WASHINGTON — Pepsi Beverages Co. has agreed to pay $3.1 million to settle federal charges of race discrimination for using criminal background checks to screen out job applicants — even if they weren't convicted of a crime.
The Equal Employment Opportunity Commission, which is working to crackdown on hiring policies that can hurt blacks and Hispanics, said Wednesday that the company's policy of not hiring workers with arrest records disproportionately excluded more than 300 black applicants. The policy barred applicants with arrest records even if they had never been convicted of a crime, and denied employment to those arrested or convicted of minor offenses.
Using arrest and conviction records to deny employment can be illegal if it's irrelevant for the job, according to the EEOC, which enforces the nation's employment discrimination laws. The agency says such blanket policies can limit job opportunities for minorities with higher arrest and conviction rates than whites.
The company has since adopted a new criminal background policy and plans to make jobs available to victims of the old policy if they are still interested in jobs at Pepsi and are qualified for the openings.
"I commend Pepsi's willingness to reexamine its policy and modify it to ensure that unwarranted roadblocks to employment are removed," EEOC Chairwoman Jacqueline Berrien said in a statement.
Pepsi Beverage spokesman Dave DeCecco said the company's criminal background check policy has always been neutral and that the EEOC did not find any intentional discrimination. He said after the issue was first raised in 2006, the company worked with the EEOC to revise its background check process "to create a workplace that is as diverse and inclusive as possible."
"We are committed to promoting diversity and inclusion and we have been widely recognized for our efforts for decades," DeCecco said.
He said the new policy would take a more "individualized approach" in considering the applicant's criminal history against the particular job being sought.
Pepsi Beverages is PepsiCo's beverage manufacturing, sales and distribution operating unit in the United States, Canada and Mexico.
Under the settlement, the company will provide the EEOC with regular reports on its hiring practices and offer antidiscrimination training to its hiring personnel and managers.
About 73 percent of major employers report that they always check on applicants' criminal records, while 19 percent do so for select job candidates, according to a 2010 survey by the Society for Human Resource Management.
But increased federal scrutiny of such policies has led some companies to reevaluate their hiring process. Pamela Devata, a Chicago employment lawyer who has represented companies trying to comply with EEOC's requirements, said there has been an uptick over the past year in EEOC charges over the use of background checks.
"The EEOC has taken a very aggressive enforcement posture on the use of criminal background and criminal history," Devata said.
The commission held a special meeting on the topic last summer, and Devata said employers have been expecting the EEOC to issue more specific guidance.
EEOC officials have said, for example, that an old drunken driving conviction may not be relevant to a clerical job, but a theft conviction may disqualify someone from working at a bank.
Julie Schmid, acting director of the EEOC's Minneapolis office, said the EEOC recommends that employers consider the nature and gravity of offenses, the time that has passed since conviction or completion of a sentence, and the nature of the job sought.
"We hope that employers with unnecessarily broad criminal background check policies take note of this agreement and reassess their policies to ensure compliance" with antidiscrimination laws, Schmid said in a written statement.