This situation raises two competing risks: (1) an Equal Employment Opportunity Commission (EEOC) charge or lawsuit alleging discriminatory treatment; or (2) the risk of a negligent hire or retention claim. Taking action to reduce one risk often increases exposure to the other.

In the EEOC’s view, making decisions based on an employee’s criminal record may have a disparate impact on individuals due to national origin and race. Before using criminal record information employers should, according to the EEOC, conduct an individualized inquiry by considering the following factors: (1) the nature and gravity of the offense or conduct; (2) the time that has passed since the offense; and (3) the nature of the job held or sought.

State negligence law poses a competing threat to employers – that if it fails to make an employment decision based on past criminal conduct, it may be liable to a third party for damages caused by one of its employees who acts consistent with their alleged criminal past. For example, if an employer obtains a news article reporting that one of its employees has been charged with fraud, fails to take action, and that employee later steals money or information from a customer, the employer could potentially be sued for not taking reasonable steps to prevent that theft. Or, even worse, the employer’s reputation could take a substantial hit.

Of the two competing risks, the threat of a discrimination claim is the more immediate risk, while a valid negligent retention claim carries the potential for more significant damages and reputational costs. To address and reduce these risks, an approach that takes into consideration the EEOC’s interpretations and negligence law is warranted.

To do so, employers should examine the nature of the crime the employee has been charged with or convicted of, how long ago the alleged criminal conduct took place and whether the crime relates to the job the employee is required to perform. To address the potential for a negligent retention claim, the employer should also consider whether the employee’s job duties would place them into future situations that could result in injury or harm to the public or third parties. Likewise, if an employee is arrested for one or more violent offenses within a short period of time, and the employee’s job duties require them to be present in customer homes without supervision, the safer option may be to suspend or terminate that employee.

On the other hand, if an employee with a good performance record is charged with tax evasion, and the employee has no access to company funds, the risk of a negligent retention claim is very low, such that it might be difficult to justify termination. 

In any case, employers should take note that making employment decisions on the basis of alleged criminal conduct, without considering all potential risks in advance, may backfire.

Richard Warren is a principal and the employment and labor deputy for Miller Canfield. He may be reached at 313-496-7932 or warren@millercanfield.com.