Reasons why Freeman defeated the EEOC alleged misuse of credit and criminal convictions

Do you know why Freeman successfully defeated the EEOC’s discrimination lawsuit alleging improper use of credit check and criminal conviction reports?  There are very important lessons for any employer to learn AND IMPLEMENT.

Judge Roger Titus of the U.S. District Court of Maryland granted Freeman’s motion for summary judgment and dismissed the case of EEOC v. Freeman. – See more at: http://www.workplaceclassaction.com/files/2013/08/2013-08-09-Memorandum-Opinion-c.pdf

It is crucial to understand why Freeman was successful. Freeman demonstrated a process compliant with EEOC requirements, consistent use of the reports and decisions motivated by business reasons. And, the EEOC totally botched the documentation they used to allege the discrimination.

Background

The EEOC sought an injunction prohibiting Freeman using any credit history or criminal history information when hiring employees. It also sought “make whole” relief for affected class members.

To prevail on a claim of disparate impact, the EEOC must show that a certain class of applicants is disproportionately and adversely impacted by a particular employment practice on the basis of their race, color, religion, sex or national origin. Then EEOC bears the burden of proof.

What did Freeman do right?

From July 20, 2006 to August of 2011, the types of background checks performed by Freeman varied with the nature of the job sought.

For “general employees,” i.e., those who did not hold credit sensitive jobs, the check included only a criminal history investigation and social security verification.

For “credit sensitive” positions, the check also included a credit history. A position was deemed credit sensitive if the employee holding that position had access to client or company credit card information, handled money, checks, or similar valuable items, had budgetary authority, had authority to make agreements with respect to customer invoices, or made. These can be consider matrix rules:

1. Freeman considered whether the applicant was truthful about criminal convictions on the application and authorization forms. An applicant who failed to disclose a conviction, seriously misrepresented the circumstances of a criminal offense, or made any other materially dishonest statement on the application, was automatically disqualified.
2. Freeman examined any outstanding arrest warrants. Applicants with pending warrants were given a reasonable opportunity to resolve the matter and have the warrant withdrawn; failure to do so made it unlikely, but not impossible, for the applicant to be hired.
3. Freeman considered the existence of any criminal convictions which the applicant committed, or was released from confinement for, within the past seven years.
4. Freeman evaluated whether the criminal conduct underlying a particular conviction made an applicant unsuitable for employment. Convictions that were of particular concern to Freeman, and would generally disqualify an applicant, included those involving violence, destruction of private property, sexual misconduct, felony drug convictions, or job-related misdemeanors.

In general, initial decisions by Freeman’s office manager not to hire an applicant because of a particular conviction were reviewed and approved by Freeman’s senior vice president for human resources or vice president of benefits and compliance.

For credit checks during the relevant time period covered by the EEOC’s complaint, Freeman’s policy consisted of a list of hiring criteria. Applicants whose credit histories revealed any of the following issues were excluded from employment for a credit-sensitive position:

1. More than two accounts of $300 or more that were 90 days past due;
2. More than three collection accounts that were not medically related;
3. More than two paid charge-offs in the prior 12 months;
4. Any unpaid charge-offs in the prior 12 months;
5. A car repossessed in the prior three years;
6. A house foreclosure in the prior three years;
7. Filed for bankruptcy in the prior seven years;
8. A judgment in the prior seven years;
9. A default on student loans;
10. Any unsatisfied liens;
11. Any satisfied liens in the prior three years;
12. Any delinquency in paying child support.

Pay attention to the evidence that Freeman was able to produce:

Freeman properly supplied the EEOC with complete background check logs for the entire period covered by the complaint.

These logs list applicant names, the branch where application was made, the date a background check was performed, and each applicant’s resulting status (coded as Hireable: Y or N).

For individuals who were listed as not hireable, a brief explanation was provided (e.g., “failed drug test” or “Resisting arrest, falsified app”).

Freeman also provided during discovery all EEO datasheets filled out by applicants during the relevant time period and the criminal background check reports prepared by the Consumer Reporting Agency, and applicant flow logs containing applicant names, application date, position sought, branch applied to, race, gender, and application disposition.

Finally, Freeman provided EEOC with all of its adverse action notices sent to applicants.

What did the EEOC do wrong?

The EEOC attempts to make a statistically sufficient demonstration of disparate impact through the expert reports of Kevin R. Murphy and Beth M. Huebner.

Murphy’s inaccurate database renders his conclusions unreliable. Freeman challenged the admissibility of Murphy’s report by identifying a number of inaccuracies in his database.

1. Murphy had access to, but did not utilize, the materials necessary to create an unbiased, accurate testing database. Murphy’s analysis was not based on a random sample of accurate data. In Murphy’s original report, he admits that he had access to information on 58,892 applicants through the discovery materials. His ultimate testing database, however, included fewer than 2,014 unique applicants, with many being duplicates.
2. Murphy’s database does not cover the time period identified in the EEOC’s claims. Murphy cherry-picked the data as opposed to drawing a random sample. The district court precluded Murphy from testifying because his analysis was based on a “sample of a sample” that “was not taken randomly” and “is not representative of the applicant pool as a whole.”
3. Murphy enhanced his disparate impact results by including “fails” from the discovery materials. Out of the 2,014 applicants in Murphy’s database, only a handful of the entries were derived from the discovery materials produced in this case. In an egregious example of scientific dishonesty, Murphy cherry-picked certain individuals from the other discovery materials in an attempt to pump up the number of “fails” in his database.
4. Murphy’s database omits all data from half of Freeman’s branch offices.
5. Murphy’s database is rife with material errors and unexplained discrepancies.

Huebner’s report is likewise unreliable and inadmissible.

The report by the EEOC’s other expert, Beth Huebner, suffers from the same reliability problems that plague Murphy’s report. With neither national statistics nor expert analysis to support its allegations of disparate impact, the EEOC’s case cannot survive. The EEOC bears the burden of establishing a prima facie case. The burden is not on Freeman to conduct its own analysis to rebut the results produced by the EEOC’s flawed report.

The EEOC has failed to Isolate a Specific Employment Practice of Freeman’s that Allegedly Caused a Disparate Impact.

CONCLUSION

The story of the present action has been that of a theory in search of facts to support it. But there are simply no facts here to support a theory of disparate impact resulting from any identified, specific practice of the Freeman.

For the foregoing reasons, Freeman’s motion for summary judgment shall be granted.