Employment Law Watch : Employment & Labor Lawyer & Attorney : Reed Smith Law Firm

The PHRC’s proposed criminal history Policy Guidance presumes that an employer's consideration of criminal history information in making employment decisions regarding African-American or Hispanic applicants/employees constitutes evidence of disparate impact discrimination. This new presumption is particularly troubling for employers in highly regulated industries that are subject to statutes, regulations and/or court cases prohibiting employment of individuals who have been convicted of specific criminal offenses in certain occupations.

The proposed guidance includes a specified list of various federal and state laws that the Commission recognizes as restricting the employment of individuals convicted of certain criminal offenses. (See “Appendix A” to the PHRC’s proposed Policy Guidance). Accordingly, employers may rely on these specified laws as a valid “business necessity” defense to overcome the presumption of disparate impact discrimination. A quick glance at this list, however, reveals that it is far from exhaustive and thus problematic for employers in industries that must comply with statutes, regulations and other authority not included in the Commission's current proposed guidance.

Fortunately for employers who may be affected by the Policy Guidance, the Commission has extended the deadline for submitting public comment to March 2, 2010. (Note: At the time of this posting, the proposed Policy Guidance submission information had not been updated to reflect the extended deadline for comments.) 

Factors An Employer Should Consider When Commenting

• Employers and advocacy groups in highly regulated industries should review the proposed Policy Guidance and, in particular, Appendix A, to ensure that the Commission is aware of all authority restricting employment in their industry on the basis of criminal convictions. Industries that are subject to specific regulation include health care, law enforcement, corrections, securities and finance, education, private security, telecommunications, energy and child care. If you are an employer in one of the aforementioned industries, or otherwise subject to statutes or regulations regarding employment of ex-offenders, you may consider submitting through an industry advocacy group all regulations applicable to your industry for the Commission’s consideration so that it is fully apprised of your industry’s legal landscape when finalizing the Policy Guidance. If the current Appendix A is adopted by the Commission, employers may be presumed to be discriminating against applicants merely because they are following valid laws governing their industries that do not currently appear in the Commission’s guidance.
• Just as employers must stay current with changes to governing authority in their respective industries, we advise that employers emphasize the changing nature of laws and regulations in their comments submitted to the Commission. Clearly, if the Commission is to look to an enumerated list of valid legal authority, such a list would have to be regularly checked against legislative, regulatory and court action that may modify employers’ obligations to conduct criminal background checks on applicants and employees. The sheer breadth of legal authority that the Commission would have to monitor suggests that the Commission should refrain from including Appendix A in its guidance. The possible omissions in such a list would place an unwarranted burden on employers to demonstrate that, though a specific law or regulation may not appear in Appendix A, the employers are nonetheless adhering to valid legal authority.

If you would like to submit comment to the PHRC, or would like further analysis of the proposed Policy Guidance and potential implications for your industry, please consult our original Alert, and/or contact us for assistance in drafting a submission that will address your important concerns to the Commission, preserve goodwill with the agency, and positively impact the final Policy Guidance.

The Policy Guidance Fails to Address the True Disparity Revealed By the Statistical Data

The Pennsylvania Human Relations Commission’s (“PHRC”) proposed Policy Guidance regarding the implications of using an African-American or Hispanic applicant’s prior criminal history in hiring decisions is based on the PHRC’s analysis of statistics showing a nationwide disproportionate conviction rate of African-American and Hispanic populations, as well as the larger disparity evidenced by Pennsylvania-specific data. This data has led the PHRC to propose that an employer that an employer’s use of criminal convictions in deciding who not to hire should be presumed to have engaged in “disparate impact” discrimination against African-American and Hispanic applicants. The Policy Guidance provides in part:

[W]hen investigating complaints of alleged unlawful disparate impact discrimination presented by Black and Hispanic complainants that are otherwise jurisdictional, the PHRC will presume that the complainant has established the disparate impact element of a prima facie case of unlawful discrimination under Section 5 of the Pennsylvania Human Relations Act (PHRA).

The data used by the PHRC, however, speaks not to discriminatory practices in hiring, but rather to the PHRC’s view that the criminal justice system of both the nation and Pennsylvania has a discriminatory disparate impact on African-Americans and Hispanics. Employers must rely on valid public records, such as criminal convictions, to ensure that their employees, clients and third parties are not endangered because of negligent hiring for positions of trust. The PHRC’s guidance, however, puts the onus on employers, who have no involvement with applicants’ criminal convictions, to try to eradicate discrimination apparently caused by the criminal justice system.

The clear target of anti-discrimination measures designed to address disparity in the criminal justice system should be those empowered and mandated to monitor that system, namely, law enforcement and prosecutorial offices. The proposed Policy Guidance puts employers in the untenable position of second-guessing valid convictions of persons who were afforded the right to trial by jury, and found guilty of crimes beyond a reasonable doubt. The PHRC’s attempt to redress discrimination in that process by imposing higher burdens on employers will create an unworkable scenario by attempting to close the barn door after the horses have already escaped from a completely different barn.

The 'Business Necessity' Defense

The PHRC’s guidance appears to closely track the central principles set forth by the Equal Employment Opportunity Commission (“EEOC”) in its 1987 “Policy Statement on the Use of Statistics in Charges Involving the Exclusion of Individuals with Conviction Records from Employment” (available on the EEOC’s website). However, the PHRC’s guidance is substantially more detailed, and in that respect more limited, in describing what an employer needs to show to rebut the presumption that its use of criminal convictions has an unlawful disparate impact. Because the courts have generally interpreted and applied PHRA and Title VII in a similar way, to the extent that the proposed Policy Guidance imposes higher burdens on employers under the PHRA than is required by Title VII, it could lead to incongruous results for employers in Pennsylvania under the two laws.

Though the PHRC’s guidance allows employers to rebut the presumption of disparate impact hiring by demonstrating business necessity, Appendix A to the guidance, which lists specific laws that the PHRC will recognize as valid hiring limitations in certain occupations, suggests that employers will otherwise need to convince PHRC investigators that they are properly adhering to valid legal authority. A quick glance at Appendix A by anyone familiar with laws and regulations governing industries such as health care, law enforcement, banking and telecommunications reveals that it is far from exhaustive. Indeed, for Appendix A to remain effective, the PHRC would need to constantly monitor changes in federal and state statutes, regulations, and court cases affecting employers in a wide variety of the industries.

The Statistical Defense

The clear tone of the 30-plus-page Policy Guidance is that employers facing disparate impact claims by African-American and Hispanic applicants or employees based on the use of prior criminal history will have a much more difficult time getting such claims dismissed. Besides the business necessity defense, the PHRC allows the employer to present specific regional statistical evidence that may show that the general presumption of disparate impact convictions does not hold true in a particular complainant’s case. However, the guidance expressly disallows any defense that the employer’s own workforce demographics rebut that presumption. Indeed, the only statistics that serve as a defense under the PHRC’s proposed guidance are those of the geographic region in which the employer operates, not the statistics actually under the control of the employer.

Pennsylvania’s Legislature Has Already Spoken Regarding Unauthorized Use of an Applicant’s Prior Criminal History

The Policy Guidance discusses at length the public policy of Pennsylvania against stigmatizing ex-offenders, on the grounds that doing so contradicts the justice system’s chief goal of rehabilitation. However, the Pennsylvania legislature has already legislated in this area, with the Pennsylvania Criminal History Record Information Act, codified at 18 Pa. C.S. § 9101, et. seq., which sets forth limits on employers’ use of criminal history records in hiring. Though the PHRC guidance acknowledges this statute, it also minimizes its impact, because no administrative agency is charged with enforcing this law, as the PHRC is charged with enforcing the PHRA. 

The PHRC discounts the advantage that private litigants have to bring immediate suit against employers under this law, rather than being forced to exhaust the administrative process required before bringing suit under the PHRA. As most employers know, a significant number of PHRA cases are dismissed because the plaintiff failed to bring an administrative charge, a prerequisite for filing suit. But a plaintiff can sue an employer under the Criminal History Record Information Act without ever being forced to clear an administrative hurdle as a prerequisite to recover compensatory and punitive damages as well as attorneys’ fees.

By seeking to expand the prohibitions of the Criminal History Record Information Act with its newly expanded interpretation of the PHRA, the PHRC is exceeding its legislative mandate. The proposed Policy Guidance would create a clear conflict with existing legislation that specifically addresses this area of employment law.

Predictive Outcomes

Though the PHRC is accepting public comment regarding this proposed guidance, some form of this guidance is virtually certain to be adopted by the Commission. To the extent the PHRC tracks the guidance issued more than 20 years ago by the EEOC, there should be no issues for employers whose hiring practices were already compliant with the disparate impact analysis regarding criminal history under Title VII. However, a comparison of the PHRC’s proposed 30-plus-page guidance, with the three-page statement issued by the EEOC in 1987, implies that employers will face a much rougher road ahead in defending against these claims before the PHRC.

The Court’s Decision

Title VII of the Civil Rights Act of 1964 (“Title VII”) prohibits two types of discrimination based on race, color, national origin, sex, and religion. First, the law prohibits intentionally treating one employee better than another because of such factors – so-called “disparate treatment” discrimination. Second, the law prohibits unintentional discrimination that results when an employer uses a test, selection device, or practice that is neutral on its face, but that has a disproportionate adverse impact on members of a protected group, or “disparate impact” discrimination.

Ricci dealt with a clash between those two types of discrimination. Although the City refused to use its test because it was afraid that it would lose a “disparate impact” case brought by black employees who had not passed the test, the Court held that fear did not justify the City in deciding not to use the test, because that amounted to intentional “disparate treatment” discrimination against the non-black firefighters who had done well on the test. In particular, the Court said that once a test has been given, even a significant statistical difference between how well two groups did on the test is not enough to justify scuttling it, because doing so amounts to “race-conscious” discrimination against those who did well on the test. To justify discarding such a test, the employer must instead show that there is a “strong basis in evidence” that if those who did poorly on the test challenge its use as “disparate impact” discrimination, the employer will lose that case, either because its test was not “job related and consistent with business necessity,” or because it refused to adopt less discriminatory ways to choose among employees who would have met its needs. In effect, the Court said that the only way an employer can walk away from a test it has already given, based on concern about possible liability for disparate impact discrimination, is to show that the test was unrelated to the job for which it was used or that the employer had ignored ways of selecting employees that would have met the employer’s needs with a less discriminatory effect.

What This Case Means for Employers

The Court’s decision puts employers between a rock and a hard place in deciding what to do if, after they give a test or use a selection device, they discover that the test or device has a disproportionate adverse effect on members of a protected group. If the employer uses the test, it may be sued by members of that group for “disparate impact” discrimination, but if it decides not to use the test, it may be sued by those who did well on the test for “disparate treatment” discrimination.

After Ricci, employers making that choice must now be much more concerned about a discrimination suit from those who will lose out if the test is discarded. An employer can defend such a claim only by showing that its own test was largely irrelevant to the job for which it was being used or not closely aligned with the employer’s business needs, or that the employer rejected less discriminatory ways of meeting those needs. But having chosen and used a test, presumably based on a belief that it would accurately predict success in a job, very few employers will be able to meet that burden.

For that reason, it is now risky to change a selection process after the fact, and employers who give a test must be prepared to follow through with it. Before giving any test or implementing any other method of selection among applicants or employees, therefore, employers should carefully evaluate the likelihood that the test or method may have a disproportionate adverse effect on certain groups; whether other alternative tests or methods are available that may have a less discriminatory impact; and – most importantly – how accurate the test or method will be in correctly selecting those employees who are best able to perform the required duties and responsibilities of the relevant job or jobs. By taking those steps before using any test or other selection device, employers will be best prepared to defend any resulting discrimination claim.