Minnesota employers will soon need to review hiring practices to ensure that they comply with a new state law that limits when job applicants may be asked about criminal records.

The new Minnesota law takes effect as the federal agency that enforces anti-discrimination laws continues to increasingly target employers who misuse criminal records when making hiring and other employment decisions. The increased emphasis on background-check policies has raised concerns among many employers about when and how they may ask job candidates about criminal records.

Background-check policies must be drafted and implemented with care in order to avoid allegations that the policies disproportionately screen out groups of applicants who are protected against discrimination by federal and state laws. Employers who seek information about credit histories also must comply with federal regulations that apply to those reviews.

Here is an overview of the key regulations that apply to employers’ use of background checks:

• The U.S. Equal Employment Opportunity Commission recommends against blanket policies under which applicants are rejected if they have any criminal record, of any kind. Rather, the EEOC recommends that policies should (1) be tailored to actual, essential job requirements; (2) be aimed at specific offenses that may demonstrate that a candidate is unfit to perform those actual, essential job requirements; and (3) include a limit for how far the employer will look back into an applicant’s past. For example, an employer hiring to fill a position in which an employer will have access to Social Security numbers or other sensitive data of customers may want to examine applicants’ criminal records for any crime that involves dishonesty or theft—such as fraud, theft, identity theft, or embezzlement. But when the same employer is hiring to fill a position as a driver, it may want to only examine applicants’ criminal records for serious traffic offenses during the past five years.
• Under the so-called the “Ban the Box” law, Minnesota employers will be prohibited from asking about, considering, or requiring disclosure of an applicant’s criminal record until after the applicant has been selected for an interview or, if there is no interview, until after the employer makes a conditional job offer. The law takes effect Jan. 1, 2014. Penalties will vary based on the size of the employer and be phased in, beginning with written warnings to first-time violators in 2014 and increasing in 2015 to up to $500 per violation, capped at $2,000 per month, for employers with more than 20 employees.
• Employers who want to review an applicant’s credit history must comply with the Fair Credit Reporting Act, under which employers must have the consent of an applicant or employee to receive a credit report and must inform the applicant if the report is the basis for not offering a job or for taking some other negative action against the applicant or employee.

(The above is only a summary; additional regulations may apply depending on the particular circumstances of any given situation.)

Three recent cases demonstrate the risk of across-the-board policies. In two separate lawsuits, the EEOC is suing a car manufacturer and a discount retailer over background-check policies that were not job-related, were inconsistent with the needs of the businesses and that excluded applicants from racial minorities disproportionately. And in June, the EEOC announced a settlement with a large transportation company that had been accused of denying an African American applicant a job as a driver because of a conviction that the EEOC said was not related to the position.

Other federal and state laws apply to the hiring process, making compliance often complex. The Best & Flanagan Employment & Labor practice group offers a range of audits and training to assist clients and advise on best practices. For more information, contact Sarah Crippen (612.341.9733, scrippen@bestlaw.com).