This situation raises two competing risks: (1) an Equal Employment Opportunity Commission (EEOC) charge or lawsuit alleging discriminatory treatment where an employer bases a suspension or termination on criminal conduct; or (2) the risk of a negligent hire or retention claim if the employee is not suspended or terminated, and later injures or harms a customer or member of the public.  Taking action to reduce one risk often increases exposure to the other, necessitating a thoughtful evaluation of each.

The EEOC’s Position on the Use of Criminal Conduct in Employment Decisions

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.  Accordingly, the EEOC notes that the fact of an arrest is not proof of guilt, and warns employers against making employment decisions on arrest records alone, without more facts indicating that the individual actually engaged in the conduct for which he or she was arrested.  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.

The bottom line is that the EEOC’s interpretations effectively discourage employers from making decisions based upon criminal records, and carry with them an implied threat of a discrimination charge or lawsuit for doing so.

Negligent Hire and Retention Claims

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.

In a recent negligent retention and supervision lawsuit, a jury awarded $800,000 against an employer where one of its managers allowed a 13 year-old child to drive the manager’s vehicle, which resulted in an accident and the child’s death. This example illustrates the risks of failing to recognize and address the potential for negligent hire claims.

Guidance for Addressing the Two Sets of Competing Liabilities

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. For example, if an employee has been arrested for driving under the influence of alcohol, and has job duties requiring him to drive a company-owned vehicle on a regular basis, the employer can best manage risk by suspending or, in some circumstances, terminating the employee.  The strength of the termination decision will be far greater if the employer interviews the employee prior to termination, and the employee admits to driving after having consumed alcohol.

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 rather than take the risk that the employee injuries a customer.

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.  The Employment Law experts here at Miller Canfield have substantial experience navigating these risks, and are ready to assist at a moment’s notice.