Academic journal article Journal of Accountancy

Criminal Background Checks Can't Remain in the Background Anymore

Academic journal article Journal of Accountancy

Criminal Background Checks Can't Remain in the Background Anymore

Article excerpt

Among the many client services they perform, accounting firms often handle client funds in the performance of various services provided to both individuals and businesses--bookkeeping, investment advisory, family office, and more. Imagine what might happen if a firm employee steals or otherwise misappropriates funds from a client: The firm would likely face a malpractice claim and have to deal with the damage to its reputation.

While historically only a small percentage of claims experienced by the AICPA Professional Liability Insurance Program have involved an allegation of theft or fraud perpetrated by an employee of an accounting firm, this is more prevalent in firms that provide bookkeeping services to small, closely held client businesses.

One step a firm can take to help mitigate the risk of a bad hiring decision is to conduct, or hire someone to conduct, a criminal background check on applicants for employment. These routine checks are valuable in decreasing the risk of negligent hiring claims---such as those that may result if, for example, it were later discovered that an individual who had recently been convicted of theft or fraud was hired to handle client funds and subsequently stole from a client after being hired.

A firm may decide that an individual with a conviction for any criminal offense is ineligible for employment by the firm, in any position. However, not all crimes are considered equal in the eyes of the U.S. judicial system--some convicted criminals are penalized with fines, while others are punished with extended prison time. So, why should all offenders be equally unacceptable in the eyes of employers implementing policies against employing individuals with criminal conviction records? The Equal Employment Opportunity Commission (EEOC) says they should not.


Issued in April 2012, EEOC Enforcement Guidance No. 915.002, Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. Sec. 2000e et seq., warns that blanket policies and practices that exclude from employment all individuals with any type of criminal conviction, regardless of the particular job duties of the position, may be discriminatory and violate Title VII.

When criminal background checks are combined with blanket policies that prevent employing individuals with criminal records, these checks can lead to unintended consequences. For example, a decades-old marijuana possession conviction could keep a perfectly capable, reformed, 40-year-old applicant from working as a staff accountant, a job in which he or she may excel.


Blanket policies may result in what the EEOC calls "disparate impact discrimination," when a facially neutral policy or practice has a discriminatory effect on a protected class or classes, even though no intent to discriminate exists. Notably, the EEOC references research indicating certain protected classes, such as African-American and Hispanic men, have higher rates of criminal convictions. Thus, disqualifying an individual based upon a criminal conviction could have a disparate impact on those protected classes and will violate Title VII unless an employer can prove that its policy is "job related and consistent with business necessity."

Background checks remain legal and critical to the hiring process. Rather than a blanket policy against employing individuals with conviction records, the EEOC encourages employers to develop narrowly tailored policies and targeted screens based upon each particular job to ensure exclusions are job-related and consistent with business necessity The screening process, according to the EEOC, should focus on:

* The nature and dangers of the crime in question.

* The time elapsed since the crime was committed.

* The nature and risks of the particular job. …

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