Other options deal with the statutory definition of a large employer to which penalties are applicable, as one with fifty or more equivalent full-time employees. Some entities have wondered whether they could simply set up several corporate entities, thereby keeping each entity below fifty employees and avoiding the penalties. Unfortunately, due to the statutory definition of “affiliates,” such a “divide and conquer” strategy will not work.

Other employers may consider simply sub-contracting more work, thus avoiding the penalty provisions one way or the other. However, in many instances, the contractor will also be subject to the Obamacare provisions, thus raising the contractor’s costs which the contractor will likely try to pass on to the employer. On the other hand, if the contractor has less than fifty employees, then perhaps this strategy could work.

There is another option for employers, but it may result in litigation. Several States have decided not to establish State-run Exchanges. According to Obamacare, the employer taxes/penalties apply only if the employee obtains subsidized coverage from a State-run Exchange. In other words, if the federal government establishes or runs the Exchange in a State, the employer taxes/penalties will not apply. Contrary to the plain language of the statute, the IRS has issued rules saying that it will treat a federal-run Exchange the same as a State-run Exchange, In other words, if an employee obtains coverage in a federal-run Exchange, the IRS may go after the employer. Oklahoma has filed a lawsuit that challenges the IRS rule and other lawsuits from employers may follow in 2014 when the penalties go into effect.

Whatever strategy employers are to use, they need to immediately review the situation and study their options. The average annual premiums for employer-sponsored health insurance in 2012 were $5,615 for single coverage and $15,745 for family coverage, according to the Kaiser Family Foundation.

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