Pepsi Pays Big Fine to Settle Criminal Background Check Charges

employee screening, employee background check, criminal background checksPepsi Beverages agreed to a settlement on federal charges of race discrimination, brought by the Equal Employment Opportunity Commission (EEOC). Under the settlement, Pepsi will pay $3.1 million for using criminal background checks to screen out job applicants.

Under the company’s policy, applicants with arrest records—even if they were not convicted—were not eligible for hire. In addition, the company denied employment to other applicants with minor convictions. The policy led to Pepsi unfairly excluding over 300 black applicants from employment.

According to the EEOC, the policy discriminated against minorities, because they have a disproportionate rate of arrest and convictions than whites. Further, using arrest and conviction records to deny employment can be illegal if it is not relevant to the job, the EEOC said. For example, an old DUI conviction would not be relevant to a retail sales job, while a conviction for theft could be.

Pepsi officials said the company’s employee background check policy is neutral, and the EEOC found no evidence of intentional discrimination. After the issue was first brought to Pepsi’s attention in 2006, the company collaborated with the EEOC to revise its background check process and improve its diversity and inclusivity.

Since the federal charges were brought against Pepsi Beverages, the company has changed its criminal background check policy. It also plans to make jobs available to those applicants who were denied unemployment under the previous policy.

Employment lawyers who monitor EEOC activity say there has been an increase over the past year in charges over background checks, and that the commission has taken a very aggressive enforcement stand on the use of criminal background and criminal history in hiring.

Pepsi Beverages is PepsiCo’s operation unit in the U.S., Canada and Mexico. Under the settlement, the company will report regularly to the EEOC on its hiring practices and provide anti discrimination training to hiring personnel and management.

The EEOC is expected to issue more specific guidelines for employers, following a hearing on criminal background checks last summer.

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