Approximately 92% of employers use criminal background checks for some or all job openings. This number is, or should be, 100% in the financial services industry, where FDIC regulations require insured depository institutions to check for any convicted criminal offenses involving dishonesty, money laundering, and any other breach of trust.

The Equal Employment Opportunity Commission has called this routine practice into question, filing suit against several national retailers and manufacturers. The basic premise of the EEOC's claims is that blanket policies excluding candidates based solely on the results of a criminal background check may have the effect of discriminating on the basis of race, because minority applicants are statistically more likely to have a criminal record. The EEOC's position is that employers must consider the relation between the nature of the crime and the position sought before denying an applicant with a criminal record and give applicants an opportunity to explain why they should be hired despite a conviction.

The legality of the EEOC's position will be heavily scrutinized in court. Employers will argue that these policies are facially neutral, and that it is perfectly legitimate, and in the case of the financial services industry is legally required, to refuse to hire applicants based on certain prior convictions. For other criminal acts not enumerated that have a more tangential relationship to the duties of the position in question, financial services employers should consider and articulate why the conviction disqualifies the applicant for the position.

Of course employers in the financial services industry should still comply with all rules and regulations regarding background checks. Until the courts begin weighing in, however, all employers are faced with a difficult challenge in managing their workforce and protecting their assets on the one hand, and avoiding scrutiny and allegations from the EEOC of race discrimination on the other.

Employers, what are your concerns, if any, about the EEOC's position? Will you change your hiring practices in light of the EEOC's position?

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