Iowa Supreme Court Says Timing of Criminal Background Checks Critical

By: Catherine Anderson Skotzke (Nyemaster Goode Summer Associate) 

On June 18, 2021, the Iowa Supreme Court in Iowa Association of Business & Industry v. City of Waterloo, upheld in part and invalidated in part a “ban the box” ordinance passed by the City of Waterloo.   “Ban the box” laws seek to discourage disparate impact discrimination by regulating and limiting an employer’s consideration of a job applicant’s criminal history in making employment decisions. Such laws are intended to protect an applicant from automatic disqualification during the selection process by prohibiting an employer from including questions about the applicant’s criminal history on an application, and in many cases, prohibiting an inquiry about the applicant’s criminal history until after a conditional offer of employment has been made.

The City of Waterloo ordinance, passed in 2019, prohibits employers in Waterloo from asking about an applicant’s criminal history on a job application. The ordinance also prohibits employers with at least fifteen employees from inquiring about an applicant’s criminal history until after a conditional offer for employment has been made and prohibits an employer from making adverse hiring decisions on the sole basis of:

(1) arrests or pending criminal charges that have not resulted in a conviction;

(2) expunged criminal records or records that are the subject of a pardon; or

(3) “criminal records without a ‘legitimate business reason.’”

The Iowa Association of Business & Industry challenged the ordinance in district court on the grounds that it violates Iowa Code § 364.3(12)(a), passed in 2017.  Section 364.3(12)(a) prohibits municipalities from enacting legislation that requires employers to provide terms or conditions of employment that exceed or conflict with state or federal law. This law was primarily aimed at limiting the types of employment-related ordinances that cities could enact regarding hiring practices and terms of employment such as local minimum wage ordinances. The district court found the Waterloo ordinance did not violate section 364.3(12)(a), but the Iowa Supreme Court disagreed in part.

The Supreme Court upheld the ordinance’s prohibition on banning the box on a paper application and delaying any inquiry into an applicant’s criminal history until after a conditional offer of employment is made because the timing was not a “term or condition of employment” within the meaning of section 364.3(12)(a).  The Court struck down as violative of section 364.3(12)(a) the parts of the ordinance that prohibited an employer from making an actual adverse hiring decision based on certain types of criminal records in certain situations, regardless of timing.

Waterloo is the first city in Iowa to enact a ban the box ordinance, but 36 states and approximately 150 cities and counties throughout the nation have enacted ban the box laws like the Waterloo ordinance. In March of this year, the Workforce Justice Act was introduced to the U.S. House of Representatives. This national ban the box bill would prohibit employers from inquiring into applicants’ criminal histories until after a conditional offer of employment is made. The bill would give states three years to remove the question of criminal history from job applications, and states that failed to comply would lose criminal justice funding from the federal government.

What does the ABI v. City of Waterloo decision mean for Iowa’s employers? First and foremost, other cities and municipalities may enact similar ordinances that regulate the timing of inquiries into applicants’ criminal histories. It also means employers that conduct routine background checks on applicants and consider the findings before making a final hiring decision may continue to do so, but this case serves as a reminder that employers must do so with reason and with the potential consequences in mind.

The Equal Employment Opportunity Commission (EEOC)’s published guidance on criminal background checks acknowledges that the nature of a job or a particular employee’s job duties may warrant looking into an applicant’s criminal history before making a hiring decision. For example, if the job involves working with children or vulnerable adults, or handling cash, an analysis of an applicant’s criminal history, especially in regard to crimes involving such situations, likely is warranted. In other situations, however, an employer could be liable for employment discrimination if its use of criminal background checks has a disparate impact on applicants of color, particularly if the exclusionary criteria are not job-related or necessary for business purposes. To determine job-relatedness or business  necessity, the EEOC considers: (1) the nature of the offense; (2) the amount of time that has passed since the offense and/or completion of the sentence; and (3) the nature and duties of the job sought.

Additionally, employer use of third-party vendors to conduct criminal background checks requires compliance with the procedures and notice provisions of the Federal Fair Credit Reporting Act. Consequently, that statute may also be a source of liability for employers if those provisions are violated.

Employers are recommended to analyze the positions for which they intend to inquire about criminal history and construct written guidelines that define the exclusionary criteria for each such position, making certain such criteria are job-related and consistent with business necessity

For questions related to this or other employment related topics, please contact a member of Nyemaster's Labor & Employment department.