Federal Appeals Court Backs Federally Regulated Employer in Suit Alleging Auto-Exclusion Criminal Record Policy Violated Title VII

The Eighth Circuit rejected an appeal from a putative class of minority workers who alleged that a federally regulated bank violated Title VII of the Civil Rights Act when it failed to sponsor waivers to overcome a federal law that bars certain former criminals from working for FDIC-backed banks.

The federal law at issue, Federal Deposit Insurance Act, bars "any person who has been convicted of any criminal offense involving dishonesty or a breach of trust" from working at FDIC-insured banks, regardless of how long ago the offense occurred, which plaintiffs argued disproportionately impacts people of color. The law allows those who have been disqualified to seek a waiver with the FDIC and allows banking institutions looking to hire those with previous convictions to sponsor such applications.

A unanimous three-judge panel ruled that because federal law prohibits banks from employing individuals convicted of a crime involving "dishonesty or a breach of trust," disqualifying those workers was "a business necessity." "We hold that even if Wells Fargo's policy of summarily terminating or not hiring any ... disqualified individual creates a disparate impact, the bank's decision to comply with the statute's command is a business necessity under Title VII," the panel said. The court also stated that the bank made a sound business decision, given that banks that are covered by the FDIC face up to $1 million in fines per day for hiring such workers.

The plaintiffs had argued that the bank could have combated the alleged disparate impact by sponsoring the employees' waiver applications. But the panel disagreed, questioning the statistics the putative class presented as evidence and noting that the waiver is not a guarantee of success.

Many organizations in regulated industries may be subject to similar federal hiring restrictions, and the Eighth Circuit's opinion provides these regulated employers with at least some helpful guidance on how to apply such laws to employment decisions.

The case is Williams et al v. Wells Fargo Bank NA, case number 16-4372, in the U.S Court of Appeals for the Eighth Circuit.


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